Business Growth With ESG: Creating Value and Resilience for Suppliers

The surge in supply chain ESG data requests marks a critical shift in sustainability reporting. More than ever, companies are being asked to share their ESG data with business partners. While navigating this scenario may seem daunting and complex, it presents a substantial opportunity to strengthen relationships with customers, enhance brand reputation, and unlock various ancillary benefits by setting the stage for sustained success.

This article will help you understand why managing Supplier ESG data requests is an opportunity more than a challenge and how responding to such data requests can serve as a competitive advantage. It will also outline the risks of non-compliance and discuss why these supply chain ESG inquiries are likely to continue their upward trajectory.

Recent analysis by the Global Sustainable Investment Alliance reports a 30% increase in ESG data requests over the past year, underscoring the impact of new regulatory measures requiring supply chain ESG disclosures, growing concerns over sustainability risks, and a broader understanding within the business community of supply chains’ essential role in achieving overarching sustainability goals.

A challenge for companies in responding to ESG data requests lies in the diversity and specificity of these inquiries. Each request typically adheres to different specialized frameworks or questionnaires, meticulously designed to align with the requesting company’s specific goals, industry standards, operational uniqueness, and their identified sustainability risks. Some of the most popular reporting requests include:

  • EcoVadis, which assesses a wide range of sustainability indicators, has reached out to information from over 100,000 companies.
  • CDP, which focuses primarily on environmental impact and climate concerns, contacted 47,000 companies for data in the last year alone.
  • Industry-specific tools like the HIGG Index in the apparel world and GRESB for real estate.
  • Many organizations have also designed proprietary questionnaires to elicit sustainability information from their suppliers or include it in the RFP (Requests for Proposals) process.

This variability necessitates a tailored response for each request, requiring companies to adapt their data collection, analysis, and reporting processes to meet a wide array of criteria. Consequently, the effort to accurately and effectively address these requests demands significant resources, including time, expertise, and technology, to ensure compliance and demonstrate a genuine commitment to sustainability.

Scope 3 Emissions and Supply Chain ESG Excellence

ESG data reporting might seem complex, but it does not need to be. Certain elements, such as diversity figures and pay, are easier to share. Climate-related information, however, can be more complex data to collect and calculate, however, it is the most requested datapoint. This is because Scope 3 GHG (Greenhouse Gas) emissions make up the largest percentage of corporate emissions, outnumbering direct emissions by 11.4 times and companies rely on their suppliers to help them measure and mitigate effectively.

As an example, the software company Atlassian highlights how a commitment to sustainability, shared best practices, and knowledge at every step of the supply chain can empower suppliers to enhance their environmental impact. Recognizing that supply chain emissions (Scope 3) constitute 90% of their total emissions, Atlassian made a commitment to aiding their customers in establishing and monitoring progress towards Science Based Targets initiative (SBTi)-approved emissions reduction goals.

And, with Scope 3 now integral to sustainability disclosure laws such as California’s SB 253, the EU’s Corporate Sustainability Reporting Directive, and ISSB’s standards, its accurate reporting has become indispensable for companies mandated or voluntarily ESG reporting.

Simplifying ESG Data Responses in the Supply Chain

To respond to supplier ESG data requests, companies are encouraged to establish robust systems for the collection and reporting of emissions data and climate-associated risks as a first step for preparing to answer requests. Here is a four-step plan to manage and respond:

  1. Assess Customer Queries: Order requests by the priority of the client and how easy it is to respond. For example, always answer your largest customers first and the requests that only require qualitative simple information without delay.
  2. Aggregate Data: Begin the journey of calculating your environmental footprint by conducting a detailed analysis of your operations, aiming to identify every source of emissions, whether directly or indirectly linked to your value chain A GHG calculation tools can help here by ensuring you have the correct data, are using the correct emissions factors, and can give you a data trail to ease the assurance process, which will further confirm the veracity of your emissions calculations.
  3. Framework Compliance: Choose frameworks that are in the most frequent demand, like CDP or EcoVadis, to ensure alignment with global standards. This approach not only facilitates compliance with the most pressing demands but also positions your organization to comprehensively address a broader spectrum of sustainability criteria, enhancing your reputation and operational resilience in the process.
  4. Regular Supply Chain Engagement: To ensure clarity, transparency, and build trust, regularly communicating with customers about your company's sustainability goals, challenges, and progress.

Capitalizing on Supply Chain ESG Data Requests

According to CDP records, typically, half of the companies approached for ESG data actually reply. This leaves opportunity for businesses that choose to engage to drive a competitive advantage. By responding, you not only strengthen connections with the customers requesting your data but also gain a host of benefits that can bolster your firm’s brand reputation, help you to assess sustainability-related risks, and reduce operational costs, such as:

Sharing Supply Chain ESG Data Should Be a Win-Win Situation

Proactive engagement in supply chain ESG data requests can elevate your brand reputation, bring key benefits, and help differentiate your brand with future customers and a growing sustainability-focused consumer base.

Responding promptly and accurately to ESG requests is increasingly becoming a non-negotiable term of customer-supplier engagements. Instead of seeing ESG data management as a regulatory chore, reframe it as a strategic business opportunity for growth.

Comparing the costs of implementing your ESG program with the potential losses incurred from inaction—such as losing crucial existing and new clients—highlights the necessity of ESG data reporting into your business model.

To increase your brand reputation further and build on your competitive edge, getting your sustainability data assured by a CPA ensures you mitigate any reputational risks of misstatements or accusations of greenwashing.

What Is the Solution?

Supply chain sustainability data requests are only going to increase. Equipping your company with the necessary tools and skills to start proactively collecting relevant data for sharing is the best way to ensure you are exploiting these opportunities and mitigating any risks.

Going one step further and getting your data assured by a registered CPA will ensure your customers can count on the data you have provided to be accurate and useful, further building the relationship and driving a competitive advantage.

If you want to start building rapport with your biggest customers, creating a positive brand image, and benefiting from the other opportunities related to managing and reporting sustainability data, reach out to our experts for help in collecting, reporting, and auditing ESG data.

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