This week, as the results of the 2010 CDP Supply Chain report are launched, Frances Way -- head of the supply chain program at the Carbon Disclosure Project (CDP) -- will provide evidence of the progress being made in the management of companies' supply chain emissions.
Today she offers examples of how some leading corporations are already transforming the way they manage carbon in the supply chain, despite the uncertainty and lack of emission reduction targets that came out of Copenhagen. Tomorrow she will take a look at how suppliers are actually performing, highlighting improvements on last year.
The CDP Supply Chain is a collaboration of global corporations who measure beyond their own carbon footprint to their suppliers' carbon emissions, in order to maintain a resilient and sustainable supply chain. The report produced by A.T. Kearney includes responses from 710 suppliers.
The Copenhagen accord left business in a state of ambiguity with no global agreement on emissions cuts. Yet, despite this, it is vital that business continues to work towards improved carbon management and we are already seeing leadership emerge with some companies setting their own industry standards on climate change, particularly when it comes to their suppliers.
Of the 44 global corporations who are currently using the CDP process to communicate with their suppliers, 75 percent already require some form of third-party certification of environmental management from major suppliers, such as ISO 14001 or EMAS. This is expected to increase to 100 percent within the next 12 months.
We are also witnessing a trend in the inclusion of carbon criteria in general supplier evaluation reports or score cards. Johnson Controls has a supplier assessment survey that includes sustainability criteria and asks suppliers if they report to CDP. Walmart's 100,000 global suppliers are expected to complete a supplier sustainability assessment which asks if they publicly reported their GHG emissions, reduction strategy and actions to CDP.
Competing for Dell's Business Through Improved Carbon Management
Another company that has gone a long way to addressing carbon management within its supply chain is Dell. Dell not only expects its suppliers to publicly report emissions and targets, but also to set expectations for their own suppliers. These requirements are included in suppliers' quarterly business reviews and impacts supplier rankings.
The company's carbon management strategy began with a focus on putting its own house in order and taking responsibility for the emissions it could control. The first step was to set an aggressive GHG intensity reduction goal as the business was growing fast. The second step was to focus on maximizing green power purchases. It now has 26 percent of electricity from renewable sources worldwide, which has led to a new target of 40 percent absolute emissions reduction by 2015 based on 2007 levels.
Dell's carbon neutral strategy follows three steps:
1. Maximize energy efficiencies.
2. Buy as much green power as you can.
3. Invest in off-setting to invest in the low-carbon economy.
Today Dell takes a holistic view of GHG impacts across the entire enterprise including the supply chain and the use of its sold products; this can lead to design decisions which would improve Dell's overall emissions performance.
Eighty percent of Dell's direct footprint is from electricity use (scope 2) and, likewise, the majority of their suppliers' footprints are from scope 2 electricity use. This means that reducing carbon can also lower operating costs.
Two and a half years ago Dell decided to incorporate base line expectations for suppliers to include the management of GHG emissions in their quarterly business reviews. Suppliers were asked if they were ISO14001 compliant and whether they were reporting their GHG emissions.
At this time, Dell saw an opportunity to partner with the CDP Supply Chain program and work collaboratively with suppliers, providing them with more resources and tools to enable reporting.
Last year 80 percent of Dell's suppliers were meeting its requirements, so it raised the bar and moved to the following:
1. Report to CDP.
2. Set a public goal to reduce operational GHG impacts.
3. Set expectations for their suppliers' own suppliers to manage and publicly disclose GHG emissions.
As quoted in the CDP Supply Chain report, Dell said, "Failure to meet these requirements can impact your ranking and potentially diminish your ability to compete for Dell's business."
Dell made the decision to ask suppliers to report through the CDP process because the questions we ask go beyond the quantitative to include valuable information on the risks and opportunities from climate change. It is this information that drives strategic thinking about business impacts; a benefit that Dell discovered when completing the CDP questionnaire themselves.
In 2009, Dell asked the suppliers that made up 95 percent of its direct spend to respond to CDP and received a 100 percent response rate. Moving forward, the company will look at how to set goals for improvement and encourage suppliers' suppliers to put in place reduction targets.
This year at CDP we have seen a rising expectation from companies for their business partners to demonstrate that they are taking steps to manage carbon. Despite a much-needed regulatory framework being slow to appear, businesses must continue to forge ahead to set their own standards in carbon management practices both directly and throughout their supply chain. Increasingly, those suppliers who do not consider climate change factors may come up against greater challenges when it comes to competing for business.
Frances Way is head of the supply chain program at the Carbon Disclosure Project (CDP).
Images CC licensed by Flickr user adamsofen.