The Power of Supplier Contracts as your Scope 3 Unlock

Supplier contracts have long been overlooked as an effective supplier engagement tool, but I expect this to change as we rapidly approach 2030.

However, sustainability leaders need to majorly transform supplier contracts:

1. Extended durations: Current short-term contracts fail to de-risk suppliers for any meaningful change to happen e.g., transitioning to organic farming requires a multi year investment in leaving the land to fallow. Without 5 or 10-year contracts, such investments don’t make any commercial sense.
2. Clarity on data use cases: If you’re asking suppliers for granular activity level data, they need to know what you’ll use it for. You can promise carrots (e.g., increased volumes, preferential pricing), but you should also reassure suppliers that while data may be used to discriminate between suppliers in the future, it will not be the case today. This allows time for the market to adjust and standards to evolve.
3. Target matching(ish): To achieve sustainability targets, you and your suppliers must be aligned. Working with large brands, we typically find that only a small minority of their most important suppliers have targets that are within the same ballpark as the brand’s publicly stated commitments. I say matching(ish) to allow for different levels of ambition, while still having some level of anchor.

‍By Saif Hameed, CEO of Altruistiq

‍

Listen to full podcast here.

‍

‍

Industry Insight: Why businesses are getting knocked out of the sustainability game early on

This year we approach the halfway point for all those 2030 corporate sustainability targets, set up in the “Great Sustainability Planning Boom” of 2018/2019. A few hard knocks later, here are some learnings we're seeing:

• Targets were not calibrated to actual business ambition. This means that the actual business trade offs were not aligned internally. In one target instance I was involved in personally, the company committed to targets that required 80% of the business to be wound down and replaced. Not realistic.
• Business resourcing did not match the target. For a $10b revenue business, a major transformation (e.g., digital, organisational restructure) can require annual investment of >$10m in the initial years across people, systems, technology. This level of resourcing was not replicated for sustainability.
• Early (political and brand) capital went to pilots that could ‘multiply’ rather than ‘scale’. For example, projects that are hyper local need to be repeated the same way each time (multiplied), which means incremental reductions aren’t any cheaper. Per unit implementation costs in year 5 of a transformation should be lower, whereas in sustainability they’re working out higher.

We’re looking forward to a year where we learn from the mistakes of others and avoid getting knocked out of the sustainability game early on.

‍

‍

The “Lessons Learned” section of the newsletter where we interview sustainability leaders, has been moved out of this newsletter and will be shared on alternate weeks.

‍

Policy Pulse: How to navigate the EU’s greenwashing rules

‍

The EU is taking bold action against greenwashing. Their 2020 study found that over 53% of claims use vague, misleading or unfounded language - so the EU is making changes to ensure customers have the right sustainability info when making purchases. This is being implemented with two key rule changes:

• Green Claims Directive - sets a framework for sharing evidence to back up voluntary green claims. This requires companies to have evidence behind claims, and that these claims are verified by a third party before use in marketing.
• Update to consumer rules - this aims to empower customers with better information, especially on circular economy features of products, whilst banning certain greenwashing claims. The directive is stopping the proliferation of eco-labels by requiring all labels to EU-approved (details below).

‍

Who is impacted?

These rules will affect all businesses that want to make claims in the EU, including international companies marketing to EU customers (only excluding SMEs below €2M revenue).

What can’t you say?

• “eco-friendly dish soap!” - no more vague or generic sustainability claims on how a product is “natural” or “sustainable”. A broad claim like this needs to be backed up with specific claims that demonstrate environmental excellence.
• “our flights are climate-neutral!” - carbon offsets cannot be used to back up claims on climate impact. The EU wants to stop the impression that buying products contributes to a green transition if this is just via carbon credits.

Any claim on sustainability must also be specific and representative. Other key requirements include:

• Specify if it only refers to certain aspects of a product (like packaging) or business (head office)
• Consider the full impact picture. Don’t claim if the positive environmental impact is outweighed by negative effects in other impact categories e.g., lowering GHG emissions by 20% in transport which results in double the impact on biodiversity would not.
• Don’t make a positive claim for something that is a legal minimum requirement (e.g. marketing around minimum energy efficiency requirements)

‍

What businesses need to do

Before making a claim, ensure it’s backed up. Companies must:

• Get the stats behind their claim - the assessment behind a claim has to include primary, company-specific data on the topic of the claim (or if not available at least high-quality secondary data). The assessment must be science-based and consider the full life-cycle or the relevant environmental impact categories (if it isn’t a full LCA itself).
• Have the claim verified - an accredited third party need to verify the claim and stats first. If the claim is legitimate they will issue a certificate of conformity that works EU-wide.

‍

What to expect going forward

Both laws are due to get final approval early in 2024, with countries then having 2 years to implement into national law. Whilst the plans for green claims are being prepped for 2026, now is the ideal time for companies to get data processes and LCA assessments in place.

Learn more:

• Briefing by EU Parliament: Green Claims Directive
• European Commission - Green Claims Directive home
• Press Release - Update to consumer rules to empower for the green transition

By Dan Enzer, Senior Research Associate at Altruistiq

‍

‍

Articles to Read

•EU bans ‘misleading’ environmental claims that rely on offsetting. Vague sustainability claims will be replaced with concrete evidence. “Climate-neutral” or “climate-positive” claims will be banned from 2026 if they come through offsetting.

•Baku backtracks after backlash over all-male UN COP29 committee. President Ilham Aliyev’s appointed 28 men (0 women) to the COP29 organising committee and Mukhtar Babayev (ecology minister and oil sector veteran) as COP29 President in waiting. After international backlash, the committee has been expanded to 42 organisers, 12 of which are women.

•The WEF rates climate and nature collapse as its top 4 risks through to 2034. The report finds that misinformation and disinformation are the biggest short-term risks with climate and nature collapse as the most severe risks over the next 10 years.

Events

•SOS Gathering: Building a Sustainable Brand and Business with Greg Jackson, CEO and Founder of Octopus Energy, Monday 19th February, 6.30 - 8.30, London. Register interest here.

‍ENG F&B Event, 28th-29th February, Berlin

•Edie 24, 20-21st March, London

•State of Sustainability North America, focusing on agri value chain sustainability data challenges, Chicago, 17th April. Register interest here.

‍