How to become a 'net zero ready' supplier

Supply chains (goods or services bought from other suppliers) can account for up to 90% of a company’s total carbon emissions.

This means many companies are asking suppliers to adopt carbon reduction targets to cut their emissions.

You may find that in order to win contracts as a small or medium-sized enterprise (an ‘SME’), you will increasingly need to show proof that you are taking action to:

● your own emissions (known as ‘scope 1 and 2’)
● emissions in your supply chain (known as ‘scope 3’)

Reducing emissions will have a major benefit for the environment, but may also help you to reduce costs and identify efficiencies.

Contents

  1. What being a ‘net zero ready’ supplier means
  2. Benefits of becoming a ‘net zero ready’ supplier
  3. What large businesses need from SMEs
  4. What the public sector needs from SMEs
  5. What you can do to prepare
  6. Get more information and support

What being a ‘net zero ready’ supplier means

Being a ‘net zero ready’ supplier means:

  • preparing your business so it will be attractive to customers looking to buy goods and services from lower-carbon suppliers
  • reducing climate related risks that your business may be exposed to such as volatile fuel and energy prices, or supply chain disruption

Benefits of being a ‘net zero ready’ supplier

Taking action to reduce your carbon emissions will allow you to:

  • protect your business against new rules and regulations
  • gain a competitive advantage over less prepared businesses
  • engage and form partnerships with other forward-thinking businesses
  • improve your reputation and become attractive to new markets, employees and investors
  • find new ways to improve efficiency and save money
  • play a positive role in your community
  • reduce your exposure to climate related risks and volatility

What large businesses need from SMEs

Some larger businesses have a legal obligation to make formal commitments to track, disclose and reduce their carbon emissions, in line with the GOV.UK’s Streamlined Energy and Carbon Reporting (SECR) policy.

This may mean that they ask for your contributions to their emissions as part of their supply chain.

Each business has its own set of standards for suppliers. You will need to check what it is your larger customers are asking for.

For example, Amazon and Unilever ask suppliers to:

  • set credible carbon reduction goals
  • track and report your carbon emissions

 

What the public sector needs from SMEs

If your company is bidding for some of the larger UK government contracts (worth over £5 million a year), you may be asked to provide a Carbon Reduction Plan.

In your Carbon Reduction Plan (CRP) you will need to:

  • make a formal commitment to achieving net zero by 2050 or earlier
  • publish a link to your latest CRP on your website (it is good practice to keep previous CRPs on your website so that your progress can be monitored)
  • record your emissions for Scope 1, Scope 2 and the required categories in Scope 3
  • outline the steps you plan to take to reduce your emissions over time

Other public sector organisations may ask for a formal commitment for lower value contracts.

For example:

  • the Welsh Government requires a CRP for some procurements above £5 million
  • all NHS suppliers must publish a CRP or have a Net Zero commitment when bidding for new procurements from April 2024

As an SME, you might not be eligible to bid for some of these procurement opportunities if you fail to make a commitment or publish your plan.

You may also want to consider how to reduce emissions in your own supply chain.

Supplying to businesses in other countries

As an SME, you’ll need to check international regulations if you provide services to businesses outside of the UK.

For example, larger businesses in the European Union (EU) must report their emissions in a standard digital format on a yearly basis. SMEs  in the EU will be expected to do this from 2028.

The International Sustainability Standards Board (ISSB) has also announced a set of common reporting standards for the global capital market. While they’re not yet mandatory in most countries, this will increase the demand for greener supply chains across the world.

What you can do to prepare

If you decide to become a ‘net zero ready’ supplier the following steps will help:

  1. Set a target.
  2. Measure your emissions.
  3. Make a plan to reduce your emissions.
  4. Reduce emissions in your supply chain.
  5. Show your progress.

1. Set a target and make it public

Many large companies now ask suppliers for a public statement showing your commitment to reduce emissions and reach net zero.

For example, you could set a formal net zero emissions target through the SME Climate Commitment.

This is an internationally recognised public commitment you can make to:

  • halve your business emissions by 2030
  • reach net zero emissions by 2050
  • report yearly on progress towards these goals

2. Measure your emissions

Large companies often share energy use and carbon emissions information in their annual reports. Providing data showing your carbon emissions will make it easier for them to work with you.

Find out how to measure your carbon emissions.

3. Make a plan to reduce your business emissions

Start with emissions you can control in the workplace and your energy supply. These are called ‘scope 1 and 2 emissions ’.

Choose the right measures based on your type of business and how much you can afford to invest.

For example, you could:

Find out more about:

4. Reduce emissions in your supply chain

Engage with other businesses and see what measures you can take to reduce emissions in your supply chain. These are called ‘scope 3 emissions ’.

You can do this by:

5. Show your progress

Once you’ve started to reduce your emissions, share your progress with your customers and suppliers.

Use GOV.UK’s Carbon Reduction Plan template to help you decide what to include.

For example, you can include your progress on reducing emissions from things such as:

  • vehicles
  • heating, cooling, lighting and electricity
  • other ‘indirect’ emissions, such as transportation and distribution of goods and services to and from your business

You can also sign up for Crown Commercial Service’s free online course ‘Producing your Carbon Reduction Plan’

Find out more about how to track and share your progress

Get more information and support

You can:

Take part in the UK Net Zero Business Census
Take part in the UK Net Zero Business Census