Reducing global carbon emissions requires collective action and credible data. The health and viability of our planet’s ecosystems are on the line, which in turn jeopardizes many of the foundations of our economy. Failure to decarbonize could put 20% of profits at risk by 2030. 

Most organizations recognize that Scope 3 emissions — those generated by a company's supply chain partners — are the most critical frontier in their decarbonization journey. After all, supply chain emissions are 11.4 times higher than operational (Scope 1 and Scope 2) emissions. Effectively reducing this impact requires supplier-specific data from your partners.

But gathering this information is challenging. According to Ivalua, more than 60% of organizations characterize their reporting on supply chain emissions as a "best guess." Many rely on industry averages, which provide a starting point for reduction strategies but fail to deliver the data necessary to move the needle.

These best guesses aren't going to cut it if we want to hit global emissions targets and transition to the low-carbon economy. Organizations must engage their suppliers to drive impactful reductions.

Following are eight steps toward building successful supplier-engagement initiatives. 

Understand how climate impacts your business, and how your business impacts climate. Every business will be impacted by the transition to the low-carbon economy. The north star for any corporate climate program is understanding the intersection of climate risk and business risk. By identifying the key value drivers to your business that stem from climate strategy and decarbonization, you can garner meaningful buy-in from your leadership team.

Set a goal for your program. The objective of supplier engagement programs evolves over time. When starting out, your goal is to map out your supply chain to understand supplier relationships. The next step is setting targets for collecting supplier data. Mature programs that already have data will work with partners to reach a science-based target for reducing emissions. 

Determine supplier engagement priorities. Most supply chains are too distributed and complex to engage with every supplier. You'll want to prioritize working with the ones where you can have the greatest impact.

The GHG Protocol provides comprehensive guidelines for measuring, reporting and verifying greenhouse gas emissions. Its preferred selection method is to rank suppliers by their potential emissions contributions. Calculating the highest emitters is easier for more mature programs with primary data from their partners. However, those without specific numbers can use industry averages to model a supplier’s likely output.

If you lack sufficient data to rank emissions impact, evaluate vendors based on the money you spend with them. Your primary suppliers play a significant role in operations and likely contribute a sizable amount of emissions. Identifying partners with the highest spend is more straightforward, because your organization owns the financial data. You can gain additional insight by combining your spend with industry averages to estimate a specific supplier's carbon output.

Relationships may also influence your priorities. Vendors with whom you have long-standing connections tend to be more cooperative in data-sharing and emissions-reduction efforts, and you may have more leverage with partners that rely heavily on your company's business.

Collect data. Once you've identified your priority suppliers, you can begin gathering supplier-specific data. By streamlining the data collection process, you increase the likelihood of receiving valuable and timely data. Check public databases, environmental, social and governance (ESG) reports, the Carbon Disclosure Project and industry trade organizations for existing data first. If the information is unavailable, survey your vendors directly. 

In this step, some companies will be collecting data for the first time to set a Scope 3 baseline, while others will be measuring progress against goals. Regardless of your climate program's maturity, good data is the foundation of impactful action. 

Manage data. Supplier-engagement programs generate a substantial amount of data, necessitating a data-management system. You can build a proprietary system, adopt GHG management software, or work with an existing GHG reporting or disclosure program. Standardize your data to allow comparisons, support reporting and enable progress tracking.

Educate and collaborate with suppliers. Supplier-engagement programs are about more than collecting emissions data. You must empower your partners to reduce their output through education and support. Suppliers that fully understand the business imperative of sustainability can engage more meaningfully in decarbonization initiatives.

Some partners need more education than others. Training for suppliers with low-maturity climate programs should emphasize the importance of GHG accounting and reductions, define Scope 1 and 2 emissions, offer guidance on locating emissions data, and demonstrate how to calculate emissions. More advanced education will cover Scope 3, setting emissions targets and building a decarbonization strategy.

Consider how you can empower your suppliers in their reduction efforts. Potential strategies include providing carbon accounting resources, offering financial support for renewable energy or collaborating on more efficient processes.

Incentivize reductions. Companies often need business motivation to undertake significant initiatives like decarbonization. You can incentivize emission reductions and sustainable practices with a combination of carrots and sticks, such as:

• Incorporating climate requirements into your supplier agreements. 
• Offering better contract terms to program participants, such as quicker payments or bigger rebates.
• Instituting additional fees for failure to meet specific benchmarks. 
• Thanking companies for their efforts with public recognition.
• Implementing scorecards and benchmarking to provide suppliers with performance metrics relative to their peers and foster healthy competition.

Track progress. Gathering data once won't yield results. You must continually collect and monitor emissions to track progress, create reports and update strategies. 

It’s especially critical to maintain current data because stakeholders increasingly expect climate disclosures. While the U.S. Securities and Exchange Commission reporting regulations are paused amid lawsuits, Optera's survey found that 91% of respondents already disclose emissions to either the public or to regulators and customers.

Data will also be critical for complying with the European Union's new legislation, CSRD and CSDDD, which require companies doing business in the EU to mitigate adverse impacts on human rights and the environment and to establish a climate transition plan. These first-of-their-kind rules will generate a ripple effect as multinational companies engage with supply chain partners to fulfill their Scope 3 requirements. The ability to prove your decarbonization progress will soon become imperative to doing business. 

Don't stop when you reach engagement with partners responsible for the top 80% of emissions. Continue reaching out to more vendors. Move from data collection to goal setting and progress tracking. Continually refine your strategies to drive bigger results. Regardless of your climate program's maturity, there’s always room for improvement. The future of your business — and the planet — hinges on these efforts.

One company can’t solve the global climate crisis alone. Supplier-engagement initiatives produce the hard numbers and collaboration necessary to drive impactful change. The wheels are already in motion. An Optera survey found that 70% of companies are engaging with suppliers to lower carbon output. It doesn't matter where you are in your journey — every incremental improvement adds up.

Tim Weiss is chief executive officer of Optera.