Decarbonise the supply chain through supplier capability

Submitted through the COP31 Sustainable Transformation Awards · SKD Türkiye (WBCSD Global Network Partner)

The company is an automotive manufacturer with 25,002 employees as of year-end 2025, operating passenger, light, medium and heavy commercial vehicles production sites with a capacity of 934,500 units in Türkiye and Romania and maintains a supply base of manufacturing suppliers and logistics service providers.

Most of an automotive manufacturer's carbon footprint sits outside its own gates. Purchased components and transport dominate the inventory, which means an emissions target that stops at the factory boundary cannot be met.

At the same time, a wave of regulation arrived faster than the supply base could absorb it. The carbon border adjustment mechanism, corporate sustainability reporting requirements in Europe and in Türkiye, due diligence obligations, the deforestation regulation, the European Union Battery Regulation and responsible minerals rules all place demands on suppliers, and many suppliers in Türkiye met that wave with limited preparation.

The programme began in 2023 and had been institutionalised by 2025, covering both manufacturing suppliers and logistics service providers. It sits under the company's Future.Now sustainability strategy, its science-based targets, and a stated principle of leaving no one behind, and it serves the corporate objectives of being carbon neutral in scope 1 and 2 emission a supply chain and logistics operation by 2035 and net zero by 2050.

The reasoning is competitive as much as environmental: suppliers that cannot measure and disclose their emissions risk losing access to European customers, so building their capability protects the company's own supply base.

Location of the initiative: Türkiye, with an intermodal rail corridor between Türkiye and Romania

The programme treats sustainability as an operating requirement embedded in purchasing, contracting, policy, performance management, financing, training, auditing and logistics, rather than as a compliance expectation communicated to suppliers.

It begins with segmentation. Suppliers are grouped by the emission intensity of the parts they produce, by sustainability risk and by business volume. A priority transformation pool of critical suppliers was formed, covering approximately 80 per cent of purchasing spend, and target-driven transformation plans were built for critical and high-impact suppliers specifically.

Assessment then establishes the starting position. Sustainability questionnaires tailored separately to manufacturing and to logistics suppliers, third-party verification, on-site audits, committee follow-up and contractual requirements are used together, so that a supplier's self-declaration is checked rather than accepted.

Capability building follows assessment. A Supplier Sustainability Committee, comprising senior-level representatives and sustainability officers from suppliers, was established after a workshop with manufacturing suppliers in 2024, at which 6-month, 1-year and 2-year roadmaps were agreed jointly. Training covers the carbon border adjustment mechanism, Turkish sustainability reporting standards, ISO 14064, carbon accounting, human rights due diligence, ethics and compliance, sustainability governance and green finance. Training and information on green-finance incentives are provided by Ford Otosan to help suppliers identify relevant financing routes.

Logistics is addressed through modal shift rather than through supplier requirements alone. An intermodal Block Train model was introduced on the İstanbul, Türkiye to Craiova, Romania corridor, moving freight from road to rail, and a vehicle transport model using the Marmaray rail crossing was introduced for finished vehicle movements.

Sustainability criteria became one of the core purchasing criteria alongside quality, cost and delivery in 2025, and supplier contracts now carry the Supplier Code of Conduct, the Supply Chain Compliance Policy, the Conflict Minerals Policy and performance requirements. Logistics contracts carry equivalent conditions and performance monitoring, which is what moves the programme from voluntary awareness to durable performance management.

Figure 1: Stakeholder views on the supplier programme from Mars Logistics, Yeşilova Holding and Ototrim

Source: Ford Otosan 2025 Sustainability Report (pg. 129-132)

Figure 2: Supplier sustainability training and programme areas delivered in 2025

Source: Ford Otosan 2025 Sustainability Report (pg. 133)

Sustainability impact

Climate

Supply chain performance is monitored for Scope 3 emissions against a 2021 base year. Logistics reduction calculations use the GHG Protocol methodology with DEFRA emission factors.

The supplier work targets Scope 3, Category 1: Purchased goods and services, where the measurable outcome so far is disclosure capability rather than a reported tonnage reduction. As of 2025, 87 suppliers report to CDP, 188 suppliers had set emissions targets, 66 suppliers reported having SBTi targets in the 2025 survey, and 25 critical suppliers had emissions verified under ISO 14064 or GHG standards. Data for 2025 was verified by an independent assurance provider, and the company moved to the global self-assessment questionnaire industry-standard self-assessment questionnaire (SAQ) with validation approach for supplier evaluation.

