How the cloud computing company is leveraging Watershed to reduce its Scope 3 emissions
As with many companies, a majority of VMware’s carbon footprint—over 70%—stems from its supply chain. In 2020, VMware set out to be net zero emissions across all Scopes by 2030, and with 75% of its annual spend to be with suppliers who have set science-based targets (SBTs) by the end of its fiscal year 2025. Critically, the more VMware could reduce emissions in it supply chain, the less it would have to pay for carbon avoidance and removals in the future.
A report published by CDP revealed that only 5% of suppliers annually are motivated to set SBTs on their own. Matthew Eaton, Head of Responsible Sourcing, knew direct action would be necessary to accelerate progress and ultimately meet this goal.
In 2020, VMware started its journey by leveraging EcoVadis' newly released Carbon Action Module to assess its suppliers on their sustainability practices. It learned by the end of 2021 that only 23% of its suppliers had set science-based targets—Eaton had his work cut out for him.
Challenge
Activate hundreds of suppliers (equaling 75% of VMware's spend) to set science-based targets by 2025 with a very limited team.
Solution
Create a streamlined supplier workflow, powered by software, that scales the ability to survey, enable, collect commitments, and track progress.
Result
Overall, 550 suppliers setting – or committed to setting – SBTs, representing 49% of supplier emissions and 52% of spend. With its Scaled Supplier Engagement program now in place, VMware has engaged 341 suppliers in just over 4 months with one full time person.
Challenge
In early 2022, the team began a pilot program to learn if direct engagement and enablement with a diverse group of 15 suppliers could move the needle on this goal. Via direct and high-touch outreach, Eaton’s team asked these suppliers what it would take to get them to commit to a science-based target and what support they would need.
The pilot inspired the Responsible Sourcing team to develop an initial set of educational training and resources to help suppliers along the way. VMware’s pilot partner created 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 on VMware’s Responsible Sourcing website.)
While the pilot revealed promising results—11 of the 15 participating suppliers who interacted with them are now in the process of setting their own SBTs—the manual and time-intensive work to survey, communicate with, enable, and track progress of suppliers wouldn’t easily scale to hundreds of suppliers.
Solution
In May 2023, VMware launched its scaled Sustainability Supplier Engagement program, prioritizing and automating engagement based on data and leveraging Watershed as its supplier portal platform. Its goal was to engage 90% of its suppliers (by spend) in 2023. Now, VMware’s playbook for catalyzing suppliers to action is:
Using Watershed, VMware has a quick view into its suppliers and can easily segment by spend, business size, emissions, and known sustainability data. Their team is prioritizing suppliers with annual spend above a certain threshold and working to influence and activate about 400 suppliers (representing 90% of their annual spend) over the course of six months.
VMware uses a Hubspot + Watershed integration to email its suppliers (example here), prompting them to join VMware’s sustainability program on Watershed’s platform. While Eaton leads the work, he also partners closely with VMware’s large sourcing team and conducts regular trainings to make sure everybody is empowered to speak to suppliers about why sustainability is a strategic priority.
In the supplier portal, suppliers take a sustainability assessment to share where they are in their journey and what help they may need. This information gives the VMware team a realistic view into their progress to meet their targets and indicates what next steps they have with each supplier. VMware has been surprised by the number of its top suppliers that indicated very nascent (or nonexistent) climate programs.
Within the portal, suppliers can watch a series of interactive e-learning modules to learn about critical introductory topics like: building a business case for climate action, the basics of emissions measurement, and how to set science-based targets. During its pilot, VMware found that static learning resources frequently felt overwhelming for companies that were at the very beginning of their climate journey.
Suppliers are requested to create a plan of record, indicating their intention to set a science-based target. This step creates a funnel of where suppliers are on their journey and the likelihood of traction.
VMware found suppliers were motivated by different things and there was no “one size fits all” approach to influencing behavior. While some were catalyzed by desire to join peers in acting on climate, many were moved by the desire to reach “preferred supplier status,” which VMware only gives to suppliers that deliver the best value and exemplify VMware’s values.
VMware is providing access for suppliers to create a fast and actionable scope 1-3 footprint in Watershed as well as a full library of more advanced climate resources to supplement the introductory e-learning module mentioned above.
VMware’s team can easily track and analyze engagement over time so they can update their own SBTs, and also identify suppliers that need follow-up attention.
Going forward, VMware is requiring all new suppliers to sign an addendum committing to setting a science-based target. The company also updated its supplier code of conduct, which can be found here.
Result
In early 2023, prior to launching its scaled program, VMware was recognized by CDP as a Supplier Engagement Leader. It was among the top 8% of companies assessed for supplier engagement on climate change.
All of VMware’s actions to date have resulted in over 550 having set – or committed to setting – SBTs, representing 49% of supplier emissions and 52% of spend. With its Scaled Supplier Engagement program now in place, VMware is well positioned to keep up the progress. They’ve been able to engage 341 suppliers in just over 4 months with just one full time person, which will help them continue pushing towards their SBT of working with 75% of their suppliers (by spend) to set SBTs of their own.
“Given the increasing cost of carbon, this is hard-dollar cost avoidance – something that procurement teams can get very excited about. The program pays for itself, but companies need to start acting on this now, as suppliers can’t change their behavior overnight. ”
Matthew Eaton,
Responsible Sourcing Lead
