Case study: Procurement & supplier engagement — An emerging standard shaping buyer requirements

Scope 3 emissions typically represent 70-90% of a company's carbon footprint, making supplier engagement the critical lever for corporate decarbonization. The Science Based Targets initiative (SBTi) now requires companies to address these value chain emissions, fundamentally reshaping how buyers evaluate and select suppliers.

Quick Answer

The SBTi supplier engagement target requires companies to have their suppliers — representing at least 67% of Scope 3 emissions — set science-based targets within five years. This standard has created a cascade effect: over 4,000 companies with approved SBTs are now requiring climate action from their supply chains, transforming procurement from a cost-focused function into a strategic sustainability lever.

Why This Matters

Supply chain emissions dwarf direct operations for most industries. A typical consumer goods company generates 80-90% of emissions in its value chain — from raw material extraction through product disposal. Without supplier engagement, corporate net-zero commitments remain impossible to achieve.

The Scale of Scope 3:

• Retail: 98% of emissions in supply chain
• Technology: 85% in manufacturing and components
• Automotive: 80% in materials and use phase
• Financial services: 99%+ in financed emissions

The SBTi supplier engagement requirement addresses this reality. Companies cannot simply offset their way to net-zero; they must actively transform their supply chains. This creates both compliance pressure and competitive advantage for suppliers who lead on climate action.

The Basics: SBTi Supplier Engagement Requirements

What the Standard Requires

Companies setting science-based targets must choose one of three approaches for Scope 3:

Option 1 — Absolute Reduction: Reduce Scope 3 emissions 42% by 2030 (aligned to 1.5°C pathway)

Option 2 — Intensity Reduction: Reduce Scope 3 intensity metrics with sector-specific pathways

Option 3 — Supplier Engagement Target: Ensure suppliers covering 67% of Scope 3 emissions set their own SBTs within five years

Most companies select Option 3 due to limited direct control over supply chain emissions. This shifts accountability to suppliers while maintaining measurable progress requirements.

CDP Supply Chain Program

The Carbon Disclosure Project's Supply Chain program operationalizes these requirements. In 2024, over 280 member companies representing $6.4 trillion in procurement spending requested climate data from 40,000+ suppliers through CDP. Key metrics tracked include:

• Response rate: 81% of requested suppliers now respond (up from 50% in 2018)
• Target adoption: 35% of responding suppliers have science-based targets
• Emissions disclosure: 67% report Scope 1 and 2 emissions; 45% report Scope 3

Suppliers increasingly recognize that CDP disclosure — once optional — has become a procurement prerequisite for major buyers.

Decision Framework: Implementing Supplier Requirements

Phase 1: Baseline and Prioritization (Months 1-6)

Map Your Emission Hotspots:

Before engaging suppliers, understand where emissions concentrate. Analysis typically reveals that 80% of Scope 3 emissions come from 20% of suppliers. Focus initial engagement on:

• High-emission categories: Raw materials, energy-intensive components, logistics
• Strategic suppliers: Long-term partners with collaborative relationships
• Influence potential: Suppliers where you represent significant revenue share

Establish Baseline Metrics:

• Current supplier SBTi adoption rate
• Emission intensity per supplier category
• Data quality scores (primary vs. estimated data)

Phase 2: Engagement Strategy (Months 6-18)

Tiered Approach by Supplier Type:

• Tier 1 (Strategic): Joint decarbonization roadmaps, shared investment in efficiency, preferential contract terms for climate leaders
• Tier 2 (Significant): Annual CDP disclosure requirements, capacity building support, clear timeline for SBTi commitment
• Tier 3 (Transactional): Standard contract clauses, category-level emission factors, periodic data requests

Support Mechanisms:

Leading buyers don't just demand — they enable. Effective programs include:

• Training workshops on carbon accounting and target-setting
• Funding for energy audits and efficiency improvements
• Preferred financing rates for sustainability investments
• Technical assistance for smaller suppliers

Phase 3: Integration and Escalation (Months 18-36)

Procurement Integration:

Embed climate criteria into sourcing decisions:

• Weight sustainability metrics in RFP scoring (typically 10-20% of total)
• Include emission reduction clauses in contracts
• Tie supplier performance reviews to climate progress
• Develop alternative suppliers for climate laggards

Escalation Pathway:

For non-responsive suppliers:

• Year 1: Education and support, no consequences
• Year 2: Formal improvement plan required
• Year 3: Reduced purchase volumes or contract non-renewal
• Year 4-5: Phase-out of suppliers without SBTi commitment

