What are the key steps to engage with suppliers on ESG risks and opportunities?

Defining clear goals is critical for effective supplier engagement in ESG. The goals will establish what outcomes are envisioned - whether assessing performance, finding areas to strengthen, or collaborating on initiatives. The goals should also connect to other priorities like furthering business objectives and meeting customer standards or industry benchmarks. By establishing a focused vision and intent, all parties involved in engagement will understand expectations and have a framework to prioritize actions and review impact.

Segmenting suppliers based on their level of ESG risk, impact, and ability to engage on initiatives is important to customize approaches and efforts for maximum effect. Categorizing suppliers allows prioritizing those with higher exposure to issues, bigger influence due to sector/location, and varying degrees of capability in regard to ESG practices. Tailoring methods according to segmentation provides a practical framework. High-risk suppliers for example may require closer monitoring and compliance focus, while high-opportunity partners could allow greater collaboration on innovation. By understanding each supplier's unique ESG profile, goals and expectations can be better tailored to drive progress overall.

A robust initial assessment forms the basis for a constructive partnership on continual ESG performance improvement. Here are some key steps: -Segment suppliers based on risk exposure, industry, size etc. -Design an assessment approach tailored to each segment. For high-risk suppliers, prioritize surveys collecting quantifiable performance data. -Leverage multiple tools like customized surveys, audit processes, external ratings and benchmarks to get a holistic view. customized surveys targeting specific issues. -Consider in-person or remote audits for the highest-risk suppliers to validate survey responses. -Analyze assessment responses to understand strengths, gaps, opportunities and challenges faced across the supplier network.

Proactive, informed and tailored engagement is key to driving meaningful ESG change across the value chain. Here are some recommendations: -Schedule introductory meetings or webinars to share assessment findings in a transparent yet supportive manner. -Conduct collaborative workshops with procurement and sustainability teams to brainstorm improvement opportunities. -Promote open dialogue to understand challenges from the supplier perspective. -Consider hosting roundtables with peer suppliers to foster knowledge sharing on tackling common issues. -Recognize top performers to incentivize progress and motivate underperformers still willing to improve. -Establish regular check-ins and updates to monitor progress, and ensure accountability.

Establish your supply chain sustainability objectives based on an assessment of your sustainability footprint of your supplier base i.e., know emissions by supplier or product (ideally both) and do your hotspot analysis. Leverage this information as a commercial lever to negotiate with your suppliers on the expected emissions intensity of their products or services similar to how you negotiate cost and include that in your supplier contract. Establish ways to monitor the emission intensity of products on a recurring basis to proactively monitor for any deviations against contractually agreed upon metrics. Incorporate any penalties and/or incentives for lagging behind / exceeding sustainability thresholds.

Providing support to suppliers is integral to ensuring effective engagement on ESG issues. Several types of support can be offered on an ongoing basis. This includes training programs to build specific competencies in areas like emissions tracking, auditing, or reporting. Peer learning sessions facilitate knowledge sharing so suppliers can learn from each other's challenges and successes. Connecting suppliers to valuable external resources broadens their toolkit. Recognition incentives reward progress and motivate continuous improvement. By offering tailored assistance, companies can help suppliers strengthen their capabilities to surmount barriers. This collaborative process helps translate ESG goals into tangible actions.

Aim for a collaborative approach. This is not be to seen as a disciplinary action based on poor environmental performance in the past. Must be seen in a positive and progressive light. It must be a mutually incentivised programme delivering results for both and their wider communities. Assessment and education are key early steps. Alignment on targets and visions is key