B2B Sustainability Disclosure: Telling Your Sustainability Story to Your Business Partners

When it comes to communicating sustainability information, one of the biggest challenges facing companies is accommodating business partners. Every firm is pursuing its own sustainability story, and companies increasingly expect their suppliers and partners to help them meet their own sustainability goals.[1] Accommodating the sustainability disclosure needs of business partners can also be extremely difficult as companies try to satisfy often conflicting demands on a variety of different timetables. But however fraught, this dynamic can ultimately be a positive one—not just in accelerating progress toward important environmental and social goals, but in strengthening business partnerships. If you engage your business partners at a strategic level, sustainability can help drive innovation and growth. This essay offers practical guidance—based on interviews and roundtables with sustainability executives—to help companies bypass the chaos and tell their sustainability stories effectively.

Having a strategy for engaging customers and business partners on sustainability issues is becoming a necessity. In a survey of 159 procurement executives, for example, “delivering on sustainability goals and commitments” was identified as a top three priority. Notably, 63 percent of survey respondents stated that delivering on corporate sustainability goals has become a “very important” priority, up from 25 percent two years ago.[2] The same survey also found that 69 percent of respondents consider sustainability performance when selecting new suppliers and renewing contracts.[3]

To be sure, many customers are simply looking for evidence of a sustainability program; few customers are deselecting suppliers for not providing sustainability information, at least not yet.[4] But some of our recent interviews with sustainability executives suggest we are likely not far from this scenario. As one executive from an automotive products company notes:

“With previous customer requests for sustainability information, there wasn’t a particular goal, they were just asking for transparency. Now things are changing. We are seeing sustainability requirements included in the specifications for a bid, such as a requirement to use green steel, and we are seeing it in contracts requiring companies perform a life cycle assessment. These requests are popping up very differently than they used to.”

To remain competitive, companies need to be prepared to provide details about their sustainability performance and activities. The following are five recommendations to help companies tell their sustainability stories to their customers and business partners:

Get clarity on “why” and “what” you are disclosing. Effective sustainability communications meet the specific needs of different audiences. The sustainability information your customers and business partners are interested in may differ from the information investors, regulators, and employees are looking for—and the reasons why they need the information will also be different. When collecting and preparing your sustainability disclosures, it is important to delineate the “why” and the “what” by audience. When it comes to business-to-business (B2B) sustainability disclosure, the “why” is to maintain and strengthen the business relationship. The “what” is information and assurance your customers need that your products and services are aligned with their own sustainability goals and objectives. And increasingly, as described by one executive from a chemical company, the scope of these requests is extending beyond information:

“Over the last few years, conversations with customers felt like a compliance exercise; they mostly wanted to know if we had a sustainability report. Within the last year or two, we are seeing an uptick in very specific requests for us to change the way we do things. For example, some customers are asking us to make the products we sell to them with renewable energy. These types of requests have spurred a lot of strategic conversations with individual customers. They require a one-on-one understanding of what our customers’ goals are.”

Sustainability reporting frameworks—such as the Global Reporting Initiative (GRI) Standards, Sustainability Accounting Standards Board (SASB) Standards, CDP questionnaires, and Task Force on Climate-Related Financial Disclosures (TCFD) recommendations—are useful starting points for determining what issues to report on and how to report on them.[5] But keep in mind that customers are not the target audience for many of these frameworks; for example, SASB and TCFD focus primarily on investors. Moreover, the specific sustainability information your customers need may be based on the reporting framework(s) they use and the industry and business they are in, so it is important to engage in dialogue to understand your customers’ priorities. This brings us to the next point.

Find opportunities for dialogue with customers. Engaging in effective sustainability disclosure with your customers requires understanding their ESG needs and priorities. Results from a recent survey of sustainability executives suggest there is room for improvement: fewer than half of respondents indicate they are satisfied with their level of engagement with customers (although customers are the stakeholder that respondents are most satisfied with in terms of their engagement on sustainability).[6] The key is to find opportunities to engage in dialogue with your business partners to set expectations for sustainability disclosure. Use these meetings to help understand what your customers’ sustainability priorities are, and what data they need from you to help them address those priorities.

Also, consider proactively reaching out to customers to share your sustainability story—and not just to customers that have been asking for sustainability information. Doing so can be a great opportunity for competitive differentiation, as noted by the executive from the automotive products company:

“We also meet with customers to share our sustainability story and to try to showcase it as a competitive advantage. We want to show them we are listening, we get it, here is our sustainability journey and the goals we’ve set. These conversations are designed to make sure customers understand where we’re at and where we’re headed in sustainability.”

