As mandatory reporting practices are implemented across the globe, companies need to be able to assess the environmental and social impact of the entirety of their operations, including their supply chain.
The question that remains with a lot of organisations is: how can you ensure suppliers understand and meet the growing ESG expectations?
Supplier engagement is key in reducing the social and environmental risks of an organisation, and companies need to facilitate the sharing of best practices and new, innovative technologies. Collaborating with the supply chain on ESG is imperative in establishing effective sustainability practices and processes.
What is Supplier Engagement?
Supplier engagement is the process of actively involving and communicating with suppliers to collect, manage and improve data that an organisation requires for regulatory compliance. In reference to sustainability, it is the collaborative action needed across the supply chain to access the necessary data for ESG reporting and improving ESG practices.
This involves working closely with suppliers to gather information on their environmental, social and governance processes, such as their carbon footprint, labour rights and resource management. This approach is crucial especially when considering Scope 3 emissions, as regulations like the ESRS require detailed reporting on this.
Scope 3 refers to all other indirect emissions produced throughout a company’s value chain. These emissions result from the operations and activities of a company, but occur from sources that are not controlled or owned by said organisation.
Engaging suppliers helps companies gain insight into the state of ESG across their supply chains, allowing them to start gathering accurate data in a much more structured manner. By collaborating with suppliers, businesses can promote the use of standardised data collection techniques, which ensures that the reported data remains consistent and reliable.
Companies embarking on their ESG journey may find it challenging to collect the necessary data for calculating their environmental and social footprint, but it is essential that they do so.
Especially in estimating Scope 3 emissions, it can be hard to accurately identify and monitor progress without sufficient, reliable data.
Why is Supplier Engagement important for ESG Data Collection?
In broad terms, supplier engagement will help to align a suppliers’ operations with the company’s long-term sustainability goals, establishing the entire value chain in working towards a sustainable future.
Engaging suppliers is also crucial in ensuring compliance with regulations like the CSRD, ESRS and CSDDD. These regulations are revolutionising the ESG landscape by mandating ESG reporting in companies’ supply chains. This requires businesses to collaborate with suppliers and engage them with the company’s sustainability policies.
Creating and establishing a formal engagement process encourages suppliers to measure, report, and disclose their sustainability data. This transparency is essential for consistent, reliable reporting and accurate progress tracking. Understanding suppliers’ ESG data helps to identify any risks, such as potential reputational damage, non-compliance and possible supply chain disruptions.
Proactive supplier engagement indicates a company’s commitment to sustainability, improving relationships not just with suppliers through clear communication, but with all stakeholders. Investors, customers and employees will see the effective supply chain management and the reported ESG data that comes from that as an organisation’s dedication to transparency and accountability.
Supplier engagement allows companies to:
- Collect accurate, reliable data from suppliers in a standardised process.
- Identify areas of improvement in sustainability previously missed due to a lack of understanding of the supply chain.
- Establish coordinated sustainability efforts and targets between the reporting company and its suppliers.
The challenges of supplier engagement for ESG data collection vary, but are oftentimes dependent on the complexity of the supply chain and the ability of a company to engage the suppliers, whether that be due to financial constraints or other barriers.
It is difficult to gather data for reporting from across complicated value chains, but it is a process that must be established and managed despite these challenges. Every company must adapt its practices for compliance, and the focus must be on driving supplier engagement to ensure this.
How Can You Drive Supplier Engagement?
There are many challenges when engaging suppliers, and companies need to be considering the steps that need to be taken to ensure supplier engagement when collecting ESG data. Here are some best practice tips to ensure your supplier engagement processes are as effective as they need to be.
1. Define Company Goals
Before your company even begins to collect ESG data from suppliers and engage them in that process, you need to have a clear idea of what you want to achieve and what information needs to be measured.
Consider questions like these:
- What are your sustainability objectives and priorities?
- What are the key ESG metrics that align with your goals?
- How do you plan to use and report the data?
- What is the scope of your data collection? Such as which suppliers are relevant?
