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Today, it is clear that the approach that encouraged companies to conduct their ESG activities solely in-house is no longer appropriate. Most carbon footprint and ESG performance measurement mechanisms integrate the company's value chain into their reporting model.
With the strengthening of regulations such as the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive), and the rising expectations of stakeholders, it is becoming even more essential for companies to integrate their entire supply chain into an ESG approach.
What's more, ESG risks - and environmental risks in particular - are no longer mere long-term projections, but tangible realities that directly affect companies. The recent floods in northern France and the cyclone in Mayotte have had a major impact on many businesses, disrupting entire supply chains. These events illustrate the growing vulnerability of businesses to climate disruption, and underline the urgent need for a transition to more resilient and sustainable models.
Involving suppliers in such a dynamic is a real challenge: how do you encourage them to adopt sustainable practices without compromising economic performance? How can we combine environmental requirements, social responsibility and competitiveness?
Evaluating and selecting suppliers
The first step in implementing an ESG strategy involving your supply chain is to take stock of your current suppliers. This involves evaluating them according to ESG criteria, identifying those whose current processes enable them to meet your objectives, those who need support to do so, and those for whom you will have no choice but to find an alternative.
Mapping ESG risks
A thorough review of your supplier ecosystem should enable you toidentify those who are most at risk. Certain categories are generally more exposed to environmental and social risks. These include industries such as textiles, agriculture and mining, which are particularly sensitive to issues of pollution, deforestation and worker exploitation.
To do this, you can rely on sector-specific risk mapping tools that enable you to assess priority suppliers and adapt ESG requirements according to their level of risk.
However, a major challenge lies in collecting ESG data within complex supply chains. While obtaining information from tier 1 and 2 suppliers is generally feasible, it becomes far more complicated to access data from tier 3, 4 or 5 suppliers, often located abroad. This difficulty can be overcome with enhanced traceability tools and partnerships with third-party organizations specializing in value chain certification.
Integrate ESG criteria into your supplier selection process
To begin the process of evaluating your suppliers, you can integrate ESG criteria right from the supplier selection phase. To do this, you can draw on certain standards such as ISO 26000, dedicated to corporate social responsibility, or ISO 20400, dedicated to responsible purchasing.
You can also consult the information contained in your suppliers' extra-financial reports. Most of them cover the environmental spectrum, and some, such as the European CSRD or the GRI, will also include social and governance criteria.
Finally, on-site audits can be carried out to verify suppliers' compliance with your ESG requirements and identify potential areas for improvement.
Communicating with your suppliers and raising their awareness
Involving your suppliers in your ESG approach doesn't just involve processes that some might consider coercive. It's also a process that requires dialogue and support.
Transparency and dialogue
An effective ESG policy depends on clear and transparent communication with your suppliers. You need to communicate upstream about your ESG requirements and objectives, so that the players in your supply chain can align themselves with them.
The publication of a sustainability report is an essential step in communicating publicly and transparently about your roadmap and the resources you have allocated to it.
However, it is important to bear in mind the administrative burden this can represent for suppliers, especially SMEs and ETIs, who have to respond to numerous ESG questionnaires from different customers. This work, often perceived as complex and time-consuming, requires the mobilization of resources that they do not always have at their disposal. One solution could be the use of shared platforms to simplify data collection, or the harmonization of ESG criteria between companies, based on certain extra-financial reporting standards.
In addition, you can publish a supplier code of conduct setting out your expectations in terms of respect for human rights and environmental impact.
Support and training
Depending on their size, sector of activity and location, suppliers are more or less aware of social and environmental issues. By offering training courses or sessions dedicated to environmental risk management or respect for human rights, you can ensure that your suppliers have acquired the same level of information and are therefore in a position to meet your expectations.
You can also provide them with technical tools and resources such as industry guides and evaluation platforms.
Nevertheless, such training needs to be adapted to local realities. While in Europe and the West, training on these subjects is more easily applicable, it is often far more complex to introduce this type of approach in certain countries where certain ESG requirements, particularly in terms of human rights, may not find an immediate echo. In such cases, it is essential to adopt a gradual approach adapted to local contexts.
Implementing a responsible purchasing policy
The responsible purchasing policies aim to align a company's procurement strategy with its ESG commitments. More than simply involving your suppliers in your ESG approach, they aim to secure their long-term commitment to your action plan.
There are generally two approaches to customer-supplier relationships:
- A strict contractual approach, as practiced by major CAC 40 companies, with stringent requirements and penalties for non-compliance.
