The number of companies committed to tackling emissions in the supply chain has doubled over the last year, according to new research from CDP and McKinsey & Company.
Out of a total of over 3,300 companies, the global nonprofit environmental disclosure platform recognized 58 companies as “Supplier Engagement” leaders — double the amount identified in 2017. The companies, which include Bank of America, Cisco Systems, HPE, Johnson & Johnson, Nestlé and Unilever, were acknowledged for their work with suppliers to reduce emissions and lower environmental risks in the supply chain.
CDP’s research noted a 15 percent increase over 2017 in the number of companies analyzing water security in their supply chains and disclosing water data to their customers. Organizations such as Klabin, L’Oréal and McDonald’s are among the first to work with CDP to tackle deforestation in their supply chains.
***Closing the Gap: Scaling Up Sustainable Supply Chain Practices***, CDP’s Global Supply Chain Report 2018, is based on climate, water and deforestation-related data collected from 4,872 supplying companies across global supply chains at the request of 99 of the world’s largest purchasing organizations. Wielding a combined purchasing power in excess of $3 trillion, these organizations include Accenture, BT Group, Cisco, KMPG UK and Philips Lighting.
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“We’re seeing investors and businesses placing substantial capital into the low-carbon economy, driven by the expectation of sound long-term economics. This is a major opportunity for businesses to take the lead, and an especially good time for them to have impact as the cost of clean technology continues to fall,” said Steven Swartz, a partner at McKinsey.
Last week’s discussions at the World Economic Forum Annual (WEF) Meeting in Davos concerning international trade — which is projected to grow fourfold by 2050, from a baseline year of 2010 — and WEF’s Global Risks Report 2018 have highlighted the importance of addressing supply chains when tackling environmental challenges. This is especially significant because greenhouse gas emissions located in the supply chain are on average four times higher than those generated by direct operations.
“Delivering on the ambitions of the Paris Agreement will require businesses to play a key role to reduce emissions, manage water resources and limit deforestation within their operations and their supply chains,” said Patricia Espinosa, Executive Secretary of the United Nations Framework Convention on Climate Change.
“I am pleased to see that an ever-increasing number of companies reporting to CDP are integrating sustainability-thinking into their business models and applaud the members of the CDP supply chain program for being pioneers in this regard. I encourage businesses to work with suppliers to raise ambition across their supply chain.”
The report reveals that this leadership is paying dividends, as awareness of climate change-related risks and opportunities is increasing down the supply chain. Over 75 percent of suppliers responding to CDP have identified some inherent climate change risks to their business and more than half report that they have integrated climate change into their business strategy.
There is considerable potential for positive impact. Reductions equivalent to 551 million metric tons of CO2 were reported by suppliers around the world in 2017 — an increase of 117 million tons from 2016. Cost savings amounting to $14 billion were reported in 2017 as a result of emissions reduction activities.
According to CDP, this impact is only a fraction of what could be achieved if all organizations at each tier of the supply chain were engaged and working to drive down emissions. Currently, only 23 percent of supplier respondents are in turn engaging with their own suppliers to reduce emissions, suggesting that many may be missing out on business opportunities and financial savings.
“Big businesses have for some time understood the importance of managing their Scope 1 and 2 emissions, but Scope 3 emissions, hidden in their value chain — and far greater in volume — are just as vital. While it’s encouraging that awareness of climate-related risk is filtering down the supply chain, it’s crucial that engagement and action follows. As our findings show, this not only makes sound business sense, but can result in considerable cost savings for both purchasing organizations and their suppliers.”