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How the maker of Advil and Tums adds the price of carbon to supplier contracts

The reason so many supply-chain decarbonization efforts flounder? According to a recent survey, it’s because buyers often ignore suppliers’ emission-cutting efforts and end up choosing the lowest-cost option.

That’s not true of all buyers, however. At Haleon, a U.K.-based consumer healthcare company that counts Advil and Tums among its brands, the procurement team factors emissions into purchase decisions. Trellis talked to Chris Low, Haleon’s head of procurement sustainability, to discover what that looks like in practice.

How Haleon’s carbon pricing works

When Haleon asks most suppliers for prices, the company also requests an estimate of the carbon footprint associated with the purchase. The procurement team then multiplies the footprint by the prevailing European Union’s Emissions Trading Scheme cost of carbon — currently around €80 per metric ton of carbon dioxide — and adds the result to the actual cost. All other things being equal, the supplier with the lowest combined total gets the deal.

The process is one component of a five-point plan that Haleon asks suppliers to commit to: The other requests are measuring total emissions, focusing on using renewable energy, committing to having emissions goals validated by the Science Based Targets initiative (SBTi) and creating a roadmap for reaching net zero.

These are requests, not demands, said Low. But they differ from those made by other businesses in that suppliers that cut emissions will be rewarded with contracts. “I think that’s where a lot of companies struggle,” said Low. “They put out an ask, but it’s not always supported and there’s no incentive.”

The impact on procurement decisions

The footprint price influences deals in different ways. It might add 10 percent to the cost of a cheap product with a large footprint, such as a plastic bottle. For more expensive products — acetaminophen, for instance — the increase could be just 1 percent. The average is around 2 percent, said Low. That’s enough of a difference to swing one to two of every 10 deals in favor of a bidder that charged more but had a smaller footprint.

There are, of course, occasions where suppliers with high footprints win because their goods cost so much less. “Sometimes the right thing to do is say, in this case, price is more important,” said Low. “This is a very useful tool to decide where it is worth prioritizing carbon and where it is worth prioritizing cost.”

How suppliers have reacted

“It’s been a mixed bag,” said Low. “There are winners and losers.”

The biggest change, however, hasn’t been in swinging specific deals one way or the other. Instead, the existence of the footprint pricing and Haleon’s other requests has impacted what Low calls “soft factors.” When the requests were first made in 2024, for example, all of Haleon’s key suppliers relied on industry averages known as emissions factors to estimate their footprints. Almost a quarter now directly measure emissions and share the data.

The procurement policy is also benefiting suppliers’ sustainability teams. Low heard from one supplier who said Haleon was “the first customer that has put their money where their mouth is.” This enabled the supplier’s sustainability team to get traction with commercial parts of the business. “It is already causing a cascade and that’s part of the intention,” said Low.

What comes next

Alongside gripes about a focus on costs, the supplier survey also surfaced complaints about short-termism: Reducing emissions takes years, but buyers won’t partner for long enough to drive real change.

Haleon’s next stage of its scheme may address that: The company is piloting deals that allow suppliers to commit to reducing their carbon footprint over the life of a contract, with progress tracked annually and financial penalties if they fall short. The idea, explains Low, is to reward companies for committing to credible future decarbonisation plans as well as current achievements.

The reductions this drives will feed into the company’s SBTi-validated goal of cutting Scope 3 emissions by 42 percent between 2022 and 2030. Haleon’s most recent report noted a 13 percent drop. Low said future impacts from the procurement program, as well as an initiative to purchase renewable energy for suppliers, will accelerate reductions and allow the company to hit its target.

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