How should a supplier respond to an ESG data request?
Clarify why a major customer requests ESG information, what evidence is required and how confidential data will be protected. Set priorities before preparing documents.
What comes first when responding to an ESG information request?
When receiving an ESG survey from a prime contractor, the starting point is to collect the records you already have and answer truthfully rather than creating a new system. There are more questions than you might think that can be answered with company data, such as safety training records, electricity and gas usage, and employment rules and ethics regulations. Answer items for which there is no data with an improvement plan, and fill in the items in order starting from those that have the greatest impact on the transaction.
Why does the main contractor request ESG data from its partners?
There is evidence that corporate customers reflect their partners’ ESG information in their transactions. In a study (Darendeli et al., 2022) that used an incident in 2017 in which an evaluation agency expanded its ESG evaluation target from the U.S. Russell 1000 companies to Russell 2000 companies, among newly evaluated partners, companies with relatively low evaluations saw a decrease in the number of contracts and corporate customers. The researchers cited corporate customers comparing the ESG of their partners and public opinion pressure regarding their partners as the possible causes. If the evaluation influences the contract, ESG surveys should be treated with the same weight as sales documents.
There is also a provision in domestic law that requires the primary contractor to examine the capabilities of its partner company. Article 61 of the Occupational Safety and Health Act stipulates that employers must contract to employers who have the ability to take measures to prevent industrial accidents, and Article 63 stipulates that contractors must take necessary safety and health measures when workers working at the contractor's workplace. This responsibility also lies behind the contractor's request for safety and health data from its partners.
What kind of ESG data do prime contractors usually request?
Evaluation requirements vary by customer, but are often grouped into three areas: environment, society, and governance. If you pair each item with evidence already available in the company, you can see the scope of your answer.
ESG survey areas and supporting data that may already exist
| Area | Typical questions | Evidence the company may already have |
|---|---|---|
| environment | Energy usage, waste, greenhouse gases | Electricity/gas bill, waste disposal records |
| society | Safety and health, working conditions, human rights | Safety training records, accident records, employment rules, employment contracts |
| governance structure | Ethical management, prevention of corruption, information protection | Code of ethics, internal reporting procedures, security management records |
How should I answer items for which there is no supporting data?
If you claim to have something that does not exist, it will become a bigger trust issue later during the on-site inspection. A study (Huq, Stevenson, Zorzini, 2014) examining the local purchasing organizations of four Bangladeshi garment suppliers and two large British retailers reported instances of formal compliance, such as suppliers keeping two sets of work records. The same study explains that open dialogue and trust between prime contractors and partners, rather than audits and monitoring, helped actual implementation.
For items for which there is no data, please write down the current status and what you will have by when. If you keep the data collected while answering the survey in one place, you can reuse it for the following year's survey and for other requests from other customers. If you write down the name and period of the supporting material in your answer, you can respond immediately when the prime contractor requests confirmation.
Should we convey the same request to our company's partners?
The primary partner has two roles: meeting the prime contractor’s requirements and conveying them to its own suppliers. A case study dealing with a multi-tiered supply chain (Wilhelm et al., 2016) called this the dual agency role and observed that the primary contractor should motivate the two roles separately and reduce the information gap at the level of the secondary partner. The resource capacity of the primary partner and what the primary contractor values among the environment and society also had an impact. Rather than handing over the request as is, it is better to explain what you are asking and why and provide a form to fill out. Preparations for partner accidents can be found at Establishing a business continuity plan.
What options are there for how to respond?
Comparison of ESG demand response methods
| way | cost | Expected effects | Risk |
|---|---|---|---|
| Minimum response to only required items | low | Keep the deal for now | Respond again when the evaluation standard rises |
| Establish a plan to improve key items | medium | Complement weak items in order | There is only a plan, but execution is delayed. |
| In-house personnel designation and management system | medium to high | Respond to the needs of multiple clients at once | Concentrate the burden on one person in charge |
| Use of external certification and evaluation | high | Securing objective evidence | Cost of maintaining certification |
The sequence is realistic, starting with minimal response and moving on to improvement plans for key items.
How should the requirements be discussed with the prime contractor?
First, ask about the submission deadline and format for the requested items and how the evaluation results will be used in the transaction. Some prime contractors also provide training and diagnostics, so check to see if you can ask for help. You can refer to Protecting trade secrets of company data for confidentiality management when handing over data, and Effects of managerial exchange meetings for sharing institutional changes with companies in the same situation. Korea Research Institute of Business & Branding addresses environmental impact, stakeholders, and supply chain responsibility as sustainability management topics, and also considers the impact of proposals on customers, members, and partners. Visit Management Studies Topics for related topics and Management publications and reports for publications.
Supply Chain ESG Frequently asked questions
Will my transaction be terminated if I do not answer the ESG questionnaire?
It is different for each customer. First check how the evaluation results will be reflected in the transaction, and if it is difficult to answer right away, discuss a submission schedule.
How do you calculate greenhouse gas emissions?
Electricity and fuel usage are the starting points. First, check whether there is a calculation method and form set by the prime contractor, and collect usage records on a monthly basis.
Do small companies need ESG officers too?
Even if you are not a dedicated person, if you appoint one person to collect data and keep track of deadlines, you will not be swayed by the demands of different customers.
What if the survey form is different for each customer?
If you collect supporting materials for commonly asked items in one place, it is easy to transcribe them even if the format is different.
References
- Journal of Accounting and Economics, 「The role of corporate social responsibility (CSR) information in supply-chain contracting: Evidence from the expansion of CSR rating coverage」(Darendeli, Fiechter, Hitz, Lehmann), 2022. https://doi.org/10.1016/j.jacceco.2022.101525
- Journal of Operations Management, 「Sustainability in multi-tier supply chains: Understanding the double agency role of the first-tier supplier」(Wilhelm, Blome, Bhakoo, Paulraj), 2016. https://doi.org/10.1016/j.jom.2015.11.001
- International Journal of Operations & Production Management, 「Social sustainability in developing country suppliers」(Huq, Stevenson, Zorzini), 2014. https://doi.org/10.1108/IJOPM-10-2012-0467
- National Legislation Information Center, Articles 61 and 63 of the Occupational Safety and Health Act, effective August 1, 2026. https://www.law.go.kr/법령/산업안전보건법