Suppliers Lag On Climate Change Strategies, Report Says

Suppliers Lag On Climate Change Strategies, Report Says

Power plant - / CC BY-ND 2.0

The Carbon Disclosure Project's (CDP) latest supply chain report found that, overall, suppliers to CDP members have a lot of work to do to improve their strategies and plans related to climate change and carbon emissions. 

For the CDP's Supply Chain Report 2010, 710 suppliers to the 44 member companies of the CDP Supply Chain Program provided information on their operations.

Supply chain emissions can account for a significant amount of a company's carbon footprint, and 89 percent of CDP members have strategies in place to work with suppliers to bring those emissions down. However, the report says, few companies have the tools needed to track suppliers' performance.

As more companies buckle down on suppliers and get more involved in examining their Scope 3 emissions, suppliers are expected to feel more pressure from their customers. While only 6 percent of CDP members currently have policies to stop working with suppliers that do not meet certain carbon management criteria, 56 percent of members say they expect to have policies in the future.

For the report, suppliers answered question on four topics: strategic risk awareness about climate change, carbon reduction ambition, reporting capabilities and implementation practices.

Regarding stategic risk awareness, 58 percent of suppliers feel they are exposed to regulatory developments, with the most common risks coming from general emissions regulations and cap-and-trade programs, followed by some who are at risk from mandatory technology requirements, energy carbon taxes or industry-specific regulations on issues like waste and water management.

To overcome these risks, suppliers are turning to emissions trading, clean development mechanisms or subsidies for renewable energy.

Many suppliers are also aware of risks from weather, with 69 percent threatened by extreme weather, 49 percent threatened by temperature and rainfall changes, and 46 percent threatened by flooding and rising sea levels.

On the topic of carbon reduction, while 56 percent of suppliers have emissions or energy reduction plans and 38 percent have reduction goals, their average target is only five years away, with many setting targets only to 2012. That, plus the fact that 62 percent have no targets at all, leads the report to conclude that suppliers need to think more long-term when it comes to reduction plans and goals.

That aside, suppliers are more and more willing to disclose information and have that disclosure verified by external groups. Sixty-two percent of suppliers reported Scope 1 emissions and 63 percent reported Scope 2. But when it came to Scope 3 emissions (their own supply chains), only 8 percent of suppliers were able to report on them.

To bring down their emissions, suppliers are using a range of tactics, the most common being energy efficiency, process improvements and renewable energy, with more than 20 percent of suppliers using three or more strategies at the same time.

But again, the report worries about the long-term sustainability and depth of these efforts since only 33 percent have strategies for engaging their own suppliers and only 28 percent have employee incentive programs related to carbon reduction.

Information for the report, which was written by A.T. Kearney, was provided in 2009. Out of 1,402 suppliers asked to provide information, 710 from around the world and various industries provided information, 95 declined and 597 did not respond.

Power plant - / CC BY-ND 2.0