Suppliers can have significant environmental and social (E&S) impacts on the operations, reputation and sustainability performance of large companies. These impacts are critical as many large companies rely heavily on their supply chains to deliver goods and services.

Below are the main types of E&S impacts that suppliers can bring to large companies:

Environmental impacts

Carbon footprint and greenhouse gas emissions: Higher supply chain emissions can prevent companies from achieving their sustainability or climate goals. It can also affect compliance with environmental regulations or participation in global sustainability initiatives.

Resource consumption: High resource consumption in the supply chain can reflect negatively on a company's sustainability commitments. Companies may risk reputational damage if their suppliers are perceived as overexploiting natural resources.

Waste generation and pollution: Poor waste management in the supply chain can adversely affect the reputation of large companies, especially if suppliers are found to be in breach of environmental laws. This can lead to fines, legal sanctions and negative public reaction.

Biodiversity and land use: Large companies that rely on natural resources in their supply chains could face consumer criticism if their suppliers contribute to deforestation, biodiversity loss or habitat destruction.

Water use and pollution: Excessive water use or water pollution by suppliers can lead to water scarcity problems in local communities, exposing the company to negative social reactions and regulatory restrictions.

Social impacts

Labour practices and working conditions: Violations of workers' rights in the supply chain can do significant reputational damage to large companies, leading to protests, loss of consumer confidence and the risk of legal sanctions.

Community relations: Suppliers often operate in local communities where their operations can have significant impacts - positive or negative. Negative impacts can include environmental degradation, resource depletion or displacement of local populations.

Health and safety: Incidents of health and safety breaches at supplier sites can lead to severe reputational damage for companies. Consumers, investors and regulators can hold the parent company liable for these shortcomings, even if the incidents occurred at the suppliers' facilities.

Fair pay and economic impact: Paying fair wages and promoting decent labour practices in the supply chain can strengthen a company's social licence to operate, enhancing brand reputation and relationships with stakeholders, including investors and consumers who value ethical sourcing.

Combined environmental and social impacts

Vulnerability to climate change: Disruptions caused by climate-related risks can cause delays, price fluctuations and instability in the supply chain. This can increase operational costs and affect the company's ability to meet demand.

Sustainable sourcing and ethical supply chains: Failure to ensure sustainable sourcing can damage a company's credibility in sustainability rankings, reduce brand value and lead to consumer boycotts or regulatory challenges. Ethical sourcing is particularly important for companies in sectors such as food, fashion and technology.

Notable statistics that provide a broad insight into the collaborative relationship between large companies and suppliers

Carbon Disclosure Project - 2022 (CDP) report: 701TPTP3T of global emissions come from the supply chain, and large companies are increasingly working with suppliers to reduce these emissions.

Sustainable supply chain research - Harvard Business Review (2020): 77% of companies reported that their focus on supply chain sustainability has increased since 2017. Large companies, particularly those in consumer goods and retail, are increasingly integrating ESG criteria into supplier contracts. 521TPTP3T of companies said they provide suppliers with capacity building assistance and training to meet ESG standards.

EcoVadis "Sustainable Procurement Barometer" (2021):  65% of large companies have a formal sustainable procurement policy aimed at improving the ESG performance of suppliers.