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PTSupplier engagement as a strategy to reduce indirect emissions
Companies are increasingly held jointly responsible for the actions of their suppliers regarding ESG issues. Recent examples show reputational and legal crises related to labor issues, corruption, and environmental crimes.
When we focus on climate change, the value chain often concentrates the greatest risks for the contracting company. Regarding Greenhouse Gas (GHG) emissions, upstream scope 3 emissions are, on average, 11.4 times higher than direct emissions (CDP, 2023).
Although it is challenging to influence actions that are outside the company’s operational control, seeking practices that enable action on the value chain is essential for a robust alignment with the best practices to combat climate change, in addition to reducing exposure to other risks. To this end, engaging suppliers in the topic is the first step towards building a strategy to reduce indirect GHG emissions, also referred to as scope 3 emissions.
The Science Based Targets initiative (SBTi), for example, has guidelines for the establishment of scope 3 targets, which are mandatory whenever they represent more than 40% of companies’ total emissions, and must include at least 67% of total emissions (SBTi, 2025). Although, in the short term, the goal for scope 3 aims at a lower ambition than those for scopes 1 and 2, the challenge for absolute reduction of these emissions is significant. Thus, one of the possibilities that the SBTi proposes is the goal by engagement, associated with suppliers, with a period of five years to be achieved (SBTi, 2025).
In order to build this engagement, it is essential that companies know their suppliers, understand the challenges and direct efforts according to the relevance of the emission sources. Therefore, this article aims to present the main steps for building a supplier engagement plan, highlighting its importance and challenges in the decarbonization trajectory of companies.
Scope 3 challenges
It is known that the first step to address actions to reduce the impacts of climate change is the preparation of the GHG inventory, which allows the identification of the most relevant sources of emissions.
Thus, the challenges related to scope 3 begin in the calculation of emissions itself, since, in most companies, the value chain is extremely fragmented. In this sense, one can choose to develop a screening, a widely applied methodology, which uses financial data and sectoral emission factors to estimate emissions.
Although screening contributes to the identification of the main sources of emissions, the definition of emission reduction actions based on financial estimates is not very effective. Therefore, the collection of data from suppliers, such as fuel and energy consumption or life cycle emission factors, represents the first step in structuring the relationship with suppliers within the scope of the climate agenda.
In this sense, developing strategies to create closer relationships with the supply chain is essential to act both in the calculation of emissions and in decarbonization projects. To this end, engagement plans are built taking into account the specificities of each company.
Supplier matrix
It is true that it is not feasible, nor necessary, to engage all suppliers of a company. As in the screening process, in which we seek to concentrate efforts on what is material, the construction of an engagement plan also needs to go through this process of selecting the suppliers that will be engaged. There are those that actually generate significant impacts on the company’s value chain, either by performing a critical activity or supplying a significant volume of certain material, and those that are punctual or that provide low-emission services.
Therefore, companies need to define criteria to prioritize which suppliers will be engaged and the implementation horizon. These criteria should be related both to climatic factors, such as the supplier’s volume of emissions and maturity in the subject, as well as to business relationship issues, such as the supplier’s punctuality, whether it is the only service provider that is being demanded, or whether the lack of service or product could compromise operations.
From the definition of criteria, weights and scales, it is possible to build the supplier matrix, which will help direct engagement actions.
Engagement actions
Engagement actions must be aligned with the company’s objectives and strategy and must be divided into different deadlines, according to their complexities. In addition, as well as the supplier matrix, it is important that the actions are reviewed as there is an increase in maturity in the topic on the part of the contractor.
Companies that are at the beginning of the process of establishing their climate strategies should first assess the level of maturity of their suppliers in relation to the topic. This diagnosis is essential to enable more effective future actions. For this, awareness and literacy actions can be conducted with the objective of presenting the project, getting to know those involved and leveling the knowledge of the participants.
From then on, short-term actions can focus on collecting physical data to improve emissions results. From the refinement in the calculation of the inventory, it is possible to act jointly in the identification of alternatives for decarbonization of the main sources and seek commitment from suppliers through the establishment of emission reduction targets.
In addition to demanding actions from suppliers, it is important that companies promote internal actions that support this plan. Clear definitions of objectives stemming from technically based goals, review of internal policies, and employee training are examples of actions that can help in the construction, maintenance, and achievement of the objectives of the engagement plan.
It is noteworthy that buyers and suppliers need to act together to promote the decarbonization of activities, and it is necessary that companies that want to engage the chain have a proactive role and be transparent with regard to the requirements that will be directed to suppliers. According to the World Business Council for Sustainable Development report, approaches for suppliers to promote actions can take place in four ways: (WBCSD, 2021)
- Non-financial benefits, which help build supplier capacity through public recognition, sharing of learning, among others;
- Financial benefits, which ensure that progress on the agenda is rewarded through performance payments, reduction in payment terms, among others;
- Non-financial penalties, which seek a regulatory approach by inserting clauses in contracts involving points such as inventory disclosure and emission reduction;
- Financial penalties, which is the most difficult approach to enforce and can be enforced through initiatives such as carbon pricing, contract termination, and more.
It should be noted that the approaches are not mutually exclusive and can be used in different periods or in risk classifications of different suppliers. For example, non-financial benefits can be offered at the beginning of the plan’s application, demonstrating to suppliers the company’s commitment to the topic. In turn, financial benefits may be needed to engage suppliers with high emissions and few substitutes in the market.
It can be noted that actions related to scope 3 are challenging and that the construction along with suppliers of emission reduction strategies is essential for achieving ambitious goals. The development of an engagement plan helps companies to direct efforts in an efficient and structured way to ensure alignment with the best practices to combat climate change.
WayCarbon assists clients in all steps of the development of the engagement plan, from the calculation of GHG screening and inventory to the definition of the actions that can be applied to suppliers over time. Always in search of innovation, the company will soon announce another solution to support organizations in this challenge.
References
CDP (2023). Scoping Out: Tracking Nature Across the Supply Chain. Available at: https://cdn.cdp.net/cdp-production/cms/reports/documents/000/006/918/original/CDP-Supply-Chain-Report-2022.pdf. Accessed on June 27, 2025
SBTi (2025). Engaging Supply Chains on the Decarbonization Journey. Available in https://files.sciencebasedtargets.org/production/files/Supplier-Engagement-Guidance.pdf. Accessed on August 8, 2025
WBCSD (2021). Reaching net zero: incentives for supply chain decarbonization In collaboration with Reaching net zero: incentives for supply chain decarbonization.
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