How to get suppliers to act on climate

More than 1,000 of the world's largest companies report their greenhouse gas emissions and have emissions-reduction targets for their own operations. Now, they want the thousands of companies that supply them with goods and services to reduce their own emissions.

To jumpstart the process, 99 large companies ask the CDP to survey more than 9,000 of their suppliers to determine how many have climate goals and where they are in the process.

The good news: Nearly half of the 4,850 suppliers that responded to the CDP’s survey have an emissions or renewable energy target, and 43 percent have boards taking responsible action on climate change. 

Apple, Microsoft, Bank of America, Ajinomoto, Kellogg Co., Sky, Panasonic, Societe Generale and Unilever are among 58 large corporations that CDP lauded as the world's greenest buyers, according to the report, co-authored by McKinsey and the Carbon Trust. Through actions such as providing farmers with training in soil management, using circular economy recycling and using recycled plastic bottles for new products, the surveyed companies together reduced emissions in 2017 by 551 million metric tons of carbon dioxide, which is worth about $14 billion in cost savings, according to the report. The authors also found that big corporate buyers including Klabin, L'Oreal and McDonald's are working to address deforestation in their supply chains.

The bad news: Less than one-quarter of the companies that responded to the CDP’s 2017 supply-chain questionnaire said that they are discussing climate-change actions with their own suppliers.

"Large portions of the global supply chain network are not considering climate in their decision making, which represents significant untapped opportunities and financial savings," Patricia Espinosa, executive secretary of the United Nations Framework Convention on Climate Change, said in the report.

Among large corporations that buy many products from other companies, Walmart has a target to cut its own greenhouse gas emissions by 18 percent by 2025, and help its suppliers cut an additional gigaton of carbon by 2030 by focusing on manufacturing, materials and use of products, among other actions.

The largest share of supply-chain companies that responded to the CDP survey, nearly one-third, are U.S. companies, but they lagged their less numerous counterparts in other parts of the world in setting emission-reduction targets, being aware of environmental risk at high management levels, integrating sustainability considerations into business strategies and taking responsibility for climate change and water concerns at the board level. For example, just 51 percent of U.S. suppliers surveyed reported their emissions, compared to 56 percent across all respondents, 72 percent among German suppliers and 81 percent among French suppliers.

U.S. supplier emissions-reductions initiatives included energy efficiency projects, such as LED lighting replacement, and renewable energy purchases.

The CDP blames the Trump administration and its fossil-friendly policies for the lag of U.S. suppliers behind other developed countries, concluding that U.S. "political realities may be reshaping companies’ operating environments."

Of the 463 Chinese suppliers that responded to the survey, 56 percent report their emissions. Chinese companies’ emissions-reduction initiatives included energy efficiency measures such as waste energy recovery, and new equipment upgrades, such as LED lighting.

While Japanese suppliers demonstrated higher levels of emissions reporting, 41 percent disclosed increased emissions and just 10 percent had renewable energy targets, showing a lag in their management of climate risk, according to the report.

Still, these and other figures are better than last year’s, Tom Delay, chief executive of the Carbon Trust, wrote in the report.

For example, 2,359 suppliers reported emissions-reduction initiatives, up from 2,189 companies, or 8 percent, in 2016.

Still, the report found that just 12 percent of suppliers surveyed in 2017 have renewable energy targets. The report’s authors chose to view that low level as a sign of the huge potential to cut emissions by greatly increasing renewable energy usage.

"Implementing a comprehensive renewable electricity program aimed at corporate supply chains can be an impactful way to reduce a company’s indirect emissions, while helping increase the global demand for renewable energy," they concluded.