Practical Examples

Unilever's Climate Transition Action Plan

Unilever sources from over 60,000 suppliers across agricultural commodities, chemicals, and packaging. Their supplier engagement program demonstrates enterprise-scale implementation:

Approach:

• Required top 300 suppliers (representing 70% of spend) to set SBTs by 2025
• Launched "Partner with Purpose" program providing technical assistance
• Created supplier sustainability academy with 50,000+ training completions
• Invested €1 billion in Climate and Nature Fund supporting supplier transitions

Results (2023):

• 89% of top 300 suppliers have SBTi commitments
• 23% absolute reduction in Scope 3 emissions since 2017
• Supplier disclosure rate to CDP increased from 40% to 85%

Microsoft's Carbon Negative Commitment

Microsoft's 2030 carbon negative goal required aggressive supplier engagement given that 98% of emissions are Scope 3:

Approach:

• Integrated carbon fee into internal budget cycles ($100/tonne)
• Extended carbon accounting requirements to all hardware suppliers
• Launched Sustainability Calculator tool for supplier use
• Created preferential procurement terms for low-carbon suppliers

Results:

• Top 100 suppliers (85% of hardware emissions) now report to CDP
• 70% of key suppliers committed to 100% renewable energy
• Scope 3 emissions decreased 0.5 million metric tons in 2023

IKEA's Science-Based Supplier Targets

IKEA's supply chain spans 1,600 direct suppliers and thousands of sub-suppliers across furniture, textiles, and food:

Approach:

• Set internal 2030 requirement: all suppliers must have SBTs
• Created supplier sustainability index tracking 15 metrics quarterly
• Established energy service company partnerships for supplier efficiency projects
• Developed renewable energy aggregation for supplier access to PPAs

Results:

• 98% of home furnishing suppliers have sustainability action plans
• Renewable electricity use in supply chain increased to 67%
• Material-related emissions intensity reduced 12% since 2021

Common Mistakes

Starting Too Broad: Engaging all suppliers simultaneously dilutes resources and creates reporting overload. Begin with the 50-100 suppliers representing 70%+ of emissions.

Demanding Without Supporting: Smaller suppliers lack sustainability staff and expertise. Programs that only demand disclosure without providing training and resources see low response rates.

Ignoring Tier 2+ Suppliers: Direct (Tier 1) suppliers often account for less than half of supply chain emissions. Effective programs cascade requirements to sub-suppliers.

Static Targets: Supplier engagement is ongoing. Annual target updates, regular performance reviews, and escalating expectations maintain momentum beyond initial commitments.

Conflicting Incentives: Procurement teams measured solely on cost will resist sustainability requirements. Align incentives by including climate metrics in buyer performance evaluations.

Action Checklist

• Complete Scope 3 inventory using hybrid approach (supplier-specific data where available, spend-based estimates elsewhere)
• Identify 50-100 suppliers representing 70%+ of value chain emissions
• Develop tiered engagement strategy with clear requirements per tier
• Create supplier capacity-building program with training resources
• Integrate sustainability criteria into procurement scoring (minimum 10% weight)
• Establish escalation pathway with defined consequences for non-compliance
• Set up supplier data management system for ongoing disclosure tracking
• Schedule quarterly reviews of supplier progress against SBTi commitments

FAQ

What if suppliers refuse to engage? Develop alternative supplier options before enforcing consequences. Most suppliers will engage when they understand requirements are tied to continued business. Small suppliers may need longer timelines and more support.

How do we handle suppliers in emerging markets? Adapt expectations to local context. Focus initially on disclosure and improvement trajectories rather than absolute targets. Provide additional technical assistance and longer timelines.

Should we share our supplier sustainability data publicly? Many companies now publish supplier disclosure rates and aggregate progress. Transparency creates accountability and allows benchmarking. Avoid disclosing individual supplier data without permission.

How do we address suppliers that serve multiple customers with different requirements? Align with CDP Supply Chain program and SBTi standards to minimize conflicting requests. Collaborate with peers in your industry to develop shared supplier requirements.

Sources

1. Science Based Targets initiative. "SBTi Corporate Net-Zero Standard." Version 1.1, April 2024.
2. CDP. "Global Supply Chain Report 2024: Catalyzing Climate Action." CDP Worldwide, 2024.
3. Unilever. "Climate Transition Action Plan 2024." Unilever PLC, March 2024.
4. Microsoft. "2024 Environmental Sustainability Report." Microsoft Corporation, 2024.
5. IKEA. "Sustainability Report FY23." Inter IKEA Group, 2023.
6. World Economic Forum. "Net-Zero Challenge: The Supply Chain Opportunity." January 2024.