As climate change becomes an increasingly serious threat to society, organizational leaders are looking for ways to proactively affect positive change. One of the most effective strategies may well lie in the realm of supplier engagement… -By James Hsu

One of the most significant societal changes of the last few decades has been the rise in widespread awareness of the pressing problem of climate change. As global temperatures increase, weather patterns have grown increasingly unstable, causing massive interruptions not just to human life, but to commerce as well. Another way that climate change stands poised to impact the business world is through the advent of regulations. In the field of pharmaceuticals, for instance, there is an expectation that major manufacturers will have a carbon negative footprint by 2030. This means that they will be expected to not only eliminate carbon-based output from their manufacturing processes, but that they take efforts to offset damage already done as well.

One of the key ways that pharmaceutical companies and manufacturers can reach such lofty goals is through changing the ways that they interact with suppliers. Here, a number of concrete examples of how organizational decisions relating to the sourcing of supplies can have a massive impact upon climate change will be examined, with an eye toward practical and prompt applications.

Fulfilling Ambitious Climate Goals with Supplier Engagement

The enormity of climate change can sometimes occasion organizations to ask: where do I begin? A 2021 study published in Resources Policy shows just how supplier engagement can help organizations begin to tackle even ambitious climate goals. The study looked at the use of petroleum hydrocarbons in the manufacture of consumer products, and various organizations attempts to transition towards the use of alternative sources of energy. These efforts included a direct change in policies relating to supplier engagement. The report cites the example of an eastern Australian mining organization that redefined its relationship with its supplier of petroleum hydrocarbon to be more centered on human relationships and sustainability. The end of result of this organizational shift was a supplier relationship that shared mutual goals and data about how best to achieve those goals, to share liability for failure to meet those shared goals, and to exact commitments from one another to reach certain measurable benchmarks in a goal for ultimate carbon neutralization.

Following the Leaders: Examples of Climate-Positive Supplier Engagement in Action

Due to the sheer scope of climate change and its potential consequences, it can feel kind of stultifying. It’s hard to imagine what one individual, or even one organization, can do to offset these disastrous planet-changing effects. But if one looks at some of the most successful organizations recognized by the Carbon Disclosure Project right now, one may find concrete examples of how organizations and their suppliers are using sourcing decisions to minimize resource wastage and carbon output.

A 2021 report by Megan Greenwalt discussed steps being taken by Dow to track and reduce their own carbon footprint, with a goal of reaching a net zero output by the year 2050. One thing Dow has done in this area is encourage the thousands of suppliers it works with directly to join the Carbon Disclosure Project and learn about the ways in which measuring and reducing one’s waste can lead to a more streamlined and efficient organization.

Greenwalt stresses the importance of data collection and usage in Dow’s campaign. Since many have become inured to the importance of climate change over the years, factual analytics that show the impact organizations can have can be a powerful motivating factor towards convincing those organizations to implement change.

Another strong example of an organization that has used supplier engagement strategies to enact positive change towards their emissions output is the example of Telefonica. One of Europe’s leading telecommunications companies, Telefonica announced in February of 2022 that they had entered the third year of a flagship program intended to reduce their environmental footprint to an effective net zero carbon output by the year 2040. The company managed to achieve this by implementing what they refer to as a “value chain,” a conceptual chain that runs parallel to their existing supply chain and its organizational commitments. What the value chain represents is a series of specific commitments related to CO2 output. To put it simply, the company’s high value contracts enable them to exert leverage on their suppliers by committing to only do businesses with organizations that have specific protocols in place for both measuring and reducing carbon output.

Taking the matter even further, Telefonica was cited by the Carbon Disclosure Project for its role in developing a full scale “supplier engagement program.” The program membership now boasts some of the most influential suppliers in telecommunications. Together, the 262 member companies share strategies for measuring and reducing carbon output and have signed a shared pledge to reduce that output by a specific amount by specific dates. These kinds of actionable and measurable goals are absolutely crucial to actually getting anything done at an organizational level, and Telefonica has done a stand-up job of acting as a leading voice in the fight to reduce carbon emissions across the industry.

One last pillar of its organizational commitments is Telefonica’s development of green technologies, which it calls Eco Smart, which enable their business to reduce emissions associated with the use of their products in the homes of end users. These changes run the gamut from packaging to equipment design to shipping and logistics. Ultimately, Telefonica represents one of the best and most straightforward ways to leverage supplier engagement to produce positive results for the climate: develop small and measurable goals with specific outcomes and timetables, and then encourage others to follow suit.

Concluding Thoughts

It’s not hard to see what pharmaceutical companies and healthcare companies might do in order to replicate these same data-driven, evidence-based approaches to supplier engagement in their own operations. By working on specific targets and providing support and encouragement of each milestone met, it is possible for firms to use improved engagement to meaningful lower emissions.