Challenge
Pharmaceutical company Gilead has a well-established supplier emissions-reduction programme and science-based targets, but aims to increase its use of primary data – especially among suppliers it considers most critically important. While some of those vendors already have programmes in place, others need more support and encouragement. The Foster City, California-headquartered business has devised a segmentation model to ensure that engagement is focused where it will have the greatest impact.
Approach
Gilead’s approach to Scope 3 supplier engagement is based partly on the segmentation model used for supplier relationship management, in which suppliers are categorised according to:
- Their criticality to Gilead’s operations and commercial performance.
- Their relative power in the relationship – those believed to be important suppliers to Gilead that also consider Gilead an important customer are deemed the most strategically significant.
Through this process, Gilead assigns a rating to each supplier to determine their overall priority level for engagement.
The second part of Giliead’s approach leverages the outputs of that segmentation model above and then overlays the results against a separate ranking based specifically on the supplier’s Scope 3 maturity, a spectrum spanning those with no programme at all to those with a full carbon-accounting scheme in place, science-based targets and an active decarbonisation plan. This information is collected via a questionnaire sent to those suppliers estimated to be responsible for 75% of Gilead’s Scope 3 emissions.
These two ratings form an axis, with suppliers roughly falling into one of four quadrants (see Figure 1, above).
- High-priority suppliers with low Scope 3 maturity: Gilead aims to work with them to develop their Scope 3 reporting and management capabilities as a matter of urgency. The rationale is that these important key suppliers may need significant time to design and deploy GHG management and decarbonisation programmes.
- High-priority suppliers with high Scope 3 maturity: Suppliers in this quadrant are considered a lower-priority for GHG management engagement as they are already taking steps to reduce their emissions. However, Gilead will engage with these firms further to collaborate more closely and explore opportunities for collaboration .
- Low-priority suppliers with low Scope 3 maturity: Such vendors are also seen as less critical, but are provided access to guidance to help them get started on their Scope 3 journey.
- Low-priority suppliers with high Scope 3 maturity: Suppliers in this quadrant are perceived to be the least critical because their existing GHG management is actively addressing carbon emissions and if business grows Gilead is comfortable that this supplier’s programme is aligned with ongoing decarbonisation goals.
“We’re not chasing the low importance suppliers that have a high maturity at all – they’re fine,” says Dru Krupinsky, senior procurement manager at Gilead, who leads the programme. “We’re really chasing the big guys that have no programme as our highest priority. And then of course, highlighting some of the shared work we do with our key suppliers that demonstrate advanced GHG management maturity.”
Depending on their maturity level, suppliers are offered support in developing their capabilities. This ranges from, at the most basic, help using the GHG protocol and carbon accounting for an initial GHG inventory, to supplier engagement, target-setting, and sourcing renewable energy . The ultimate goalpost is the design and implemention of a decarbonisation programme for their own supply chains (see Table 1, below).
Outcome
By combining two methods of assessing suppliers – an SRM segmentation model and a supplier GHG emissions management maturity assessment – Gilead is now able to focus its support and engagement on those vendors that are both critically important to its business and most in need of support, ultimately delivering the impact where it is needed most.
Image: Sundry Photography / Shutterstock.com
