Mar 12, 2025
How to Do a Supplier Sustainability Assessment Successfully
A supplier sustainability assessment is the answer!
There are two main reasons to carry out a supplier sustainability assessment. They are:
To meet the expectations of stakeholders, such as customers and investors, who require companies to operate in an ethical manner
For the company’s own sense of corporate responsibility in striving to reduce negative environmental impacts and improve conditions for employees and communities.
It is not enough simply to implement ethical policies within your own company’s operations; you need to ensure that your supply chain runs in a sustainable manner, too. If it does not, you cannot truly claim to have sustainability at heart.
With more than 90% of an average organization's greenhouse gas emissions coming from its supply chain, now is the time to ensure that your partners are doing all they can to create a more environmentally friendly approach.
This article explains the steps you need to take to carry out a successful sustainability assessment of your suppliers and the challenges you might face.
Key takeaways
Jurisdictions are continually introducing legislation surrounding ESG
It is no longer enough to concentrate only on your own operation’s sustainability performance, but you should also assess firms that supply raw materials
Firms must look up and down their supply chains to ensure compliance and business ethics
Collaboration with partners is an essential element of carrying out a supplier sustainability assessment
Organizations should support sustainability efforts with resources and advice.
How to do a supplier sustainability assessment
Step 1: Define objectives and scope
To begin the process of assessing the sustainability of suppliers, you need to understand what you want to achieve and which parties you will assess.
Think about the purpose of carrying out the assessment, as this will help you create a process that will best meet your needs and provide you with material information for improving the ethical performance of your supply chain.
For example, the purpose could be to:
Ensure that supply chain entities are working in compliance with regulations related to the work that you do, such as meeting their obligations regarding the EU Conflict Minerals Regulation.
Help you meet your corporate sustainability goals by improving your performance against a range of predetermined metrics.
Improve risk mitigation by revealing potentially negative outcomes such as disruption, reputational damage, and sanctions imposed by regulators.
Understanding the key driver behind your assessment will guide how you develop your sustainability criteria. It might also help you define the scope, depending on whether you want to apply the assessment to the whole supply chain or just to selected suppliers, potentially those most exposed to sustainability risks.
Step 2: Establish assessment criteria
Consider the criteria you want to assess your suppliers against. This will be driven by the purpose of your supplier sustainability assessment and other factors, such as your industry. For example, fashion retailers might be particularly interested in ensuring their suppliers are meeting commitments to human rights and labor laws regarding their employees, especially those situated in developing countries.
Sustainability ranges across the three areas of ESG, encapsulating environmental, social, and governance matters. Think about including assessment criteria from across these categories to gain a holistic understanding of your suppliers' sustainability.
Criteria to consider may include:
Area | Examples of criteria |
Environmental | Carbon footprint and emissions |
Waste management and recycling | |
Sustainable resource usage | |
Social | Labor rights and fair wages |
Workplace safety and conditions | |
Diversity, Equity, and Inclusion (DEI) | |
Governance and ethical practices | Anti-corruption policies |
Compliance with regulations | |
Transparency and reporting |
Investigate standards in your industry to help decide which metrics are most relevant for you to track. Use established ESG frameworks and standards to help you set achievable but impactful goals for your suppliers to meet.
Step 3: Gather data from suppliers
Engage your suppliers to gather the sustainability data related to your assessment. Request sustainability reports that they have already undertaken, any certifications they have relating to ESG matters, and the results of audits carried out on their performance in this area. Many companies already report audited sustainability data in or with their annual reports, which can provide much of the detail you need to make an informed assessment.
This should give you an overview of many aspects of sustainability as a starting point for your assessment. To ensure that you gather the information you require for your particular desired metrics, create a supplier questionnaire that requests this data.
You can also carry out your own audits, interviewing employees and management, and performing on-site inspections to gain insight on their operations and how well they meet your expectations regarding social and environmental sustainability.
Step 4: Analyze and score supplier performance
Once you have gathered the data from your suppliers, apply it to your criteria and use an ESG framework to help you rate their performance in the areas that are important to your business. This benchmark will help you understand if the supplier is making progress with sustainability matters and if there are any issues that could reflect badly on your organization as a partner.