The logistics work targets transport emissions directly. The Block Train intermodal model on the Türkiye-Romania corridor shifted freight from road to rail and delivered a 48 per cent emissions reduction, which falls under Scope 3, Category 4: Upstream transportation and distribution. Finished-vehicle transport between Craiova and Kocaeli using the Marmaray rail crossing began in 2025. Its realised emissions performance should be reported only after the calculation boundary and operating period are confirmed.

External recognition of the approach came through the CDP Value Chain Engagement score, which reached A- in 2025, alongside an A score in the water security category.

Nature

Responsible raw material management runs alongside the carbon work. The Conflict Minerals Policy is embedded in supplier contracts, and responsible minerals monitoring forms part of the assessment framework.

Preparation for the deforestation regulation is included in the training and assessment scope, which brings land use into the supplier conversation before it becomes a reporting obligation.

Social

Human rights, working conditions and inclusion practices are part of the assessment framework rather than an adjacent programme. Human rights due diligence is one of the training subjects delivered to suppliers.

Assessment leads to action where performance is weak. In 2025, 286 critical suppliers - 271 Tier-1 suppliers and 15 logistics providers - had been evaluated through the sustainability questionnaire; the programme tracks both the number of suppliers that successfully pass the ESG assessment and the number assigned corrective or improvement actions. Risk- and impact-based corrective and improvement action plans were created for 9 low-performing suppliers. Over the 2023 to 2025 period, agreement on improvement and corrective activities was reached with 18 suppliers where negative impacts had been identified. In 2025, on-site sustainability audits were carried out at 24 suppliers through independent third-party audit firms.

Governance capability at supplier level improved measurably. Of the 37 critical suppliers whose roadmap outputs are tracked, 30 have published ethics policies and established a reporting mechanism, 32 have set up sustainability governance and appointed a lead, and 23 have delivered sustainability and responsible sourcing training to their own purchasing teams.

Training volume rose from 3,579 hours in 2024 to 7,405 person-hours in 2025, comprising 3,544.09 person-hours on environmental topics, 1,445.2 on social topics, 1,967.6 on governance, 318 on ethics and 130.9 on finance.

Business impact

Benefits

The main return is supply base resilience. Suppliers that can measure, verify and disclose their emissions retain access to European customers, so the capability built protects continuity of supply as regulation tightens.

The capability gain is documented rather than asserted: 87 suppliers reporting to CDP, 188 with emissions targets, 66 with SBTi targets in the 2025 survey, and 25 critical suppliers with emissions verified under ISO 14064 or GHG standards represent a supply base that can answer customer and regulatory questions without the manufacturer answering on its behalf.

Logistics delivered direct operational benefit alongside emissions reduction. Shifting from road to rail through the intermodal Block Train model on the Türkiye-Romania corridor cut emissions by approximately 48 per cent. Finished-vehicle transport via the Marmaray rail crossing began in January 2026; no realised reduction is stated here pending confirmation of the calculation boundary and operating period.

External assessment improved: Ford Otosan's company-level CDP scores were B for Climate Change and A- for Water Security in 2025, which carries weight with investors and with customers applying their own supply chain criteria.

Supplier feedback recorded in the 2025 sustainability report indicates concrete value created. One manufacturing supplier reported that webinars and shared material allowed it to follow sustainability requirements more effectively and strengthen its own roadmap, while another supplier group reported that the collaboration and experience-sharing environment enabled it to develop a more inclusive and systematic sustainability approach within its own supply chain.

That multiplier is the strategic benefit: suppliers that begin applying ESG assessment and training in their own supply chains extend the programme's reach beyond the tiers the company can address directly.

Costs

The cost base has four components: internal resource across purchasing, sustainability, logistics, legal and compliance and risk teams; fees paid to independent third-party audit and consultancy firms for verification and on-site audits; delivery of the training programme, which reached 7,405 person-hours in 2025; and the coordination effort behind the Supplier Sustainability Committee, workshops and roadmap follow-up.

Costs also sit with suppliers, and the programme is designed around that fact. Emissions measurement, ISO 14064 verification, governance appointments and target setting all require supplier investment, which is why the programme includes training and information on green-finance incentives while financing remains the responsibility of suppliers and financial institutions.

