Amid pressure from investors, regulators and consumers, companies are becoming increasingly active in tackling their carbon footprint – both within their own operations and in the wider value chain.
For Electrolux, the global household appliance manufacturer, this has been a long-term driver for decades, as demonstrated by its listing on the Dow Jones Sustainability Index and multiple awards in this space.
According to recent polls of its consumers, Electrolux found that more than half say they are climate conscious but not living as sustainably as they would like to. In order to help them, the company has set out a broad sustainability framework spanning nine different areas and climate goals, one of which is driving supply chain sustainability.
With supply chain emissions being on average 11.4 times higher than operational emissions, Electrolux recognises that tackling this is vital to reducing its overall carbon footprint as it looks to reach net-zero emissions throughout its value chain by 2050.
The first step in decarbonising the supply chain is understanding its current levels of emissions and where they emanate from. Doing this requires close collaboration with and support from suppliers.
Electrolux partners with CDP (formerly the Carbon Disclosure Project) via the Supply Chain Program to engage its key suppliers and encourage them to disclose their emissions and other relevant environmental data.
Electrolux’s CDP Supply Chain Program
Led by the Sustainable Procurement Senior Program Manager, part of the Group Purchasing Transformation Team, the disclosure project takes place in annual cycles with the support of several functions as well as CDP.
The Sustainable Procurement Senior Program Manager is responsible for creating and operationalizing the entire strategy, including:
- Program Development and roll-out
- Development of targets and KPIs
- Tracking and reporting performance through ad-hoc developed dashboards
- Selecting, engaging, educating, and supporting suppliers with capacity building
- Handling communication with suppliers, acting as their contact point for any issues during the disclosure cycle
- Creating and driving collaborative networks with both internal and external stakeholders
Working closely with the Group Sustainability Team to ensure the program strategy is shaped according to the company’s strategy and aligned with its sustainability framework. The group team also provides continuous support and guidance, co-hosting trainings and sharing with suppliers relevant knowledge, best practices and details of Electrolux’s approach.
To establish a baseline measure and then monitor improvements over time, Electrolux engages and supports suppliers in completing the CDP questionnaires, which gather qualitative and quantitative climate-related data and other relevant environmental information in a standardized manner.
Electrolux’s initial focus when the program launched in 2020 was on the top 300 suppliers that account for about 80% of its spending on direct materials and global logistics suppliers. Key elements of the program include:
- Training internal staff and suppliers
- Communication campaigns to encourage suppliers to get involved
- Collecting and analyzing data and scores: using the outcomes from the disclosure cycle (scores and custom reports) and reported data to measure supplier environmental impacts and to track progress of internal and external sustainability goals and/or commitments
- Driving improvements over time: suppliers improve their responses and performance through feedback from Electrolux, CDP’s action exchange initiative, and scoring documents
What is the Carbon Disclosure Project and why did Electrolux choose to partner with it?
CDP (formerly the Carbon Disclosure Project) is a global environmental impact non-profit working to secure a thriving economy that works for people and planet. They do so by running a global disclosure system, built over the last two decades, that enables companies, cities, states, and regions to disclose, measure and manage their environmental impacts.
The measurement of these impacts becomes the basis for strategic decisions and drives more sustainable and environmentally conscious practices.
When companies request their suppliers to participate in the disclosure via the Supply Chain Program, the suppliers are asked to report quantitative and qualitative information on a range of sustainability topics in a standardised way via the CDP questionnaires. Once these are completed, the responses are shared with the stakeholder that requested the company to participate, and the company will also receive a score grading their performance and their benchmark against peers.
All companies that participate in the CDP complete the questionnaires within an annual three-month window that typically runs April-July.
Electrolux chose to work with CDP because its rating is:
- Independent: Scoring is completed by partner organisations trained by CDP
- Comparable: CDP methods are the same across all countries – the same key actions need to be demonstrated and same information provided
- Transparent: Full methodology is available online, alongside webinars and ad-hoc explanation
- Wide-reaching: In 2021, CDP supply chain members made requests to 23,487 distinct suppliers around the world to disclose their supply chain data
- Finally, Electrolux has been disclosing through CDP for 15 years, upon the request of both customers and investors – and is recognized as one of the leading companies in the world in combating climate change and water risk (Climate A List 2021 and Water A List 2021, in the leadership index for 6 and 4 years in a row respectively)
Meanwhile, the benefits for suppliers to participate include:
- Measure and improve environmental impact and benchmark impact against peers
- Identify cost savings and areas to improve operational efficiency
- Identify risks and opportunities and communicate risk management
- Propose collaborative opportunities and increase value from customer relationships
- Demonstrate transparency and operational competency to their customers
- Disclose via one response for all customers and stakeholders
- CDP disclosure support and guidance
The team runs several training sessions to support both internal staff and suppliers in participating in the program.