- How often do you want to collect data?
- What level of detail and quality of data do you need?
2. Choose Your Methods
Once you have your goals defined and an established idea of the data you need from your suppliers, it’s important to select the best method of collection for your organisations, as well as have the right tools at your disposal for this. ESG data can be collected through several different options, such as questionnaires, surveys, audits, interviews, certifications, ratings, and benchmarks.
Software platforms are often used to aid in the time-consuming task of collecting this data and ensuring it is ready for reporting, so consider investing in systems that will help your supply chain adapt.
You should also look for any tools and/or methods that are aligned with the standards that require supply chain ESG data to be reported on, like the CSRD and ESRS. Establishing this will help in communicating to your suppliers how you want ESG data to be collected.
3. Develop a Supplier Code of Conduct
Developing and implementing a supplier code of conduct will help your suppliers throughout the value chain to have a clear understanding of the company expectations. When supply chains can span across the globe, it’s important to ensure your suppliers adopt your ESG practices into their operations, as they may not have to comply with the same regulations as the company.
Maintaining a code of conduct ensures suppliers understand what is expected of them as a part of your supply chain, and establishes consistent and standardised processes for ESG reporting and data collection.
In creating a code of conduct, it’s crucial to consider the abilities of suppliers. By requesting input through surveys or interviews, your organization can gain insights into the difficulties they face while moving towards more sustainable and ethical practices. This presents a chance to understand how to effectively assist suppliers and foster ongoing growth.
4. Invest in Education and Training Opportunities
Many suppliers might want to engage with ESG and sustainability, but lack the necessary training and resources to do so. It is then the job of the company to provide opportunities for education in this, in order to facilitate more effective data collection processes.
Training topics could include regulation compliance, reporting requirements, data and documentation gathering, and how to better adhere to the organisation’s supplier code of conduct. The training could be given in the form of workshops, webinars, and/or in-person events/conferences.
Educational and training initiatives offer advantages such as quicker data collection for ESG reporting, more organised and uniform data, and improved cooperation between a company and its suppliers. Enhancing engagement and teamwork with suppliers fosters trust and ensures their alignment with your organisation’s ESG objectives.
5. Implement Risk Assessments and Assess Regularly
It is important for companies to periodically assess supply chain risk, look at your processes and engage suppliers in improving this. ESG-related risk assessments will use data collection, third-party audits, site assessments and more to determine the risks and opportunities of individual suppliers.
This provides an important way for companies to evaluate suppliers and be able to provide support, by developing an understanding of and engaging with the issues that suppliers face in their operations.
When companies can identify potential risks, you can be proactive in addressing them, establishing the root cause and providing a strategic plan to mitigate it.
Although these steps can seem like a sizeable investment for your company, these measures can provide financial savings in the long-term, ensure a resilient supply chain, and create strong relationships with your suppliers. Driving supplier engagement is a crucial part of establishing effective ESG practices, so that ESG data can be collected and reported on for compliance.
How Convene Can Help Your Supplier Engagement
Collecting ESG data from suppliers is not a one-way process, it requires clear communication and collaboration. The process of ESG data collection can be complicated and laborious, and that’s why you need as much help as you can get.
Companies who are looking for assistance with their data collection processes across the supply chain are turning to systems that can manage this for them. Investing in software can make the process of data collection and ESG reporting much simpler.
This is where Convene comes in.
We have developed our own ESG reporting tool: Convene ESG.
Convene ESG provides an end-to-end platform to collect data, track progress, compare with peers, align with frameworks and produce ESG reports.
With our new supplier module specifically built to meet the ESRS requirements, we’re here to ensure your organisation is ready for ESRS reporting.
We want to ensure efficiency, compliance, and strategic ESG insight, with automated and centralised supplier data collection and pre-built forms that simplify Scope 3 data collection.
We also have upcoming capabilities like AI-driven benchmarking and custom questionnaires to address unique ESG goals.
In order to ensure you maximise your ESG potential in 2025, choose a sustainable future with Convene ESG.
