The growing demand for sustainable supply chains

Sustainable supply chains have become a top priority for businesses worldwide. As global corporations push to meet aggressive climate targets and comply with tightening environmental, social, and governance (ESG) regulations, suppliers face mounting pressure to align with sustainability expectations. Those that fail to provide accurate data or adopt greener practices risk losing business to competitors that do.

In the U.S., the future of ESG policy remains uncertain, with shifting political dynamics influencing how regulations may evolve. However, regardless of domestic policy changes, ESG remains a global priority. Entities worldwide, including in Canada, the European Union (EU), Mexico, Brazil, Australia, and China, continue to strengthen market reporting requirements, meaning businesses operating internationally—or supplying companies that do—must meet higher sustainability standards. Suppliers will increasingly need to align with these expectations to maintain access to key markets.

The demand for sustainability data has surged over the past decade, with the Carbon Disclosure Project (CDP) engaging over 23,000 companies annually—a number expected to grow in 2025 as organizations work to meet stricter reporting mandates. Well-established frameworks like CDP and EcoVadis remain the primary channels for data collection, while newer platforms such as Sedex and The Sustainability Insight System (THESIS) are increasingly impacting how metrics are reported.

As supply chain transparency becomes a business imperative, this article explores the sustainability data top organizations require, the key role suppliers play in corporate climate goals, and practical steps to stay competitive in a sustainable supply chain.

The Business Impact of Sustainable Supply Chains

Sustainable supply chains are a big part of corporate responsibility. Most of a company's environmental and social impact comes from its entire value chain—not just its own operations.

To understand emissions, think of them in three categories:

• Scope 1: Direct emissions from a company’s own facilities and vehicles, like fuel burned in company trucks or factories.
• Scope 2: Indirect emissions from purchased energy, such as electricity used in offices, warehouses, or production sites.
• Scope 3: Indirect emissions from everything else in a company’s supply chain, including materials sourced from suppliers, product transportation, and even how customers use and dispose of products.

For most companies, Scope 3 emissions are the largest, often exceeding their direct (Scope 1) and energy-related (Scope 2) emissions by tenfold or more. This makes sustainable supply chain practices a key focus for reducing carbon footprints and meeting climate goals.

Why Do Buyers Focus on Supply Chains?

• Regulations on the Rise: Companies face increasing mandates to track and report supply chain sustainability metrics.
• As highlighted in our previous ESG priorities article, from 2025 onwards, the EU’s Corporate Sustainability Reporting Directive (CSRD) will require extensive disclosures on emissions, water use, deforestation, and other data from the supply chain. Eventually, this will directly impact more than 50,000 companies and indirectly impact thousands more in the global supply chain.
  • California’s SB 219 requires Scope 3 emissions reporting by 2026. If you or one of your customers does business in California, you will likely have to report and should begin preparing ahead of time.

• Reducing Risks: Large buyers use supply chain data to identify and address environmental and social risks. Suppliers who take action early help their customers avoid legal issues and business disruptions.
• Enhancing Brand Value: Companies that ignore Scope 3 emissions risk being seen as neglectful of their most significant carbon source, while those championing transparency and collaboration gain respect as sustainability leaders.

Sustainability Metrics Driving Modern Supply Chains

Building sustainable supply chains means tracking key metrics that address environmental and social priorities. While reducing emissions remains a priority, today's buyers are also assessing suppliers' overall efforts to align with global standards.

Key Sustainability Metrics for Supply Chains

• Climate Impact: Metrics like carbon emissions, energy use, and climate resilience strategies are central to sustainability efforts.
• Ethical Sourcing: Companies seek assurance that materials come from responsible sources, avoiding links to deforestation or human rights abuses.
• Social Equity: Workforce wages, labor rights, and community impacts are becoming important factors in supplier evaluations.
• Circular Economy Contributions: Buyers value suppliers who integrate recycling, waste reduction, and resource efficiency into their operations.

Suppliers can build stronger partnerships, improve sustainability credentials, and maintain a competitive edge by aligning with these metrics.

Frameworks for Building Sustainable Supply Chains

To build sustainable supply chains, large organizations use standardized frameworks and tools to evaluate suppliers. These platforms simplify data collection, allowing buyers to assess and benchmark suppliers’ strategies and align with those buyers’ own standards and targets. Additionally, each framework supports different aspects of sustainability:

• CDP: This framework specializes in climate-related disclosures with a strong focus on emissions data. This global leader in climate and other environmental disclosures collects and reports emissions, climate risks, and targets, as well as deforestation, biodiversity, and water data. Suppliers who complete its survey receive performance grades, which showcase their alignment with sustainability goals.
• EcoVadis: This framework evaluates ESG performance comprehensively, making it suitable across all industries. EcoVadis’ widely used sustainability platform evaluates suppliers based on comprehensive metrics, including emissions, social responsibility, and governance. With over 150,000 rated companies, it enables transparent reporting and recognizes top performers with medals. The EcoVadis framework gives procurement teams a clear scoring system to benchmark supplier performance.
• Sedex: This framework has a focus on social sustainability, such as fair labor and human rights. Sedex helps suppliers showcase labor, safety, and ethical practices, aligning with their largest customers’ sustainable procurement strategies.
• THESIS: Originally designed for retailers and still offering tailored performance insights for the industry, this framework is now widely used across various sectors. THESIS provides actionable insights, allowing companies to benchmark supplier performance and make data-driven decisions.
• Science Based Targets Initiative (SBTi): Some buyers now require suppliers to adopt SBTi corporate net-zero standards to reduce Scope 3 emissions and support overall climate targets.

