For complex manufacturers, successful environmental, social, and governance (ESG) programs require supply chain engagement. Research from the Principles for Responsible Investment has even shown that for many manufacturing verticals 80 – 90 percent of their environmental footprint is contained in their supply chain. In addition, the biggest human rights impacts occur in their supply chains, like child labor and corruption. (Want to learn more about why your supply chain is the right place to focus for ESG? Check out our guide!)
That’s why making your suppliers active partners in your ESG program is essential: Your ESG score — and risks — are directly tied to their performance data, and their actions can raise or lower your ESG standing. No matter how strong your internal sustainability processes are, you can’t ignore what your suppliers are doing.
The more ESG data you’re able to collect from suppliers, and the better the quality, the stronger your program will be in terms of proactively addressing risk and demonstrating sustainable value to consumers and investors. Conversely, if your supply chain is a black box of hidden risks, you are operating in dangerous territory. When you engage suppliers as partners in shared ESG goals you increase transparency and improve business ESG insights.
ESG and Supplier Fatigue
Supplier engagement is one of the most important pillars of a successful ESG management strategy, but it’s no small feat. In fact, the U.S. Environmental Protection Agency’s (EPA) Center for Corporate Climate Leadership even identified “survey fatigue” as a topic of concern in their official guidance for manufacturers. Because so much of your ESG impacts come from your supply chain, supplier fatigue poses one of the biggest threats to your program health.
Supplier fatigue happens when your supplier partners don’t feel like they have the time, resources, or justification to communicate key performance indicators (KPIs) to you, and it results in lower response rates to ESG questionnaires and/or less accurate data. It skews your analytics, leaving you with data gaps and results lacking defensible data.
One of the core reasons for fatigue is survey flood: Many companies reach out to their suppliers for data on multiple topics, without carefully targeting the right person in an organization because their compliance programs are decentralized. So, if you are sending out surveys to the same contact for all your data, not making sure the requests are timely, and not on topics of relevance, you may be contributing to the flood. Making things even worse, several survey topics can overlap — such as data for product compliance and ESG — adding to a supplier’s burden if they are asked to repeatedly answer the same questions for different stakeholders in the same company.
Suppliers also get fatigued when their customers lack understanding about priorities and abilities. For example, a small supplier can get overwhelmed when faced with complex, technical data requests or a flood of industry acronyms like LkSG, UFLPA, RM; PC with WEE, UL, ISO XXXX; MC with RoHS; etc.. Your suppliers may be working in an entirely different language or workplace culture, and may not have the basic understanding needed to reply to your data requests — resulting in fatigue or ignored surveys because they simply do not understand your needs.
When you look at the root causes of fatigue, one thing becomes clear: fatigue is caused by the systemic approach to data collection rather than the supplier. That means it’s the responsibility of manufacturers to improve their outreach efforts.
Top Tips to Keep Suppliers Engaged
How can manufacturers counter supplier fatigue and build a more resilient ESG program? Let’s take a look at some best practices:
Tip #1: Standardize Surveys
Research has shown that when suppliers receive numerous, overlapping, but not identical, surveys from their customers, they place less importance on answering each one accurately. Instead, suppliers were more engaged when they understood the survey was standardized and linked to a greater industry or multiple buyers. This means that “homebrew” ESG surveys can be counterproductive and that complex manufacturers should instead lean on existing ESG standards for their survey efforts. For example, using the industry-standard Slavery and Trafficking Risk Template (STRT) will be more effective than creating custom questions about human rights risks. Similarly, align questions with existing ESG standards like the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). Assent’s ESG Solution helps you implement these vital industry-standard surveys and align your ESG data collection with recognized standards.
Tip #2: Reduce the Number of Surveys
One of the main sources of supplier fatigue is concurrent demands from multiple customers for data, compounded by customers sending a multitude of data requests. For example, a parts supplier may receive surveys for several regulations — Restriction of Hazardous Substances (RoHS), The California Safe Drinking Water and Toxic Enforcement Act (Proposition 65), and Toxic Substances Control Act (TSCA) — in addition to ESG surveys. And those ESG surveys may include separate surveys for human rights, conflict minerals, environmental performance and more… When you add it all up, suppliers selling to numerous manufacturers find themselves responding to dozens of requests each month! It’s no surprise they become fatigued and program engagement drops.
Assent reduces the number of surveys to send suppliers by streamlining outreach with smarter surveys. We let you combine multiple ESG topics and product compliance topics so you aren’t overwhelming your suppliers. In addition, if a supplier has already provided data to our Assent Sustainability Network, it will automatically complete relevant questions so suppliers only ever have to answer a question once. A single survey can provide answers to each of their clients.
Not only do we streamline outreach through surveys, we also engage with the right person on the right topic. Each outreach may be associated with a different set of contacts, depending on the supplier. One supplier may have a central contact for every such inquiry, another supplier may have topical contacts.
Tip #3: Make it Meaningful and Material
Suppliers are more engaged and less likely to feel burdened by ESG data requests if they see there’s meaningful follow up action based on their responses. Evidence suggests that when suppliers see “checkbox compliance” surveys— “click the boxes in this survey, so we can get back to business” — they allocate less time and human resources to completing them. It’s also important that the topics you ask about are material to the supplier. For example, don’t waste a supplier’s time by asking them to complete conflict mineral surveys if none of their products contain any minerals of concern. By treating suppliers like partners in your ESG journey and putting the data they provide into action, collaborating on ESG efforts becomes a priority rather than a source of fatigue.
Assent’s ESG solution helps manufacturers and their suppliers improve their ESG scores with corrective action recommendations. Suppliers get tailored lists of steps they can take to improve their ESG score, and manufacturers can see supply chain ESG health improve over time. Assent also provides suppliers with ESG and regulatory education at no cost, helping them understand the purpose of ESG surveys and see the bigger picture.
No ESG program can function without follow up action. Nothing is so detrimental to a relationship as an unfulfilled agreement with no set, consistent consequences for noncompliance. The establishment of joint and transparent action plans shows that both parties are serious: ESG is important to us and we are working diligently together to achieve it.
Make Suppliers Your Best Asset
An engaged supply chain is the best support system for your ESG program. When your suppliers are partners in ESG management and benefit from providing the data to build a sustainable supply chain, you’ll have the foundation to improve your ESG scores and make a real impact on the environment and global human welfare.
Empathy is essential for making suppliers your partners. Understand their cultural background, their workplace culture, language barriers, their size and regional locations, and how they would respond to training. The good governance in ESG is about establishing a mutually-acceptable course of action, not establishing a forceful one-way demand.
Download Assent’s free guide, Four Steps to Create an ESG Program for Manufacturers, to learn how to start building an ESG program that turns suppliers into engaged partners.
