In the course of our assessment work we look at supply chain sustainability in large organisations. We came across a particularly good example from Southern Housing and they very kindly shared their thoughts about the assessment. Here’s what they said:
1. What motivated your organisation to engage your supply chain with sustainability questions?
Southern Housing’s supply chain has a huge impact on our sustainability performance, in terms of our environmental impact and climate resilience. To understand and improve performance and meet our Strategy Targets, we recognised the need to engage with our supply chain to be able to measure and hold our suppliers to account in terms of sustainability. This will enable us to meet our targets by supporting our carbon, plastic, waste and chemical reduction plans.
We monitor and report on our supply chain in our annual SHIFT submission and ESG report. Going forward we’re looking to report results of our carbon footprint under SECR (Streamlined Energy and Carbon Reporting). We already report Scope 1 and 2 emissions, and limited scope 3 emissions, but not from our supply chain. And we expect scope 3 emissions to make up the biggest slice of our emissions. If we are going to drastically reduce their carbon emissions, we will have to do so in collaboration with their supply chain partners
2. What specific sustainability issues (e.g., carbon emissions, waste management, responsibly sourced materials) were you most concerned about when engaging your supply chain?
We targeted on our main maintenance and construction suppliers, as these are the areas of highest spend and carbon emissions. We focused on three areas:
- Carbon emissions – scope 1 and 2 emissions, which for our key suppliers was primarily from business mileage
- Materials used – understanding what products are used, where these are sourced from and how sustainable they are.
- Waste – understanding how much waste is produced by type, and what happens to the waste – how much ends up in landfill. And ultimately to feed into our scope 3 emissions reporting
3. What tools or frameworks, if any, did you use to measure the sustainability performance of your suppliers?
We designed a template for our Sustainability Audit based on the requirements of existing reporting frameworks, including SHIFT, SECR and SRS (Sustainability Reporting Standard). Where possible we relied on evidence of existing Environmental Management Systems, for example ISO14001.
4. How did you ensure consistency and transparency in responses across the supply chain?
Where we could use existing reporting frameworks, we could rely on standard definitions and guidance to try to ensure consistency. However, even when there is guidance this is often open to interpretation.
We used the same template for all suppliers to enable easy comparison and benchmarking to identify any anomalies. We focused on quality, rather than quantity. Where possible we met with suppliers to go through the information and evidence required. This enabled us to explore ways to work together, rather than it be about ‘us and them’.
Where possible we request raw data e.g. usage data, to enable us to calculate carbon emissions and cross reference information supplied with published information.
5. What challenges did you encounter when implementing this initiative, and how did you overcome them?
Scale and complexity of our supply chain – we have a lot of suppliers and having recently been through a merger not all the data on suppliers is in one place or managed in the same way. Plus, each of those individual companies will have an equally large network of suppliers beneath them. So, reporting on scope 3 carbon emissions relies on each part of this network accurately monitoring and reporting its own data. Although there is guidance on how to do this, reporting is not mandatory, and the guidance is open to interpretation.
Poor response rate – some suppliers simply ignored our requests for sustainability information. To increase engagement, for key suppliers (with the highest spend), we met with suppliers to agree what information they could provide and by when. We also worked with Contract Managers to embed this into their regular meetings. Where we still had no information, we researched the supplier to see whether they had published any sustainability information e.g. on their website, or in their financial statements.
Lack of contractual requirements – some suppliers refused to send data citing they were not contractually required to. This is more of an issue with older contracts and construction contractors (particularly where a construction project is already complete, or we are a relatively small player in a construction project). We now ensure sustainability reporting requirements are in all contracts via our Procurement Team, and we’re working with our Development Team to build stronger relationships with construction contractors at the start of a construction project.
Supplier no longer operating or in contract – if suppliers have gone bust, or the contract ended, it was impossible to collect any information.
Timing – we send out Sustainability Audits from July, asking about the previous year, and sometimes we will not get the information back until October/ November. This is to allow suppliers time to finalise end of year reporting e.g. SECR. However, this means that our scope 3 emissions reporting is potentially a year out of sync.
Some suppliers don’t have required information/ data – an average SME doesn’t have the time or expertise to effectively measure their emissions. We support smaller organisations through the audit process to supply what data they can and translate this into carbon emission for them. We’re also working with our main maintenance contractor to calculate carbon emissions from products where we have common suppliers.
