Haleon adds roughly 2 percent to the cost of every supplier bid — an internal carbon surcharge built on the EU Emissions Trading Scheme price of about €80 per metric ton of CO2 — and lets that adjusted number, not the invoice, decide who wins the deal.

The U.K.-based consumer healthcare company, whose brands include Advil and Tums, has been running the mechanism since asking suppliers to commit to a five-point plan in 2024. Chris Low, Haleon's head of procurement sustainability, walked Trellis through how it works — and the model deserves attention from anyone tracking how Scope 3 pressure gets transmitted down the materials chain.

How does the carbon pricing actually work?

When Haleon requests prices from most suppliers, it also asks for an estimate of the carbon footprint tied to the purchase. The procurement team multiplies that footprint by the current EU ETS carbon cost — around €80 per metric ton — and adds the result to the quoted price. All other things equal, the lowest combined total wins the contract.

Carbon pricing is one leg of a five-point ask Haleon puts to suppliers. The other four:

• Measure total emissions
• Prioritize renewable energy use
• Commit to having targets validated by the Science Based Targets initiative (SBTi)
• Build a roadmap to net zero

Low is careful about the framing. These are requests, not demands. But they come with teeth that most buyer programs lack: suppliers that cut emissions win contracts. "I think that's where a lot of companies struggle," Low said. "They put out an ask, but it's not always supported and there's no incentive."

What does the surcharge do to deal outcomes?

The footprint penalty lands unevenly across product categories. A cheap item with a heavy footprint — a plastic bottle is Low's example — can take a 10 percent hit to its adjusted cost. An expensive input such as acetaminophen might see just 1 percent. The average across the portfolio sits around 2 percent, Low said.

That's enough to flip outcomes. According to Low, the adjustment swings one to two out of every 10 deals toward a bidder that charged more on paper but carried a smaller footprint. For packaging and polymer suppliers serving consumer health, that's the number to sit with: a 2 percent average penalty is already large enough to move market share between converters.

The mechanism doesn't rule out high-carbon winners. Sometimes a supplier's baseline price is so low that even the surcharge leaves them ahead. "Sometimes the right thing to do is say, in this case, price is more important," Low said. "This is a very useful tool to decide where it is worth prioritizing carbon and where it's worth prioritizing cost."

How have suppliers responded?

"It's been a mixed bag," said Low. "There are winners and losers."

The biggest shift, though, isn't in individual deal outcomes. It's in data quality. When the requests went out in 2024, every one of Haleon's key suppliers estimated footprints using industry averages — emissions factors. Almost a quarter now measure their emissions directly and share the primary data with Haleon.

That migration from generic factors to measured data is the quiet headline for the recycled-content and materials world. Measured footprints are what let recycled feedstocks demonstrate their lower-carbon advantage in a bid, and Haleon's policy is effectively paying suppliers to produce that evidence.

The policy is also strengthening sustainability teams inside suppliers. Low recounted one supplier telling him Haleon was "the first customer that has put their money where their mouth is." That external signal helped the supplier's sustainability staff win arguments with their own commercial side. "It is already causing a cascade and that's part of the intention," Low said.

What comes next: contracts with teeth and deadlines

The supplier survey that frames Haleon's approach also flagged a familiar complaint: buyers won't partner long enough to drive real change, because decarbonization takes years while contracts run short. Haleon's next pilot phase takes aim at exactly that. The company is testing deals that let suppliers commit to cutting their footprint over the life of a contract, with progress tracked annually and financial penalties if they fall short.

The intent, Low explained, is to reward credible future decarbonization plans alongside current performance — not just today's league table.

Those reductions feed a hard deadline. Haleon carries an SBTi-validated target to cut Scope 3 emissions 42 percent between 2022 and 2030. Its most recent report shows a 13 percent drop so far. Low said the procurement program, plus a parallel initiative to purchase renewable energy for suppliers, will accelerate reductions enough to hit the 2030 target.

For suppliers to Haleon and buyers watching from other CPG firms, the annual progress-tracking pilot is the milestone to watch: if penalty-backed multi-year decarbonization clauses spread, carbon performance stops being a bid-day calculation and becomes a contractual delivery obligation.