How the CDP is Pushing Supply Chain Carbon Reporting Forward

How the CDP is Pushing Supply Chain Carbon Reporting Forward

Thousands of suppliers are working hard this summer to complete survey submittals to the Carbon Disclosure Project as a July 31 deadline approaches.

Many of them are small and medium-size suppliers of large companies, such as Walmart or Bank of America, and were asked by these companies to send environmental data to the CDP. Requests by large companies, especially Walmart, have caused many companies to calculate their carbon footprint for the first time.

"We have seen a sharp increase in supplier participation over the last year, with twice as many Walmart suppliers registering in 2011 to measure, manage, and disclose their greenhouse gas emissions and climate change strategies to CDP," said Keith Littlejohns, senior account manager, Carbon Disclosure Project.

The CDP is the largest registry of voluntarily reported carbon and sustainability data in the world. Initially, the CDP targeted companies with the largest market capitalizations, but in the past few years they expanded the number of company participants with their Supply Chain program, which launched in 2007. Over 50 companies now participate in the CDP Supply Chain program, with Walmart being particularly notable.

Walmart has encouraged its 100,000 suppliers to start reporting to the CDP as part of the Walmart's Supplier Sustainability Assessment. Suppliers complete this assessment online and receive a score. Walmart has the most extensive supplier-scoring program for sustainability in the industry, but other large companies, notably Procter & Gamble, have launched similar programs. (P&G is not, however, currently participating in the CDP Supply Chain program.)

Suppliers who participate in the CDP Supply Chain program vary in size from the very small (e.g., a single-location dairy) to very large (e.g., Pepsi), and suppliers are asked a wide range of questions about sustainability strategy, risks, goals, and reduction programs. Questions from the CDP survey include the following:

• Is climate change integrated into your business strategy?

 

• Did you have an emissions reduction target that was active (ongoing or reached completion) in this report?

• Please provide details of your intensity target

• Did you have emissions reduction initiatives that were active within the reporting year?

• Have you identified any climate change risks (current or future) that have the potential to generate a substantive change in your business operations, revenue, or expenditure?

• Please describe your gross combined Scope 1 and 2 emissions for the reporting year in metric tons CO2e per unit currency total revenue

While sustainability has become less important for many companies because of the recession, complying with requests from top customers always remains a priority, especially in highly competitive markets.

A request from such a large customer as Walmart or Bank of America, which are customers that often represent a substantial percentage of the supplier's revenue, is often the tipping point for small and midsize companies to securing budget and management attention for calculating a firm's carbon footprint, refining its views on climate risk, and pulling together a list of energy-reduction projects.

In addition to environmental benefits, calculating a company's carbon footprint consistently leads to cost savings, since it's often the first time that senior management seriously looks at aggregated energy use and cost.

The CDP and its Supply Chain Members such as Walmart should be commended for starting such programs, and other large companies should follow this trend.

Having more energy-efficient suppliers translates into supply chains that are healthier financially, more flexible, and, in some cases, competitively differentiated.

Image CC licensed by Flickr user Salim Virji.