The approach has operational costs that are easy to underestimate. Embedding sustainability criteria alongside quality, cost and delivery in purchasing decisions lengthens supplier evaluation, and integrating the Supplier Code of Conduct, Supply Chain Compliance Policy, Conflict Minerals Policy and performance requirements into contracts requires legal capacity as well as sustainability capacity.

There is a trade-off in supplier relations. Corrective action plans for 9 low-performing suppliers and negotiated improvement agreements with 18 suppliers require time and can strain commercial relationships, which is why the programme is framed around capability building rather than exclusion.

Costs are contained by segmenting the supply base so that intensive effort is concentrated on the critical pool covering approximately 80 per cent of purchasing spend, by using shared webinars and committee sessions rather than bilateral support, and by using the same questionnaire and audit data for supplier management, corporate disclosure and assurance.

Impact beyond sustainability and business

Co-benefits

The programme produces a multiplier effect. Suppliers that establish their own sustainability governance, measure their emissions, set targets and pass knowledge to their own sub-suppliers become transformation actors rather than compliance respondents, and some have started running ESG assessment and training in their own supply chains.

Knowledge sharing with automotive industry associations, the exporters' association and a university carries the model into the wider components sector, so the effort is not confined to one manufacturer's supply base.

In logistics, the intermodal models have accelerated adoption of low-carbon operating approaches among service providers, who can then offer the same capability to their other customers.

Information on green-finance incentives and relevant financing routes can strengthen the economic sustainability of the transition rather than leaving suppliers to fund it from working capital.

Potential side-effects

Placing sustainability requirements into contracts alongside quality, cost and delivery shifts cost onto suppliers, some of which are small and medium-sized businesses with limited capacity. Without access to suitable financing, the requirement can increase prices or disadvantage lower-capacity suppliers. The programme therefore includes information on green-finance incentives, without implying that Ford Otosan provides or guarantees financing.

Assessment fatigue is a genuine risk when suppliers serve several customers each running their own questionnaire. Adopting a global self-assessment questionnaire (Global SAQ) in 2025 responds to this risk by improving comparability and giving survey results a two-year validity period.

Modal shift to rail depends on corridor availability and rail infrastructure capacity. The approximately 48 per cent result is specific to the Block Train corridor; the Marmaray finished-vehicle route should be quantified only after its calculation boundary and operating period are confirmed.

Typical business profile

The model suits manufacturers with multi-tier supply chains and high purchased-goods emissions - automotive, machinery, white goods, electronics - that are exposed to European regulation and that hold enough purchasing leverage to make participation worthwhile for suppliers.

It is most applicable where a significant share of purchasing spend is concentrated in a manageable number of critical suppliers, because the segmentation logic depends on being able to define a priority pool.

Delivery requires purchasing, sustainability, logistics, legal and compliance, and risk functions working to a shared cycle, board-level oversight of supply chain risk, and access to third-party verification and audit capability.

Approach

1. Segment the supply base before engaging it: Group suppliers by the emission intensity of the parts they supply, by sustainability risk and by business volume, and define a critical pool - here covering approximately 80 per cent of purchasing spend - so that effort is concentrated where it changes the inventory.

2. Establish the starting position with a tailored assessment: Issue sustainability questionnaires designed separately for manufacturing and logistics suppliers, and verify responses through third parties rather than accepting self-declarations.

3. Build roadmaps with suppliers, not for them: Run a workshop with suppliers to agree 6-month, 1-year and 2-year roadmaps jointly, and establish a supplier sustainability committee so that priorities and needs are reviewed at every meeting.

4. Escalate proportionately where performance is weak: Create risk- and impact-based corrective and improvement action plans for low-performing suppliers, conduct on-site audits through independent third-party firms, and negotiate improvement agreements where negative impacts are identified.

5. Deliver training against the regulations suppliers face: Cover the carbon border adjustment mechanism, sustainability reporting standards, ISO 14064, carbon accounting, human rights due diligence, ethics and compliance, sustainability governance and green finance, and track delivery in person-hours by pillar.

6. Explain financing routes alongside the requirement: Share information on green-finance incentives and relevant finance options, while making clear that suppliers apply to financial institutions and that Ford Otosan does not provide or guarantee financing.

7. Move the requirement into contracts and purchasing decisions: Make sustainability one of the core evaluation criteria alongside quality, cost and delivery, and embed the supplier code of conduct, compliance policy, conflict minerals policy and performance requirements into contracts, including logistics contracts.

8. Attack logistics emissions through modal shift: Develop intermodal rail solutions with service providers on the corridors that carry the most volume, calculate reductions using the GHG Protocol methodology with recognised emission factors, and monitor performance through the contract.

