Are Suppliers Doing Enough on Climate Change?
Are Suppliers Doing Enough on Climate Change?
Frances Way, head of supply chain at the Carbon Disclosure Project (CDP), writes on the progress being made in the management of supply chain emissions with the release this week of the 2010 CDP Supply Chain Report. Today she provides highlights of the report and the year-on-year improvement in supplier performance.
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.
Part 1 and Part 2 of Way's look at the CDP report are available at GreenBiz.com.
Companies leading in carbon management increasingly want their suppliers to be aligned with their own ambitions. At CDP we have found that our member organizations are keen to collaborate with their suppliers to reduce emissions.
As Marc Engel, group chief procurement officer at Unilever told us, "In 2010, we will expect an increase in the number of our suppliers engaged through CDP. Unilever will continue to drive emissions reductions activities across the supply chain, and we expect real progress in suppliers' emissions reduction."
But are suppliers up to it? To find out how suppliers are really performing A.T. Kearney assessed 710 CDP responses on four dimensions to evaluate how aligned they are with the member organizations' expectations.
1. Strategic awareness about climate change.
Suppliers were evaluated on whether they could provide precise information about the risks to their business. Supplier awareness around regulatory and environmental changes was at a similar level to last year with just over half the respondents reporting exposure to risks related to climate change. It is concerning that a significant number of suppliers still do not think that climate change poses a risk to their business.
2. Carbon reduction ambition.
Emission reduction targets were assessed for levels of commitment and the key take away here is that things are improving but suppliers still have some way to go. Whilst 56 percent of suppliers have a reduction plan, only 38 percent gave clear and detailed reduction targets. We were pleased to see a significant increase in the number of emissions and energy reduction plans in place (27 percent more suppliers compared to 2008). However, suppliers still lag member organizations, 82 percent of whom are committed to clear reduction targets.
On a positive note 70 percent of the suppliers with targets were working towards an absolute (as opposed to intensity-based) reduction in emissions and the average annual absolute reduction of 3.6 percent is on target with the scientifically stated requirements. Unfortunately the average commitment period for targets is just five years whereas the science states reductions are required at least until 2050.
3. Reporting capabilities.
We looked at how capable and transparent suppliers are when reporting GHG emissions. The number of suppliers able to report their emissions (scope 1 and scope 2) doubled year on year from 30 percent to over 60 percent. This is very encouraging as measuring emissions is the first step to carbon management. Another major area of improvement this year is the enhanced data quality assurance. Compared to 2008, the number of suppliers with 3rd party verification increased by nearly half. Finally, 43 percent of suppliers opted to make their CDP response public and available to all stakeholders.
4. Implementation practices.
In order to evaluate the suppliers' ability to meet the reported reduction targets, their approaches were assessed in terms of depth, commitment and sustainability. Only 60 percent of suppliers have a board committee or other executive with overall responsibility for carbon management (compared to 91 percent of member organizations). Of more concern is the discovery that under a third of suppliers provide employee incentives for the successful implementation of emission reduction plans and the achievement of targets compared to 84 percent of member organizations.
Whilst it is encouraging to see year on year improvement from the suppliers, there is still work to be done if suppliers are to bridge the gap between their carbon management practices and those of their customers. Those leading suppliers able to demonstrate advanced carbon management will be in a better position when competing for business.
Images courtesy of Walmart.