Suppliers are invited to informational sessions, capacity building webinars, and trainings to educate and support them in clearly understanding the disclosure flow, questionnaires’ content and all the benefits of participating. Most importantly, these sessions are the best occasion to share with suppliers Electrolux’s environmental ambitions, goals and best practices, to make them aware of Electrolux’s sustainability priorities and the role they play on climate impact work.
All trainings are co-hosted by the Sustainable Procurement Senior Program Manager in close collaboration with Group Sustainability and CDP.
Electrolux uses a number of communications channels both to encourage supplier participation and raise awareness of the program among internal staff.
The supplier communication campaign, which runs annually, consists of:
- An initial engagement letter signed by CPO
- A more detailed instructions document which highlights Electrolux’s priorities/focus areas connected to specific questions in the questionnaire
- Supplier capacity building training and webinars
- A thank you letter, including a certificate of accomplishment
- Feedback letter
- Final supplier information session to share overall results, progress, and next steps
The internal communication campaign, also run annually, includes:
- Newsletters and articles to increase awareness and highlight achievements
- Staff training to educate purchasing staff about how to support suppliers
- Final information session to share overall results, next steps, strategy and targets
Collecting and analysing data
All supplier data is collected via and hosted on the CDP platform, which includes analytics tools to visualise performance over time. It can also be exported to excel for further analysis.
The final goal of the Sustainable Procurement Program is to make sustainability a key element of choice in Electrolux’s decision-making process; therefore, tracking suppliers’ environmental performance year-on-year will allow the company to take more informed and environmentally-conscious business decisions when it comes to awarding new business.
To achieve this, cross-functional collaboration with Electrolux’s Supplier Relationship Management Program is key. The CDP data feeds into the company’s supplier scorecard, an internally developed performance management tool which allows it to monitor supplier performance and drive improvements.
Driving improvements over time
Having gathered the baseline information, Electrolux is now focused on driving improvements from suppliers. For the second round of disclosures in 2021, it began tracking supplier progress against the baseline and feeding this back to the suppliers.
For each annual cycle, a group of suppliers among those with the lowest score are selected to implement improvement plans (between 2020 and 2021 around 90 suppliers out of 300 involved in the program).
The team meets with those suppliers to provide guidance, share best practices, identify opportunities and define the improvement plans. They then follow up monthlyuntil all the actions are completed. Their performance is then compared the following year to monitor whether the changes implemented are delivering results.
Thanks to its thorough steps to engage and educate suppliers and closely collaborate with internal stakeholders, Electrolux has managed to exceed its own expectations by achieving a 100% response rate from suppliers in the 2022 cycle – in just its third year of participation in the CDP. By achieving this result, Electrolux is the only CDP supply chain member in the world with a 100% supplier response rate, among members with over 150 suppliers engaged in 2022, demonstrating the value Electrolux’s supply base sees in the process and the commitment to drive together a change for the better.
This achievement follows impressive results in the 2021 round including:
- A 95% response rate – a 3% increase from 2020
- A 50% increase in the overall number of suppliers reporting emissions data
- A 2.3x increase in the number of suppliers verifying their emission data through accredited third-party authorities
Finally, Electrolux was rewarded by CDP as a Supplier Engagement Leader 2021, recognised as one of the top performers in the world in this area.
While it recognises that reducing carbon in the supply chain is a long-term journey, the foundations of the program have put it in a strong position to target reductions in the future and the year-on-year trend so far has been promising.
Maxfield Weiss, Executive Director of CDP Europe, said: “With supply chain emissions on average 11.4 times higher than the operational emissions of a company, there is enormous potential along international supply chains for companies like Electrolux to be agents of change.
“Electrolux is one of CDP’s leading supply chain members in terms of supplier response rates, which reflects the highly effective supplier engagement strategy that Electrolux has implemented, including webinars, communication of clear KPIs, and one-on-one conversations with suppliers.”
Tracking supplier emissions levels is only the first step in reducing emissions to reach carbon neutrality by 2050. From 2022, Electrolux is stepping up its efforts to encourage this with a focus on driving suppliers improvement year over year and endorsing suppliers’ Science-Based Targets setting.