Some companies also use custom questionnaires to gather specific data, but as frameworks improve, custom requests are becoming less common. Standardized frameworks are transforming how buyers and suppliers collaborate, increasing transparency and promoting sustainable practices. Suppliers can strengthen partnerships by understanding these systems and preparing in advance to meet data requests.

Supply Chain Compliance and Incentives

Corporations are employing both mandates and incentives to encourage suppliers to align with their sustainable supply chain requests. Key examples include:

• Microsoft: To be a Microsoft supplier, companies must adhere to Microsoft’s sustainability requirements, including reporting their emissions via CDP annually and setting ambitious climate goals.
• Walmart: Through its innovative Project Gigaton, Walmart rewards suppliers who actively reduce emissions. Benefits include preferential financing, expanded contracts, and the prestigious Giga Guru label.
• Mars: Sustainability incentives focus on encouraging suppliers to adopt greener practices, such as improving sourcing or reducing emissions. Aligned suppliers benefit from business growth opportunities and improved contract terms.
• General Motors (GM): GM incentivizes sustainability by offering preferential treatment to suppliers who achieve EcoVadis scores above 50 and commit to carbon neutrality for Scope 1 and 2 emissions.

Consumer Goods Companies’ Sustainability Focus

Large consumer goods companies like Mars and Coca-Cola most frequently use Sedex and EcoVadis. These frameworks emphasize social responsibility, aligning with the sector’s focus on ethical labor practices and sustainable sourcing.

To stay ahead, suppliers to the consumer goods sector should adopt compliance measures aligned with these frameworks, ensuring they can meet growing data demands and build a more positive relationship with their customers.

See: Consumer Goods Companies Chart

Sustainability Metrics Driving Manufacturing Supply Chains

Manufacturing companies are at the forefront of addressing climate change due to the significant impact of their supply chains. Leading global manufacturers rely on CDP and EcoVadis to assess and improve supply chain sustainability.

In manufacturing, Scope 3 emissions from supply chains are significantly higher than direct emissions (Scope 1 and 2), making suppliers key partners in achieving sustainability goals.

Steps for Suppliers

• Utilize CDP: This vital tool tracks emissions and environmental data, a priority for manufacturing suppliers.
• Leverage EcoVadis: This platform provides ESG performance insights, helping suppliers demonstrate sustainable practices.

By tracking emissions and aligning with recognized frameworks, suppliers can meet growing buyer demands and enhance their position in sustainable supply chains.

See: Manufacturing Companies Chart

Building Sustainable Supply Chains for Retailers

Retail companies are driving sustainability in their supply chains through a mix of reporting frameworks. Sedex is widely used for its focus on social issues like labor rights and workplace safety, while CDP and EcoVadis offer additional tools to track environmental performance. THESIS, specifically tailored for the retail sector, helps suppliers measure and meet sustainability goals.

For suppliers, adopting Sedex and THESIS provides a solid starting point. However, understanding each retailer’s unique targets is vital to building successful partnerships and securing a competitive position in supply chains.

See: Retail Companies Chart

Preparing for the Future of Sustainable Supply Chains

Successful suppliers anticipate and adapt to increasing data demands. Taking proactive steps helps you stay ahead of requests, strengthen buyer relationships, and gain a competitive edge. Here’s how to start developing strong partnerships with your key customers:

• Start Small and Grow: If you're new to sustainability reporting, begin with simple data like energy use or workforce metrics, which you may already track. Focus first on Scope 1 and 2 emissions since they are easier to measure and commonly requested by customers. As you progress, expand the scope, detail, and accuracy of your data.
• Engage Your Buyers: Regularly communicate with your buyers to understand their sustainability expectations today and as they evolve. What frameworks are they using? Do they have any incentives? Are these requirements or requests? These insights will guide your approach to data collection and reporting.
• Evaluate and Improve Your Systems: Conduct a sustainability assessment to identify gaps in your processes. Focus on what your key buyers value most and build a program that addresses both immediate requirements and future expectations.

Conclusion

Sustainability data has become a necessary part of supply chain operations and overall business strategy. Companies that adjust early will be better prepared for new rules and rising buyer expectations.

Ready to start? Elliott Davis can help you gather the required data, address gaps, and meet your customers' reporting needs. Simply fill out the form below, and a member of our team will connect with you.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.