Suppliers are facing increasing pressure from the buyers of their goods and services to report their environmental, social, and governance data. As corporations announce plans to be Net Zero across their end-to-end supply chain at some point in the future – often 2050 – they then need their suppliers to participate in helping them meet their goals. Corporations are kicking off these initiatives both because their customers expect it and because of increasing regulatory pressure. Increasingly, companies will take sustainability criteria into account in their purchasing decisions.
Large corporations often have thousands, sometimes tens of thousands, of direct material suppliers. Getting suppliers to participate is a gargantuan task. Increasingly, EcoVadis is becoming known as the go to organization to help corporations accelerate this journey to collect upstream supplier environmental, social, and governance data. Because EcoVadis is the leader in this, a supplier that is reporting data to one corporation using the EcoVadis reporting format, will often be able to quickly provide their ESG data to a different buyer wants because that buyer will also be working with EcoVadis and want the data reported in the same format. EcoVadis is a purpose driven, for profit corporation based in Paris, France.
Once a year, EcoVadis clients request that their suppliers perform EcoVadis’ annual assessment of a supplier’s sustainability performance, which includes the carbon assessment. The data, which is reported on the EcoVadis platform, highlights the supplier’s emissions. The data collected from the assessment is used to provide an internal sustainability scorecard that is shared by the supplier to their customers (the buyers). The Carbon Action portion of these scorecards benchmark a supplier’s ability to collect and disseminate emissions data. A supplier’s Scope 1 emissions become part of a buyer’s Scope 3 emissions. In short, the reported supplier data ripples up to a buyer’s Scope 3 calculations.
EcoVadis analyzes all documentary proofs and content provided (e.g. environmental policies, energy invoices, GHG emissions report audits, etc.) to confirm alignment to reported information, but does not itself certify that the data provided by suppliers is accurate. EcoVadis’ focus is helping suppliers accelerate their journey by measuring and improving their sustainability management system, collecting and reporting their data, building capacity to ultimately drive reductions in impact. EcoVadis also deploys artificial intelligence to monitor online publications. Analysis of what is reported may suggest that a supplier has not been totally forthcoming in what they have reported on the platform. This can trigger a change to a supplier’s scorecard.
Of suppliers in the EcoVadis network, 46% of large companies and 9% of SMEs report emissions publicly (e.g. via CDP or their sustainability reports), and about 20% report their emissions directly on the EcoVadis platform annually. Currently, a supplier looking to satisfy a customer usually goes through a labor-intensive project to collect and analyze their data. Many companies don’t even know how to start these projects. The work EcoVadis is doing is focused on not just getting data, but helping companies build up their capacity, so they are able to calculate emissions data accurately, and with the precision their clients will need – e.g. going from company-wide emissions to reporting at product line or product-specific level – on an ongoing basis in a much less labor-intensive manner.
Schneider Electric and EcoVadis
Christophe Quiquempoix, VP of Sustainable Procurement at Schneider Electric shared his insights during a panel discussion at EcoVadis Sustain Conference 2023. Christophe was asked, “How did Schneider Electric get started on their net zero journey and what was the role of the suppliers?”. In his response, he shared that the first step was to set emission targets internally, which included:
- Carbon neutral across scopes 1 & 2 by 2025
- 50% reduction in emissions by 2025 for operating suppliers
- Carbon Neutral up and down the entire value chain by 2040
After the internal emission targets were set, they ran an initial supply chain maturity assessment which informed them that 70% of their suppliers were new to decarbonization and were unable to compute their own carbon footprint at that time. Schneider Electric, like most companies, have most of their supply chain emissions generated in their extended supply chain. Schnieder Electric’s analysis showed that their direct emissions were 20 times less than their suppliers.
Laying the foundation of a Net Zero Journey
Once the targets were set internally, Schnieder turned externally to their suppliers and asked them to set their own emission targets. The main goal was to have suppliers start their own decarbonization journey. The initial response was minimal, but what was provided did help the Schneider sustainability team to create a baseline. Considering the low response rate and the maturity level of their suppliers, Schnieder Electric started from the ground up and worked “hand in hand” to support their suppliers net zero journey.
Schnieder Electric constructed a “full framework” of tools, resources, and offered collaboration opportunities dedicated to sharing strategies on reducing emissions. Some of the resources made available to the suppliers included an online digital platform, “Neo Network” that provided training videos. A “Digital Emissions Calculator” for suppliers that still had issues with calculating their carbon footprint. Internally they launched the “Supply Chain Renewable Initiative” that provided suppliers access to renewable energy. Which was completed by aggregating suppliers into cohorts so they could gain access to Power Purchase Agreements (PPAs) and Energy Attribute Certificates (EAC).
The project was officially launched in 2021 and by January 2022, 100 suppliers had declared their carbon footprint. At the end of 2022, 950 suppliers had declared their carbon footprint and in spring of 2023 1,015 suppliers were still actively engaged within this program. Resulting in a 10% reduction in emissions across the supplier network.