CDP Supply Chain report reveals that suppliers lag behind in carbon reporting

Submitted by: Tholakele Nene, Thursday, February 7, 2013

The Carbon Disclosure Project (CDP) recently conducted its fifth annual information request for member companies aimed at documenting and highlighting the current state of emissions reductions between member companies and their suppliers. The CDP Supply Chain Report for 2012-13, Reducing Risk And Driving Business Value, reports on the emissions associated with CDP reporting companies and their global supply chains. One of the major findings of the CDP supply chain report is that there is still a significant performance gap between suppliers and the CDP member companies that report on their supply chains (also referred to as the Supply Chain Member companies).

According to the report only 38% of suppliers compared with 92% of Supply Chain Members report having a target for carbon emissions. Meanwhile, the percentage of members investing in emissions reduction initiatives is 69%, and for suppliers stands at only 27%. This shows the need for suppliers to implement initiatives and strategies in tackling emission reduction and the need for proper reporting.

For many companies the majority of their emissions can be attributed to their supply chain (also known as Scope 3 emissions). If suppliers do not record their emissions it is difficult for reporting companies to provide accurate data on their Scope 3 emissions and their total carbon footprints will be inaccurate. This undermines the CDPs efforts to provide accurate carbon information on reporting companies for investors.

Benefits of emission reduction for businesses

One of the drivers of implementing carbon reduction initiatives is that monetary savings can be made. According to the report, in the year 2012, 73% of CDP Supply Chain Members reported monetary savings from emissions reductions activities compared with only 29% of suppliers. Furthermore, the report stated that the 29% of suppliers that have reduced their emissions have saved some $13.7 billion as a result.

Reporting companies are aware of the risks of climate change on their supply chains

The CDP Supply Chain Report reveals that 70% of the respondent companies identified a current or future climate change risk related to their supply chains. More than half identified extreme weather events such as droughts and floods as already having an impact or as having an impact to their operations in the next five years.

Progress has been achieved by suppliers

Although there is still a gap between the CDP Supply Chain member companies and their suppliers, there has been an improvement in the number of suppliers that are achieving emission reductions. In the year 2011 CDP recorded that 19% of suppliers reported on their emissions and in the year 2012 this improved to 29%. According to the report, this is due to the effectiveness of member companies in engaging with their suppliers to determine carbon information. As more members request information from their suppliers, their awareness about climate change is also enhanced.

Risk identification is a key driver in emission reduction investment

The report also found that risk identification was amongst the key drivers behind companies investing in emission reduction activities. Moreover, there was growing concern amongst the members and suppliers regarding business continuity based on physical risks and customer demands. As evidence, 73% of the companies that are investing in emission reduction activities said they feel climate change poses a physical risk to their operations while 13% identify regulation as a sole driver of risks.

Business value is created through supply chain sustainability

Reporting companies are benefiting from supply chain sustainability in a number of ways, according to the CDP Supply Chain Report.  These include: better operational efficiency, emission reductions, product and service innovation, as well as premium pricing for low carbon products, to name a few.

In 2011 43% of the responding CDP Supply Chain members reported on their emissions reductions, and in 2012, this increased to 63%. Furthermore, in 2011 39% of CDP Supply Chain members reported monetary savings from emissions reductions activities and in 2012 that increased to 73%. This shows that there is now a stronger business case than before for companies investing in emission reduction activities.

In addition to gains made in profits, member companies that are recording their supply chain emissions identified opportunities to benefit from an enhanced reputation regarding sustainability and to change their consumers’ behaviours.

What can be done moving forward?

According to the report there are a number of actions that can be taken to drive the idea of the importance of emission reduction by Supply Chain Members and their suppliers. These range from good data management practices that can help reduce emissions, to encouraging companies to engage with their suppliers about the importance of emissions reduction, so that there can be a cross functional collaboration of activities and initiatives.

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Tholakele Nene