Sustainable procurement: unlocking the power of your suppliers

What if the key to reducing your company's carbon footprint lies in your supplier network?

Baringa's third instalment of our Sustainability Industry Roundtable Series focused on ‘Unlocking the power of suppliers: how procurement leaders are driving the carbon reduction agenda’. With leaders from diverse sectors — including consumer products, retail, telecommunications, oil and gas, pharmaceuticals — the critical role procurement plays in advancing sustainability efforts was highlighted through exploring the role of supplier engagement, industry-wide decarbonisation strategies, and the dynamic challenges and opportunities reshaping the field.

What did we discover?

• Be realistic about resources: Don’t underestimate the time, funding, and support needed for your procurement teams and suppliers. Setting ambitious goals requires adequate resources to drive meaningful action.
• Start early, even if it’s not perfect: Don’t wait for all the answers. Both your business and suppliers will have questions, and you won’t always know the right response. Use this feedback to inform next steps and embrace learning by doing.
• Prioritise key suppliers: Focus your efforts on suppliers who have the highest impact and the greatest potential for improvement. Equip procurement teams to build supplier capabilities and deliver measurable results.
• Secure leadership endorsement: Gaining top-level commitment to sustainability is crucial. It gives procurement the mandate to drive sustainability efforts and supports difficult decisions around financial and operational trade-offs.
• Engage key stakeholders early: Develop a clear, straightforward approach that stakeholders can easily understand and endorse. Ensure your roadmap is aligned with your team’s capabilities and provides a clear direction for the organisation.
• Expand beyond carbon: Sustainability isn’t just about carbon. Build a framework that allows for scalability across other sustainability metrics, including social and environmental factors.
• Integrate sustainability into procurement’s everyday work: Sustainability should be embedded into procurement strategy and decision-making. Ensure it becomes part of buying decisions, category strategies, contracts, and supplier management processes.

Why is it important for companies to reduce their supply chain emissions?

Many companies have set ambitious sustainability goals, such as achieving Net Zero. However, their efforts have largely concentrated on improving internal operations and tackling emissions within their direct control (Scope 1 and 2). This approach misses the crucial point: more than 80% of emissions typically come from supply chains.

To meet these Net Zero targets and address the bulk of emissions, alongside broader environmental and social risks, procurement practices must undergo a transformation. It’s time to move beyond intentions and take decisive action to drive real, measurable reductions across the entire supply chain.

What is the role of procurement in making the supply chain more sustainable?

Procurement must have a clear mandate to position sustainability as a strategic priority. With this mandate, procurement teams can:

• Bring transparency across the supply chain, highlighting both risks and opportunities to create informed sustainable strategies.
• Integrate sustainability into procurement strategy contracts, and supplier management processes, balancing difficult decisions around financial and operational trade-offs.
• Deliver tangible impact by achieving measurable sustainability improvements year after year, building a truly future-ready and resilient supply chain.

What is the value in sustainability beyond becoming ‘green’?

Sustainable procurement can strengthen supply chain resilience, enhance operational efficiency, and even lead to cost savings. Evidence of sustainability commitments can elevate a company's brand value and are crucial for attracting and retaining top talent. In today’s market, companies are now expected to show tangible progress on sustainability. Those who fall short risk being left behind.

How should procurement teams work more effectively to measure the supply chain carbon footprint?

Improving data quality is essential for accurately measuring the carbon impact of supply chains. This may involve developing standardised carbon reporting methods aligned with the GHG Protocol and other international standards to assess the emissions impact of individual suppliers. The methodology for measuring supplier footprints should be tailored to the "materiality" of each supplier—that is, their relative impact on your overall emissions. Approaches can range from spend-based emissions mapping to supplier-provided data and detailed product carbon footprinting, ensuring that measurement efforts are proportional to the supplier’s contribution to your emissions profile.

How can procurement teams improve engagement with suppliers on sustainability?

Supplier emissions reduction targets may be established, requiring a commitment from the supplier to decarbonise as a condition for continuing the business relationship. Supplier engagement should be spearheaded by the procurement category teams, who are the direct contact for the supplier into your organisation, and they must be equipped and trained to effectively collaborate with suppliers on sustainability.

Category playbooks can serve as practical guides to help category teams identify and discuss specific actions suppliers can take to reduce emissions. These playbooks ensure that carbon reduction is seamlessly integrated into the supplier management process. By providing suppliers with a clear, actionable decarbonisation roadmap as part of your supplier relationship management program, you encourage stronger buy-in and foster greater collaboration toward sustainability goals.

How should you respond to suppliers who challenge supplier engagement programmes due to costs or even disinterest?

Consider developing a comprehensive system to incentivise suppliers, making their sustainability performance a critical factor in how you allocate business. By rewarding progress, you not only encourage suppliers to meet sustainability targets but also embed these expectations into your procurement strategy. One approach is to explore how improvements can be monetised, such as performance-based bonuses or preferential treatment. Additionally, green financing options can be leveraged to offer financial rewards for meeting specific environmental benchmarks, further motivating suppliers.

Securing funding to support suppliers on their sustainability journey is equally important. Many suppliers, especially smaller ones, may lack the resources or capacity to implement meaningful changes. By providing financial support, whether through grants, low-interest loans, or co-investment models, you help reduce barriers, enabling suppliers to adopt greener practices more effectively. This can also create stronger, more resilient partnerships, as suppliers see your company as an enabler of their success.

What is the end goal for a sustainable procurement team?

Your procurement strategy must embed sustainability as a core element within category strategies, sourcing decisions, and supplier management frameworks. A portion of the evaluation criteria for sourcing and awarding business should focus on sustainability, with added incentives for suppliers making meaningful progress in their carbon reduction efforts.

The role of procurement, and its interface with sustainability teams, should be clearly defined, featuring integrated governance across both functions. This includes introducing new processes, building capabilities, improving data quality, and adopting advanced digital systems and platforms to streamline efforts.

To move from strategy to action, senior leadership alignment and sponsorship are crucial to ensure that sustainability priorities are well understood and that procurement actions align with the company's broader objectives. Finally, sustainability programs must be scalable beyond carbon, addressing broader issues such as nature conservation, biodiversity, water management, and human rights.

What is the best advice for organisations starting out on their supplier engagement journey?

Engage all relevant stakeholders early in the process. Driving meaningful change often involves tough decisions and trade-offs, which require strong governance and collective commitment. Ensuring everyone is aligned and invested is key to reaching your sustainability goals.

Equally important is being realistic about the resources required to deliver a successful supplier engagement program, and emphasising the importance of leadership support. Suppliers will bring a wide range of questions, and the answers won’t always be clear right away. It's okay to acknowledge this uncertainty. Instead, focus on building the knowledge, tools, and infrastructure together.

Please reach out to Maureen O’Shea, Byron Cotter, Megan Toon, Patrick Winters or Jonathan Roberts to discuss how Baringa can support your organisation to unlock the potential of your suppliers and elevate the role of procurement in driving sustainability for your organisation.