In addition to one-on-one dialogue, there may also be opportunities to engage with customers through industry coalitions. These can be helpful resources for identifying the key information your customers are looking for, as well as providing standardized ways to communicate that information. One example is the ESG/sustainability reporting template developed by the Edison Electric Institute (EEI) and the American Gas Association (AGA), designed to help electric and gas companies provide the financial sector with more uniform and consistent ESG/sustainability data and information.[7] Some companies are also hosting customer conferences and webinars designed to help their suppliers get a better sense of sustainability priorities and expectations. Participating in or hosting these events can be a great way to engage on sustainability with your business partners.

Determine the right communication channels. Companies can use a variety of channels to communicate sustainability information (e.g., annual SEC filings, corporate website, press releases, case studies, social media, intranet, investor presentations, news articles, conferences, customer meetings, etc.). The specific needs of your customers will determine the best channels to use.

The sustainability report remains one of the primary channels companies use to tell their sustainability stories, but keep in mind it may not always be the most effective. Consider using the report as a reference from which shorter, more focused communications are derived. These communications can include stand-alone documents that are more data heavy and provide a deeper dive on specific topics—from greenhouse gas emissions; to worker health and safety; to diversity, equity & inclusion; to supply chain resilience. These supplemental communications can also include customized reports that highlight specific opportunities for partnerships based on your customers’ sustainability goals and priorities. Tailored reports can be a great way to begin engaging customers more strategically.

A challenge with traditional sustainability reports is that often the information in the report may be outdated by the time the report is published. To overcome this, consider providing interactive or searchable databases that are regularly updated with sustainability information. These databases enable companies to provide significant amounts of timely data on a range of topics—information that may not fit neatly into a narrative report and needs to be provided as soon as it is available and verified. For example, companies may want to develop a portal or microsite to provide information targeted at business partners. Several companies also rely on external providers as a way of sharing sustainability information with customers and suppliers. Providers such as EcoVadis, CDP, and NQC make it relatively easy to share information with business partners.

While microsites and external databases are helpful for communicating sustainability data, it is worth noting that these resources do not necessarily address an issue that many companies face—getting the actual data. Few companies have sophisticated technology in place for data collection.[8] As described by the executive from the automotive products company, “the issue is less about having a place to aggregate the data, and more about how that input is populated.” Investing in the right technology to collect your sustainability data will make communicating the data far easier.

Engage with ESG rating agencies, but don’t go chasing after all of them. Customers and business partners are turning to ESG ratings for information on companies’ sustainability performance. These ratings, however imperfect, give customers a simple way of assessing the sustainability performance of their suppliers and partners. But with 600+ ESG rating firms looking to interact with companies, you need to be strategic about which organizations to engage with and how, and avoid chasing after all the raters.

One approach is to develop three tiers for level of engagement with ESG rating firms. The first tier should consist of three to five firms you proactively engage with. These are the ESG rating firms that give you the greatest coverage of sustainability issues that truly matter to your company and your business partners. The second tier should consist of a handful of firms you engage with more passively, such as for the purpose of verifying data. In the third tier will be firms you do not engage with or devote resources to serving.[9] This prioritization can help you choose which firms to engage with, which is crucial given the significant time commitment required to respond to ESG rating firms. The importance of being strategic with rating firms is emphasized by the automotive products executive:

“It’s important for us to prioritize and know what the important issues are for us. Just because a rating firm asks for something, it doesn’t mean we have to contort ourselves into a pretzel to get the data, especially if they’re looking for something that isn’t relevant to our industry.”

Elevate the disclosure conversation to a more strategic level. While you may be prepared to discuss sustainability at a strategic level with your customers—such as opportunities for partnering on sustainability innovation—the procurement person on the other end of the discussion may be simply going through a checklist looking for evidence that you are disclosing sustainability information.[10] One way to help elevate the conversation to a more strategic level is to invite people from other functions into the discussion. For example, consider getting your customer’s innovation and sustainability teams in the room. As noted by the executive from the chemical company:

“Our sustainability conversations with customers used to be just between an account manager and a customer. We would create talking points from our sustainability report and give them to our commercial teams to use for customer conversations. But recently, as these conversations are getting more technical and more strategic, we usually have a sustainability person in the room. Customers are also starting to ask to talk to our sustainability person.”

Your sustainability story can be about much more than meeting supplier selection criteria—it can be a great way to strengthen partnerships with customers by spurring sustainability-led innovation and other collaborations. Designing products and solutions to help your customers meet their sustainability goals is a smart move since virtually every large company is looking to its suppliers and partners for help. But a strategic partnership needs to be built on a strong foundation of trust and understanding. So it is important to begin by getting clarity on why sustainability matters to your customers and what issues matter most to them. Only then can you begin to authentically engage in more strategic discussions.