Supplier Relationship Management's Role in Achieving Sustainability Targets

Author: Alan Day, Chairman and Founder

For most companies, delivering on sustainability targets increasingly defines corporate credibility. The promises are everywhere: net-zero supply chains, circular economies, ethical sourcing, Scope 3 reductions, modern slavery eradication, biodiversity protection. These are no longer peripheral issues for communications teams. They now sit at the core of business strategy, often under the personal accountability of the chief executive.

Yet behind the headline commitments lies a more difficult truth: most companies cannot achieve their sustainability goals without the active cooperation of their suppliers. Emissions, resource usage, labour standards and innovation potential sit overwhelmingly outside the four walls of the enterprise. According to State of Flux research, over 50% of most organisations’ ESG (environmental, social and governance) footprint originates in their extended supply base. The problem is external.

This is where Supplier Relationship Management (SRM) becomes critical. Procurement leaders who treat sustainability as a policy compliance exercise or rely solely on onboarding questionnaires will fall short. Sustainability requires partnership, and partnership requires structured, long-term relationship management. SRM is no longer simply a lever for cost or risk. It has become the operating discipline that connects enterprise ambition to supplier capability.

 

Sustainability is not a sourcing event

Early procurement responses to sustainability were mostly transactional. Teams issued codes of conduct, updated contract clauses, and embedded sustainability metrics into RFPs. Vendors who failed to meet minimum standards were de-selected. Those who complied were onboarded. Compliance was rewarded. Non-compliance penalised.

This approach was a necessary first step. However, today it is not enough. The complexity of global supply chains, variability in supplier capability, and gaps in ESG data mean oversight alone will not deliver transformation. Sustainability targets now demand outcomes that go beyond what can be enforced through contracts or tracked via static audits.

Real progress depends on deeper supplier engagement: transparent data sharing, joint investment in capability building, co-development of low-carbon solutions and innovation partnerships. These are not achieved through tendering or scorecard policing. They require mature, trusted relationships. This is the space where SRM operates.

 

Supplier capability over compliance

Our 2024 Return on Relationships research shows that 61% of organisations believe their suppliers lack the maturity to meet growing sustainability expectations. Simply replacing them is neither realistic nor risk-free. Developing them is essential l.

SRM enables companies to segment suppliers not only by spend or strategic value but also by ESG maturity. High performers can join innovation initiatives, while others receive tailored support. The SRM governance model creates the platform for these conversations. This begins at onboarding and continues throughout the life of the relationship.

For example, one global consumer goods company has embedded sustainability progress reviews into its quarterly business reviews. These sessions go beyond KPIs to track joint action plans. Supplier development teams provide practical help with emissions reporting, traceability standards and packaging innovation. As a result, a growing cohort of suppliers are directly contributing to Scope 3 reductions. This is something a contract clause alone could never achieve.

 

Innovation begins outside your enterprise

Many of the biggest levers for ESG progress such as low-emission materials, energy efficiency, and closed-loop systems originate with suppliers, not buyers. Suppliers often hold the technical expertise and operational insights needed for breakthroughs.

But innovation is rarely volunteered without trust. Suppliers are unlikely to commit R&D resources, intellectual property or capital unless they see long-term partnership and shared benefit. SRM provides the governance and commercial alignment to make that possible.

Joint business planning, a core SRM discipline, is the forum for these strategic conversations. Rather than treating sustainability as a compliance checkbox, joint planning turns it into a shared agenda. Both sides explore mutual objectives, resource needs and co-investment opportunities.

Ardagh, a global packaging company, exemplifies this approach. It is collaborating with suppliers across its value chain, including equipment manufacturers, technology providers and energy suppliers, to co-develop low-emission furnaces for glass production. These advances are not achievable in isolation. They depend on deep, strategic collaboration that delivers value to both parties.

 

Listening to suppliers: a better feedback loop

Many companies still treat supplier feedback as a one-way satisfaction survey. In a sustainability context, this is a missed opportunity. Suppliers often face real barriers such as poor data access, outdated technology or cost constraints that hinder ESG progress. Without that visibility, buyers risk setting unrealistic demands.

Some organisations are addressing this by launching sustainability-focused Voice of the Supplier (VoS) programmes. Microsoft, for instance, has used VoS to surface supplier concerns around Scope 3 data, decarbonisation investments and shifting regulations (read the case study here). These insights now feed into their joint planning efforts. This allows for more targeted support and better outcomes.

This type of structured listening builds transparency, strengthens trust and ultimately accelerates sustainability delivery.

 

Managing complexity and trade-offs

Delivering sustainability targets is not linear. It requires trade-offs between cost, quality, resilience and innovation, all while facing regulatory uncertainty and customer scrutiny. Suppliers, too, must juggle competing priorities and shifting technical demands.

SRM helps navigate this complexity. Through governance forums, from day-to-day operational reviews to annual “top-to-top” sessions, buyers and suppliers align on what is feasible and adapt when conditions change. It keeps dialogue alive and focused, even when plans need adjusting.

It also builds supplier loyalty. This is a powerful advantage in tight supply markets. Suppliers who feel trusted and valued are more likely to prioritise ESG projects for committed partners, rather than spreading efforts thinly across transactional accounts.

 

Building ESG into your SRM system

To embed sustainability within SRM, companies need to operationalise it at every level:

• Segmentation: Classify suppliers by both commercial and sustainability relevance
• Governance: Integrate ESG metrics and roadmaps into your supplier governance model
• Capability building: Offer training, platforms and technical support to help suppliers mature
• Joint innovation: Collaborate on projects focused on emissions, circularity and ethical sourcing
• Relationship health: Maintain trust, transparency and alignment to support shared risk-taking

SRM should evolve from a procurement-driven activity into an enterprise-wide capability. This enables organisations to deliver on their public ESG promises in collaboration with the suppliers who will make or break those goals.

 

The CEO’s credibility is now in the supply base

Public commitments have already been made. The challenge is no longer about setting targets. It is about delivering them. And most of the variables that determine success sit outside your business.

If CEOs and CPOs view sustainability as a compliance exercise, they will fail. But if they treat it as a relationship challenge built on trust, transparency and capability, they have a far better chance of meeting the expectations they have set.

Benchmark your supplier management maturity

Take part in the 2025 SRM Research to find out how your organisation compares and where your supplier partnerships can better support sustainability goals.

Want to uncover what is helping or hindering your ESG efforts?
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