The CDP has released its Supply Chain Report for 2010 – the full report is here.
The CDP Supply Chain Program involves a group of global corporations who have extended their climate change and carbon management strategies to their suppliers via the CDP’s annual information request. This year, 44 companies (Members) asked 1402 of their suppliers for information and 710 (51%) responded, 95 (7%) declined and 597 (42%) did not respond. The report is based on the key findings extracted from the information requests.
The information revealed that Member companies face significant challenges in addressing their supply chains. Only a small number of companies have extensive knowledge of the availability of suitable green products and most Members don’t currently have the tools they need to track their suppliers’ climate change performance.
However, the report finds that 89% of Members already have a strategy in place to engage with Suppliers on GHG emissions and the importance of carbon versus classic procurement targets is expected to triple during the next five years. It will become common for Members to adjust their supply base according to low carbon criteria - 56% of Members expect that in the future they will deselect suppliers for failing to meet formal carbon management criteria, compared to just 6% today.
It’s clear that suppliers will need to perform detailed carbon emissions assessments and will also need to set ambitious targets for reducing their emissions in order to remain competitive.
Suppliers were assessed across four dimensions of carbon management:
• Strategic risk awareness - A large part of the supply base (58%) feels exposed to regulatory developments, with general emissions regulations (57%) and cap-and-trade schemes (38%)most commonly identified. Extreme weather events threaten almost 70% of suppliers, while changes in temperature and rainfall patterns threaten almost a half, with flooding and rising sea levels not far behind (46%).
• Carbon reduction ambition - Only 38% of suppliers have carbon reduction targets in place and their current commitment lasts an average of just five years. In fact, 81% of suppliers do not set targets beyond 2012.
• Reporting capabilities - Suppliers do display an increased willingness to disclose emissions information; 62% currently report Scope 1 emissions and 63% report Scope 2. But there is a lack of information around Scope 3 emissions - the percentage of suppliers who report supply chain emissions (i.e. suppliers’ suppliers’) drops to just 8%.
• Implementation practices - The most commonly used approaches for implementing emission reduction plans are energy efficiency increases, process improvements and renewable energy use. It’s now also an important topic at board level - 60% of companies have elected a top-level executive with carbon reduction responsibilities. Unfortunately, though, only a third have a strategy in place to engage with their own suppliers on this topic.
It’s an interesting report in that it highlights the progress being made in bringing the supply chain into the emissions calculations, but it also shows how far there is to go. Once you get past immediate suppliers the effort disappears fast. Only a third are looking at the performance of their own suppliers and less than 10% are reporting their supply chain emissions.
It’s an area that will become increasingly under focus, not least because of stakeholder pressure, which the CDP represents. There will be an increasing need for information flow up and down the supply chain (good business for solutions providers), and pressure on all suppliers (including ICT) to perform.