As a sustainability consultancy, in conversations with our larger clients, we frequently hear about the challenges they face in engaging suppliers and acquiring relevant ESG data. This is particularly true for companies with a diverse supplier base or those lacking the market leverage to demand compliance under the threat of exclusion from preferred supplier lists.
On the other hand, when we speak with many of our mid-sized and smaller clients, we often find them in a difficult position: they have just received ESG questionnaires from a large customer and are uncertain about how to respond.
Let us start by acknowledging two things:
Smaller companies often lack the expertise, resources, or support needed to meet the ESG data demands of their bigger clients.
Larger clients have yet to fully integrate sustainability data into their purchasing practices and contracts. They are often hesitant to request this information from their suppliers, typically doing so at the last minute, providing little context and leaving little time for proper preparation.
In both scenarios, an opportunity is missed and (we can assume) bad data is collected. This light approach to ESG data can also hurt both suppliers and clients in the long run.
Suppliers remain unprepared for the tighter ESG regulation-driven demands and lose business in the long run, the Client collects and reports bad data and is exposed to all the associated risks.
Here are a few simple recommendations for companies on how to engage with their supply chain to ensure a smooth data collection process:
Start early, give suppliers time to prepare
Don’t wait until the last minute to request ESG data from your suppliers. Start the conversation early to give them time to understand your requirements and prepare accordingly.
Communicate the importance of ESG reporting
Be ready to explain why sustainability reporting is crucial and how it will impact your supplier selection process. Suppliers need to understand that ESG data is not just a box-ticking exercise, but a fundamental part of your business strategy. (For more on this, read our related article on The Growing Importance of Sustainability Clauses in Vendor Contracts.)
Be clear about your data requirements
Clearly outline the specific data you need and the reporting frameworks you are/intend to be using. Are you adhering to the Global Reporting Initiative (GRI), are you required to report under the CSRD or another framework? Does your company have specific emission reduction targets? Being upfront about your requirements helps suppliers understand the scope and relevance of the data you’re requesting.
Define immediate and future requirements
Clarify what data is essential now and how your expectations will evolve. This helps suppliers plan and gradually enhance their reporting capabilities.
Establish open communication channels
Ensure there is a dedicated line of communication for sustainability-related queries. If your company has a dedicated sustainability team, encourage them to share information openly with suppliers, especially smaller ones that may lack the resources to manage ESG reporting independently.
Start with your Tier One suppliers
It is often beneficial to begin your ESG data collection efforts with your Tier 1 suppliers, as they are typically the most critical to your operations. Once you have established a solid reporting process with these key suppliers, you can extend support to smaller, lower-tier suppliers. This can be done by sharing requirement documents, offering training materials, or facilitating partnerships with third-party experts.
Educate and guide your suppliers through ESG requirements
Providing education and guidance to your suppliers helps them understand and meet ESG requirements. Many suppliers, particularly smaller ones, may be unfamiliar with the complexities of ESG reporting. Offer training sessions, workshops, and resources to help them grasp the importance of sustainability and how it applies to their operations, as well as how it relates to your strategic goals.
Consider providing a comprehensive guide or toolkit that explains the ESG expectations, including key terminology, reporting frameworks, and best practices, as well as third-party solutions
Regularly check in with your suppliers to address any questions or concerns they might have. By investing in their education, you improve the quality of the data they provide.
Establish a clear ESG Supplier Policy and compliance framework
Developing a robust supplier policy that clearly outlines your expectations for ESG compliance is essential. This policy should detail the specific requirements and standards your suppliers need to meet while also encouraging regular self-assessment and continuous improvement.
Foster accountability and transparency and help your suppliers understand the importance of adhering to sustainability criteria. You may adopt a Supplier Code of Conduct or go further in your requirements and incorporate relevant clauses in contracts that stipulate consequences for non-compliance, as well as incentives for suppliers who demonstrate exemplary ESG awareness and performance.
And last, but of considerable importance- implementing such a framework will also ensure that your company remains compliant with the ESG expectations set by your own clients.
How can we help?
uIMPACT is a full-service provider of sustainability assessment, reporting, and management services. We help companies report on CSRD, SFDR, and EU Taxonomy and meet the sustainability expectations of partners and investors.
Small and medium-sized companies can benefit from our intuitive web-based platform for ESG screening and SDG alignment assessment to effortlessly start their sustainability journey.
Reach out to us at
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