- A cooperative approach, more prevalent among small and medium-sized businesses, where the aim is to identify risks and work jointly with suppliers to improve their practices.
Each company must choose the approach that best fits its business model and ESG strategy.
Contractualizing your ESG approach
Engaging your suppliers often means going through the contractualization phase. This meansincorporating environmental and social clauses into the contracts you sign with them. These clauses may include the selection of sustainable materials, the adoption of eco-design practices, commitments to environmental protection or respect for human rights, or greenhouse gas emission reduction targets in line with the Paris Agreement.
By working with committed suppliers, you can not only secure your supply chain, but also foster innovation and competitiveness. Developing long-term partnerships based on shared values strengthens your company's resilience in the face of future environmental and societal challenges.
Integrating an internal carbon price
On the strictly environmental front, more and more companies have decided toinclude an internal carbon price in their supplier selection criteria.
Carbon pricing is a strategic tool for encouraging suppliers to reduce their GHG emissions. This is all the more crucial given that, according to the CDP, scope 3 accounts for an average of 75% of a company's total emissions. By integrating an internal cost of carbon into their purchasing decisions, and giving preference to suppliers with a low carbon footprint, companies can accelerate their ecological transition.
A common approach is to set a price per tonne of CO2 when inviting tenders. Suppliers' bids are then evaluated taking into account an additional cost linked to the emissions generated, thus influencing purchasing decisions in favor of the most sustainable solutions. This method of calculation makes it possible to integrate environmental costs into procurement strategies and accelerate the transition to a greener value chain.
Setting goals and measuring progress
Embarking on an ESG approach doesn't mean you'll have to change suppliers to select new ones better able to meet your social and environmental expectations.
This approach requires you to involve your suppliers, or at least those who are able and willing to do so, and to set up a continuous improvement process. Your ESG performance and that of your suppliers are intimately linked, and must evolve together.
To achieve this, you need to set common objectives and agree on the indicators you will use to measure your progress towards these objectives. These will not only enable you to monitor your own progress, but also that of your suppliers, and to identify areas for improvement.
Non-financial reporting remains the key tool for ensuring clear, detailed monitoring of progress made and future objectives. It guarantees greater transparency and strengthens stakeholder commitment. It enables your suppliers to take a long-term view, build a sustainable transition path, ensure their resilience and increase their competitiveness.
The duty of vigilance: a regulatory obligation
In addition to voluntary initiatives, companies in some countries are required to comply with regulatory obligations in terms of environmental and social vigilance throughout their supply chain. This is the notion of "duty of vigilance" or "due diligence".
In France, Law No. 2017-399 imposes a duty of environmental and social vigilance for French companies with more than 5,000 employees and foreign companies with more than 10,000 employees on French territory. This duty of care applies to their activities and those of their subsidiaries and business partners.
In Germany, the LkSG Act introduces a similar duty of care for companies with over 1,000 employees.
This duty of care is due to be extended to all European Union countries between 2027 and 2029 via the CSDDD directive, and will eventually concern European companies with over 5,000 employees and sales of over €450 million, as well as non-European companies with sales of over €450 million within the EU.
As part of CS3D, companies must:
- Identify and prevent ESG risks in their supply chain.
- Implement a vigilance plan to anticipate, mitigate or halt environmental or human rights impacts
- Launch a transition plan in line with the objectives of the Paris Agreement
With these regulations, companies will have to step up their supplier control and monitoring mechanisms, notably through more frequent and stricter audits, as well as with a transparency obligation regarding ESG data.
It should be noted, however, that the directive is currently under review by the European Commission, and could see its requirements watered down and its application postponed.
Conclusion
Involving suppliers in an ESG approach is therefore no longer an option, but a strategic necessity. By integrating environmental and social criteria into their purchasing processes, establishing constructive dialogue and leveraging levers such as carbon pricing, companies are strengthening not only their own resilience and competitiveness, but also that of their suppliers.
Faced with the urgency of climate change and the growing expectations of stakeholders, they are adopting a proactive approach to environmental and social responsibility, and positioning themselves as benchmark players in their markets, better able to tackle future challenges and thus attract customers and investors.
At the same time, with the evolution of regulations such as the CSDDD directive, this approach is also becoming a legal imperative. But rather than a constraint, it should be seen above all as an opportunity for innovation and differentiation, contributing to a sustainable transition and the long-term viability of companies.