Look for gaps in suppliers’ ESG strategies which you will require them to address as a matter of urgency. This process should also help you identify red flags that show a concerning approach to sustainability and which could cause a detrimental outcome, such as non-compliance with regulations or other legal issues.
Step 5: Provide feedback and recommendations
Based on the outcome of your assessment, you need to share your results with the supplier in question and enter discussions about the issues that arise from it. If there are any concerns, you should work together to develop a roadmap for improvement.
Help the supplier set targets to improve ESG performance by:
Defining measurable sustainability goals that they can work towards.
Offering support to help them meet compliance requirements, which can be complex.
Providing training, resources, and incentives to help them improve their sustainability efforts in the areas highlighted as lacking in your assessment.
By developing a trusting relationship with suppliers, you can create open communication lines that allow you to collaborate more effectively and solve issues in a timely manner to the benefit of both parties.
Step 6: Monitor and continuously improve
A supplier sustainability assessment is not a one-off event for compliance; you need to commit to regular assessment cycles that help ensure your supply chain continues to meet the needs and challenges of the developing sustainability landscape.
Use the previous assessments as a benchmark against which to measure progress with ESG matters over time. This helps assure you that you are going in the right direction or warn you that there is an issue with the sustainability of your supply chain before it becomes endemic.
Be sure to update your assessment criteria to take in regulatory changes and trends in the expectations of stakeholders with regard to sustainability.
Challenges in assessing supplier sustainability
Ensuring the accuracy of the ESG data you receive from suppliers is a difficult task, particularly for supply chain partners based in other parts of the world. This makes verification a difficult process logistically, relying on suppliers having had their metrics externally audited by a trusted third party.
You may face resistance from suppliers who are concerned about the work involved in extracting, recording, and sharing the data you require. For smaller businesses, this could require resources that are not available to them.
Cost and resource constraints within your own business can also be challenging, particularly if you have a complex supply chain. This can require the work of multiple employees over a long period of time and across multiple continents. potential legislative burden that comes with new reporting requirements, for example.
Key benefits of assessing supplier sustainability
Improved brand reputation as a sustainability leader with a quantifiable commitment to sustainability matters in line with the expectations and requirements of investors, customers, and other stakeholders.
Cost reduction by creating more efficient workflows and supply chains, cutting excessive consumption of resources such as fuel. In addition, better sustainability may reduce financial penalties for breaches of the related legislation.
Regulatory compliance with legislation such as the Corporate Sustainability Reporting Directive and the US Dodd-Frank Act Section 1502 regarding conflict minerals.
Potential risk mitigation, helping companies reduce their concerns over operational interruptions, reputational damage, scandal, and other negative outcomes.
FAQ
What is a supplier sustainability assessment?
A supplier sustainability assessment is a systematic review of a supplier’s environmental, social, and governance performance to ensure responsible sourcing and reduce supply chain risks.
What is the MECE framework in supplier sustainability?
The MECE (Mutually Exclusive, Collectively Exhaustive) framework organizes potential sustainability areas and issues into distinct, non-overlapping categories that cover all possible options, allowing for comprehensive and clear supplier evaluations.
How can companies encourage suppliers to improve their sustainability practices?
Companies can provide clear standards, offer training resources, and incentivize positive performance through rewards or continued business, creating a collaborative approach to achieving sustainability goals.
Conclusion
Carrying out a supplier sustainability assessment is a key element in ensuring that your supply chain meets the ESG standards set within your organization or externally, by the law. Without knowing how ethical your suppliers are within their operations, you cannot claim to prioritize sustainability. Any attempt to do so would be seen as greenwashing. Assess your suppliers to highlight areas for improvement or red flags and then either support them to improve or seek new, ESG-conscious vendors.
Beebolt helps you solve the communication problem that comes with all this. Our end-to-end platform allows you to communicate and collaborate with your suppliers more easily, sharing documents and building a relationship that sets the groundwork for honesty and constructive work to build better sustainability.
Talk with an expert today to find out how Beebolt can help.
