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The May 2023 SBTi Supplier Engagement Guide lays out the supplier engagement journey as follows:

Source: May 2023 SBTi guide 

For this section, we assume your team already has buy-in to set an SBT that includes Scope 3. This section will cover BC3 Practitioners’ approaches to defining supply chain targets and the pros and cons of setting and pursuing each type of target.

If you have not yet secured buy-in to set a Scope 3 target, or want more information, you can refer to the BC3 GHG inventory & Target setting basics guides. 

To understand the technical guidance around how to set a credible scope 3 target, section 2 of the SBTi Guide covers how to calculate scope 3 emissions, how to determine which target is right for your organization, and which suppliers to include in your target.

As you see above, several BC3 Member companies have set a supplier engagement target (versus a reduction target) possibly for one of the following reasons (as published in Section 2.2 of the May 2023 SBTi Guide):

• There is limited access to primary supplier or product-specific emissions data resulting in a spend-based calculation for related categories (inhibiting the ability to track supplier - or product-level emission reduction measures) 

• The supply chain or product mix is extremely complex, which makes tracking supplier or product-specific emission reductions cumbersome and costly 

• The company does not produce physical goods, resulting in a footprint primarily driven by indirect procurement. Influence over suppliers - and therefore emissions reduction - may be limited 

• Specific emissions reduction levers to achieve the minimum absolute or intensity-based scope 3 targets are not yet identified or difficult to implement

Source: May 2023 SBTi guide 

There are many factors to consider when evaluating which target method is right for your organization. Based on their own experiences, BC3 Practitioners have identified the following considerations for setting and pursuing each type of target:

2B. SUPPLIER DIVERSITY GOAL CONSIDERATIONS

Something to consider as you are setting a supply chain goal is how your climate goals may impact supplier diversity goals and efforts. Smaller businesses are more likely to have diverse ownership, and smaller businesses are more likely to have  fewer resources to pursue sustainability than their larger counterparts. You can consider setting up your program to ensure your sustainability expectations aren't preventing or limiting business with small and diverse suppliers. Here are some considerations that the BC3 Practitioners have identified:

• Set up your program to ensure that companies have the opportunity to “come along on the journey” – focus on what companies are willing to do and what’s appropriate for their business versus what they are already doing or have achieved.

• Consider whether different expectations should be applied to different suppliers or how engagements might look different between smaller and larger companies.

• Evaluate whether you’ll be able to provide small and diverse suppliers with access to tools and resources that support their progress.

• Make your procurement team an internal advocate for the program by connecting sustainability efforts to Supplier Diversity. Some BC3 Practitioners have developed “Holistic Responsible Sourcing” approaches on their procurement teams 

• Think about how you can streamline communications with suppliers, and consider that a supplier may have different people managing sustainability and diversity. Sometimes it will make sense to engage on both topics, while other times it won’t. Your procurement team may have a DEI survey to onboard all new suppliers, which can be leveraged to add sustainability questions.

2C. ORGANIZING & PRIORITIZING YOUR SUPPLIERS

In section 2.3 of the May 2023 SBTi Guide, guidance is provided on selecting the right suppliers for your target. The section below covers additional ways BC3 Practitioners have utilized to collect, organize and verify baseline supplier data to help build supplier engagement programs. 

While understanding the relative spend and emissions impact of your suppliers is critical to effectively focusing your supplier engagement efforts, some BC3 Practitioners would encourage their peers to use this process for just that – defining your engagement strategy–but not for identifying specific suppliers to be in scope or out of scope of your target. 

• A key SBTi criteria for supplier engagement targets is that your suppliers must set an “SBTi-aligned” target within the five-year target timeframe. 

• Your supplier base will change over the five year period of your target (if you have set an SBTi supplier engagement target), and thus your approach to engagement and the suppliers you are targeting must be flexible and capture new suppliers while deprioritizing short-term suppliers.

• Focus on who should be included in your engagement efforts, not who the target should be limited to. 

That said, in order to gain internal buy-in and plan for target implementation, it will be helpful to identify a list of priority suppliers and their business status and GHG program maturity, as detailed in the SBTi guidance. It may help to segment suppliers based on climate maturity and the company’s ability to influence the supplier. In particular, what percent of your top suppliers have committed to or set SBTs already? Of those that haven’t, do you expect any to be low-hanging fruit based on the maturity of their GHG program? Also of those that haven’t, what kind of leverage do you have over them? What does your longer term relationship look like? Getting answers to these kinds of questions will involve working with your procurement team, internal teams contracting the suppliers,  and conducting desktop research into your top suppliers. After segmenting suppliers, you can divide them into tiers and tailor engagement strategies for each tier. You can use this baseline data to create a profile of what you think progress towards a supplier engagement SBT might look like over five years, how easy or difficult it may be to achieve, and the level of resources required.  

Before embarking on data collection, it may be helpful to get to know your procurement organization, if you haven’t already. For example, is there one centralized team or is the procurement function distributed? How is ownership of supplier relationships organized (e.g., by commodity, by region, by business unit)? What key tools and systems are used to track suppliers and spend? How big of a role do your sourcing and procurement teams play in supplier relationship management and purchasing decisions versus how much is managed by the business partners that work with those suppliers?

i. COLLECTING BASELINE DATA ON SUPPLIER RELATIONSHIP

You can obtain this information from your finance and procurement teams so that you can begin to categorize your suppliers for better understanding of your overall supplier landscape. When creating a supply chain program strategy, it is  important to understand the landscape of your suppliers.

Identify who within your procurement organization leads operations in order to collect necessary baseline data. 

Tip: You may find that points of contact on your procurement team work more on the AP/Invoice side of things and have a harder time responding to ESG questions. Going through the owner of the supplier relationship could be a more effective way of requesting contacts. 

ii. COLLECTING BASELINE GHG DATA ON YOUR SUPPLIERS

iii. SEGMENTING AND PRIORITIZING YOUR SUPPLIERS

Now that you have some supplier data, You will need to establish criteria to segment and prioritize your suppliers for engagement. You can’t take the same approach with 1,000 suppliers. It's not scalable, and different companies may need a different approach.

In section 2.3 of the May 2023 SBTi Supplier Engagement Guide, you can view several considerations for selecting suppliers to include within the target, which include:

• Leverage over suppliers 

• Strategic status of supplier (importance to business)

• Sourcing/procurement trends (how will spend change with individual suppliers and across the supplier base)

• Supplier GHG program maturity

• Supplier category 

• Supplier risk level