Environmental, Social & Governance4 min read

How to Build a More Sustainable, Diverse, and Accessible Supply Chain

Matt Eaton

The modern world is evolving quickly, and business is changing right with it. Those of us working in supply chain functions are adapting to keep pace and deliver even more value to our companies. Just a few years ago, we were asked to embrace General Data Protection Regulation (GDPR) and become knowledgeable on privacy topics to support business operations and regulatory compliance. Now, it’s commonplace to talk about these topics with suppliers. Looking ahead, the next big change is undoubtedly Environmental, Social, and Governance (ESG), especially with the upcoming Corporate Sustainability Reporting Directive (CSRD) from the European Union.

Personally, I could not be more thrilled to have ESG conversations with suppliers, as I’ve always been an advocate of protecting our planet. I also understand why those of us in supply chain roles have major leverage – our organizations help companies spend over $22 trillion dollars in the United States alone1.

Legislation that supports sustainable development has been slow to gain traction, especially in the United States. But corporations can and must be part of the solution. According to the UN Global Compact, there are more than 17,000 Sustainable Development Goals (SDG) participants in over 160 countries. These companies have the opportunity to generate strong economic returns, while also embedding long-term social and environmental value into their operations.

To bring this to life, Responsible Sourcing2 has become a popular strategy. For many companies, this is because their biggest sustainability impact often lies within their supply chain.

I’m excited about our part to help deliver on VMware’s 2030 Agenda and ESG outcomes of Sustainability, Equity and Trust, serving as a key lever to strengthen our business resilience, create opportunities to innovate, and combat climate change through VMware Responsible Sourcing.

Over the past 12 months, our Responsible Sourcing program has made considerable progress around sustainability, diversity, and accessibility. Two significant achievements in this area are:

  • The official launch of our Sustainability Supplier Engagement Program
  • VMware’s recognition as a CDP Supplier Engagement Leader

Sustainability Supplier Engagement Program

Our suppliers represent a significant portion of our carbon footprint, with 70%+ of our emissions coming from our supply chain in our most recent greenhouse gas inventory. As a company, VMware has committed to achieving net zero carbon emissions for our operations and supply chain by 2030. As a critical first milestone, we are aiming for 75% of our annual spend to be with suppliers who have set science-based targets (SBTs) by end of FY25. Ambitious as this is, we know it is achievable and requires strong partnerships with our suppliers.

Supplier sustainability is not something that just happens on its own, nor can you make strides without a baseline understanding of what sustainability means to your suppliers. In FY21 we started this journey by leveraging EcoVadis' newly released Carbon Action Module to assess our suppliers on their sustainability practices. Once we had a baseline understanding we set a strategy to act.

At the end of FY22, we found that 23% of our suppliers had set science-based targets. A report published by CDP  revealed that only 5% of suppliers annually are motivated to set SBTs on their own. We knew then that we had to take direct action in order to meet our FY25 goal by finding ways to accelerate progress through procurement actions, such as strengthening our Supplier Code of Conduct, direct enablement for our suppliers, and even implementing contractual language with sustainability requirements.

In early FY23 we began a pilot program to learn how direct enablement with our supply network could help move suppliers along in their sustainability journey. We were intentional in ensuring the program represented a diverse set of suppliers from across various industries, business sizes, and diversity ownership. This provided a good framing to identify nuances in how we support different types of suppliers as we work to expand the program.

The pilot revealed promising results. Seventy-three percent of participating suppliers who interacted with us are now interested and/or actively engaged in setting their own SBTs.

The pilot also became a driver for VMware Responsible Sourcing to develop an initial set of educational training and resources to help our suppliers along the way. Five training modules were created to understand where suppliers were on their sustainability journey and how VMware could help them reach new milestones. The net result was a library of educational resources covering topics like how to build a business case for sustainability and engage your stakeholders, SBTs 101, and how companies can get started on measuring their greenhouse gasses. This material is now available for free to our community through our Responsible Sourcing Website.

On May 5th, we officially launched a new, scaled Sustainability Supplier Engagement program leveraging Watershed, our supplier resource portal and carbon management system, and an automated communications platform designed by Bridge Partners. The roll out will be staged as we gather important feedback that will enable us to further optimize interactions. We expect to engage 90% of our suppliers (by spend) in FY24.

CDP Supplier Engagement Leader

In addition to the Sustainability Supplier Engagement Program, we have continued to expand our impact across several other areas. These include working with Procurement to add new contractual language related to the environment in our Supplier Code of Conduct, and more recently, launched a new Supplier Sustainability Addendum (SSA) specifically designed to support and drive supplier commitments to set science-based targets. We have begun executing this new SSA with all our highest-spend suppliers. In addition, we’re engaging our Suppliers in completing an ESG assessment in EcoVadis and launching a new program designed to increase sustainability in our promotional and giveaway items.

These efforts, all combined, led to our recent recognition by CDP as a Supplier Engagement Leader. We were among the top 8% of companies assessed for supplier engagement on climate change, based on our 2022 CDP disclosure. This recognition is a great proof point for the progress we’re making toward our supply chain emissions goals. It’s also a testament to the collaboration between our many teams.

We are well on our way to meeting our 2025 goal, and with the direct engagement and education we’re offering through our scaled program, I’m confident we’ll hit our target.

It takes all of us to do everything we can to fight against climate change. We encourage you to use our Responsible Sourcing site as a guide and you can find more on VMware's ESG efforts here.

[1] Kramer, M. R., Agarwal, R., & Srinivas, A. (2019). Business as Usual Will Not Save the Planet.

[2] The term Responsible Sourcing herein is inclusive of the following: Sustainable Sourcing, Sustainable Supply Chain, Sustainable Procurement, Sustainable Supply Chain Management, Responsible Supply Chain, Responsible Procurement, Responsible Supply Chain Management.