Stakeholders involved

• Project leads: Oversight of social, environmental and climate-related risks and opportunities, including those in the supply chain, is the responsibility of the Early Determination and Management of Risk Committee, made up of Board members. Company-wide sustainability decisions are taken in the Sustainability Committee chaired by the General Manager, in which finance, legal and compliance, risk management, product development, investor relations, purchasing and logistics are represented. Ownership is reinforced through performance targets: supply chain carbon transformation and the integration of sustainability into contracts are carried in the performance objectives of the Purchasing Leader and the General Manager.

• Company functions: Supply chain targets are translated into operational processes through the Central Sustainability Department, the Sustainability Field Team, and the purchasing and logistics teams. Performance is monitored through questionnaires, audits, committee review and contract mechanisms, and reported upward to senior management, so that supplier sustainability performance travels through the same reporting line as cost and quality performance. Legal and compliance and risk functions carry the contractual integration of the supplier code of conduct, supply chain compliance policy and conflict minerals policy.

• Main providers: Independent third-party audit and consultancy firms conduct on-site sustainability audits and verification. An independent assurance provider verified the 2025 data. Logistics service providers are partners in solution design rather than recipients of requirements: the Block Train intermodal model and the rail-based vehicle transport model were developed jointly with them. Training providers and relevant external experts share information on sustainability investment support and green-finance incentives; any named financial-institution relationship should be added only after confirmation.

• Other: Suppliers are treated as design partners. Their views were taken when the first sustainability question set was created in 2023, and ESG priorities and needs were assessed jointly at the 2024 workshop. That feedback produced the Supplier Sustainability Committee and the shared 6-month, 1-year and 2-year roadmaps. At every committee meeting, supplier views and needs are collected, and the outputs of questionnaires, on-site audits, training and workshops are used to improve programme content. In 2025 logistics service providers were brought into the questionnaire, contractual requirement and performance monitoring system as well. Knowledge sharing with automotive industry associations, the exporters' association, and a university supports diffusion of the model across the components sector, and some suppliers have begun applying ESG assessment and training within their own supply chains.

Key parameters to consider

Scope 3 supply chain performance is tracked against a 2021 base year. Logistics reduction calculations use the GHG Protocol methodology together with DEFRA emission factors, which makes the corridor results comparable with other operators' figures.

The programme monitors six headline areas: suppliers assessed for sustainability across manufacturing and logistics, suppliers assigned corrective or improvement actions following low performance, with follow-up tracking; independent third-party on-site sustainability audits; supplier training person-hours and training scope; suppliers reporting emissions, CDP disclosures, and science-based targets; and corridor-specific logistics emissions reduction.

The expansion sequence is instructive for planning. The structure began with critical suppliers in 2023, extended to Tier-1 suppliers in 2024 and to logistics service providers in 2025. The next stage is to increase the number of suppliers in scope, to run KPI follow-up with existing suppliers, and to extend the requirement from suppliers to their own Tier-n suppliers.

Diffusion rests on three levers: measurement and verification, capability building, and financing combined with contractual integration. Removing any one of the three leaves the programme either unenforceable, unaffordable or unmeasurable.

Implementation and operations tips

Segment before you engage. Concentrating the intensive work on a critical pool covering approximately 80 per cent of purchasing spend is what made the programme affordable to run and material to the inventory.

Put suppliers into the design. Taking supplier views when building the first question set in 2023, and then differentiating the manufacturing and logistics supplier questionnaires and their 6-month, 1-year and 2-year targets in response to that feedback, produced roadmaps suppliers had agreed to, which is a different starting position from roadmaps they have been issued.

Pair every requirement with a route to meet it. Training and information on green-finance incentives are provided because a disclosure requirement placed on a small supplier without capability or capital can produce either a poor response or a price increase.

Do not present disclosure capability as abatement. Counting 188 suppliers with emissions targets and 66 reporting SBTi targets in the 2025 survey is a measurement milestone.

Develop logistics solutions with the carriers. The Block Train and rail-based vehicle transport models came out of joint work with service providers. Report the approximately 48 per cent Block Train result separately from the newer Marmaray route, whose realised performance still requires a confirmed calculation boundary and operating period.

Move from voluntary to contractual once the capability exists. Making sustainability a core purchasing criterion alongside quality, cost and delivery in 2025, after two years of capability building, is what converted awareness into durable performance management.