Explore this subject further: How does climate action influence customer decisions?.
Your business depends on other businesses. Suppliers provide the materials, products, services and capabilities that enable you to serve customers and sustain performance. Their costs, operating conditions and investment decisions can affect your own enterprise value.
Climate change is altering these relationships. Physical risks can disrupt production and delivery, while changing technologies, customer requirements and market conditions create new opportunities and expectations. Some suppliers will be ready to respond. Others may recognise the opportunity but lack the resources, information or commercial certainty to invest.
For leaders, the question is how to work with your suppliers to strengthen the performance, resilience and future value of both businesses.
The prioritisation challenge is to identify the supplier relationships that matter most to enterprise value and offer a feasible change pathway to ongoing commercial benefit.
Energy Consumers Australia’s 2026 Small Business Energy Consumer Survey helps explain the circumstances of smaller businesses.
Support for transition and readiness to act differ
The findings reveal a gap between support for transition and confidence or readiness to act. This matters when larger businesses expect smaller suppliers to provide emissions information, change equipment or adopt new operating practices.
The survey provides context for understanding the resources and practical constraints of smaller businesses, rather than proof of how a particular supply chain will respond.
For buyers, the next step is to investigate supplier capability directly. For suppliers, the next step is to understand the changes that might improve costs, productivity, market access or customer relationships.
This business perspective includes support for transition alongside concerns about implementation. Andrew McKellar, Chief Executive, Australian Chamber of Commerce and Industry, expressed it this way:
“Business looks for certainty and practical implementation to achieve a pathway toward these medium and longer term goals.”
Large businesses are already incorporating climate expectations into supplier relationships. In its FY2025 Sustainability Report, Telstra described its use of supplier environmental disclosures, climate-related contract provisions and product eco-design requirements. These examples show how climate considerations can become part of sourcing decisions, contractual commitments and product development.
For suppliers, such requirements can influence the capabilities and investments needed to retain customers or compete for future work. For buyers, the question is whether these arrangements produce reliable information, feasible commitments and better commercial outcomes. Telstra's disclosures demonstrate the use of these mechanisms, but do not by themselves establish the financial returns or effectiveness of individual supplier responses.
The importance of commercially workable supplier relationships becomes clearer when we consider a business whose performance depends on agricultural production, processing and distribution.
Mallee Harvest Foods
This fictional Australian food business depends on growers, packaging providers, processors and logistics partners to deliver reliable products to its customers. Product quality, input availability, supply continuity and margins underpin enterprise value. Changing growing conditions, energy costs and customer requirements could affect different suppliers in different ways.
Helen Russo — Managing Director
Helen wants to protect supply reliability while identifying opportunities to improve product quality, reduce operating costs and meet changing customer expectations. She recognises that growers and other suppliers make investment decisions based on their own costs, risks, capabilities and commercial prospects.
She is considering how Mallee could engage its suppliers to understand where climate-related changes create shared opportunities, which requirements are commercially feasible and where changes to procurement arrangements might improve the business case for investment.
Leadership question: How can we work with our suppliers to strengthen supply reliability, improve product performance and create value for both businesses as climate conditions and market requirements change?
For Mallee, the opportunity is to develop commercial relationships that support dependable supply, investment in productive capability and access to customers. The value of a collaborative response would need to be tested against its costs, benefits, timing and dependencies.
What makes a supplier relationship valuable in transition?
Five questions can help leaders investigate supplier relationships and prioritise responses.
- Enterprise dependencies: Which suppliers and supplier capabilities are most important to our revenue, costs, product quality, reliability and future growth?
- Changing conditions: How could physical climate risks, technologies, regulations and customer expectations affect these suppliers and their ability to deliver?
- Supplier perspectives: What do suppliers tell us about their opportunities, constraints, investment priorities and commercial requirements?
- Shared value: Where could collaboration improve productivity, reduce costs, strengthen supply continuity or create new commercial opportunities?
- Investment and delivery: What changes to specifications, contracts, investment timing or commercial arrangements could make a beneficial response viable for both businesses?
At Sightlines Advisory, we use the Climate Value Framework to connect supplier relationships with enterprise value, climate-related risks and opportunities, and the responses available to a business. Beginning with the value drivers and dependencies of the enterprise, the approach considers how supplier capabilities, costs, investment decisions and operating conditions influence future performance. This helps leaders distinguish commercially significant supplier relationships from general expectations, investigate where collaboration could create or protect value, and assess the implications for investment and implementation.
For your next leadership discussion, consider a supplier relationship that is important to the future of your business. What could change the value of that relationship? What does your supplier need to succeed, and how could your own commercial decisions support a better outcome?
Supplier relationships can become a source of competitive advantage when businesses understand their mutual dependencies and create conditions for commercially valuable change.
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