Lack of established definitions or guidance – responsibly sourced materials (including embodied carbon) is the area which has proved most challenging to collect data on. Existing regulations mean carbon and waste reporting is more clearly defined and existing reporting established, particularly for larger companies. For the purposes of the audit, we define responsibly sourced materials as those which are:
- Sustainable – the natural materials are replenished or use recycled materials
- Environmentally friendly i.e. do not harm the environment e.g. lower carbon
- Ethically produced i.e. do not harm local communities e.g. producers uphold labour rights and provide safe working conditions.
We take account of where suppliers use recognised sustainability standards e.g. BES 6001 and apply the same standards to their suppliers.
We’re also working with our main maintenance contractor (Axis) to improve reporting on embodied carbon.
6. Has engaging your supply chain in this way lead to any innovations or changes in the way Southern choose which suppliers to work with?
We work closely with our Procurement Team to ensure sustainability is assessed at each stage of the procurement process, as outlined in our Sustainable Procurement Principles. These aim to ensure the products, services and works we buy are as sustainable as possible.
The Sustainability Team are consulted on new Procurement Project Plans (PPPs), to set the Sustainability Reporting Requirements for new tenders. Our standard reporting requirements are:
- Provision of the supplier’s:
- Environmental/sustainability policy
- Net zero reduction plan
- Environmental accreditations e.g. ISO14001
- Commitment to utilise EURO 6 (emissions standard)
- Compliance with the Waste Duty of Care requirements (Environmental Protection Act 1990)
- Provision of any environmental standards applied to products used
- Provision of carbon impacts from the manufacture of products supplied
This enables us to assess the environmental commitment of suppliers before we agree to contract with them. These same reporting requirements will feed into the contract so we can establish regular reporting with the Contract Manager in line with our established Audit Framework. Our standard environmental KPIs are
- Carbon emissions (or supporting data e.g. fleet vehicle mileage by fuel type annual energy usage)
- % responsibly sourced materials
- Amount of waste produced and the % waste re-used, recycled, or sent for incineration or landfill.
If a supplier does not complete a Sustainability Audit, this is escalated to the Contract Manager to agree an improvement plan with suppliers. And in extreme circumstances, where Sustainability KPIs are part of the contract, we’ll consider ending contracts for non-compliance.
7. Have you observed any ripple effects, such as suppliers adopting sustainability practices beyond what you required?
Because more ‘clients’ are asking suppliers about sustainability, this has raised the profile and importance of sustainability. Particularly in our larger suppliers, we’ve seen a growth in Sustainability/ ESG (Environment Social Governance) or SHEQ (Safety Health Environment and Quality) Teams being set up. Plus, more and more suppliers have established strategies, policies, reduction plans or accreditations, demonstrating their commitment to sustainability.
From reviewing these strategies/ plans or meeting with suppliers we’ve learnt about innovations from specific suppliers e.g. our office cleaning contractors is piloting Tersano units in three of our largest offices. The device turns tap water into Stabilized Aqueous Ozone (SAO), a safe and highly effective cleaner and sanitiser capable of eliminating 99.99% of the toughest germs.
8. Has the exercise brought any particularly benefits to Southern Housing?
It’s early days. Ultimately, we want to reduce carbon emissions and minimise our environmental impact. Therefore, measuring and reporting is just the first step. To date, we’ve focused on building relationships with our key suppliers so we can gather reliable and consistent data.
Undertaking Sustainability Audits has helped us embed our Sustainable Procurement Principles, a document which supports the green thread of our Environmental Sustainability Strategy and Social Impact Statement when undertaking procurement activity.
Engaging with our supply chain has also enabled us (and other suppliers) to share and learn from good practice. For example, our main maintenance contractor has automated their carbon reporting, including from their supply chain. So, we’re exploring extending their approach with our own DLO. It’s given us a better understanding of the challenges and opportunities our supply chain face. For example, where suppliers are piloting Electric Vehicles.
Building relationships with suppliers has enabled us to gain social value for sustainability projects e.g., contractors supporting us to enhance biodiversity to support local species and increase resident’s wellbeing and climate resilience within our communities.
Thanks to Bethany Austin and the Sustainability Performance & Projects team at Southern Housing Group for sharing their experience and knowledge.
Photo by CHUTTERSNAP on Unsplash