CDP: Sustainable Supply Chain Dependent on Climate Change Awareness
March 20, 2009 // Published as a news service by IHS
Increased awareness of the risks that climate change poses to global supply chains is needed, according to a report from the Carbon Disclosure Project (CDP). The group surveyed 634 global suppliers and found only 58% believed that climate change posed a risk to their operations, while one-third said it posed no risk.
The results are significant considering data from McKinsey & Co., cited in the 2008 CDP Supply Chain Report, finding that between 40-60% of organizations' total greenhouse gas emissions are found within the supply chain through processing, packaging, transportation and other activities.
While CDP noted that few large companies have yet developed a way of addressing climate change impact on supply chains, the group said it is important to begin to prepare for future reporting and emissions reduction targets by:
- Engaging with suppliers to raise their awareness of climate change risk while recognizing that many suppliers are just beginning to consider the issue.
- Identifying the areas where the greatest difference can be made in carbon reduction to maximize efficiency.
- Clearly communicating what information is required from suppliers and how it will be used.
- Obtaining supplier support at the board level.
- Aligning carbon emissions, climate change and procurement objectives.
- Embedding carbon and climate change into overall supply chain management processes, instead of treating it as a "bolt-on" to traditional procurement processes.
"Procurement teams worldwide must take a role in developing more sustainable business practices and embed the issue of climate change into an organization's core operations," said Frances Way, head of supply chain for CDP. "Risks posed to a company's supply chain from the impacts of climate change include extreme weather events, water scarcity, regulation and associated cost volatility. Companies must take steps to mitigate the impact of these risks to their business."
Way noted that greater collaboration with suppliers is needed to create transparency through long-term relationships and partnerships.
Asian Suppliers
The CDP report indicated that Asian suppliers are using governance and employee incentives to drive action in carbon and climate change activity. Of the 77 responding suppliers based in Asia, 66% cite board level responsibility for climate change issues, above the 54% average.
Interestingly, Asian supplier engagement on climate change differed significantly by country, with Taiwan and Japan dominating the sample and India, China and Thailand demonstrating much lower response rates.
According to CDP, 34 companies use their system to report on carbon footprint and climate change strategies to facilitate a resilient and sustainable supply chain. Among the companies are Proctor and Gamble Co., Colgate-Palmolive Co., Johnson & Johnson Services Inc., Juniper Networks Inc., Vodaphone and others.
Suppliers responding to the survey, according to CDP, operate in the industrial, retail (consumer staples and discretionary), information technology, materials, telecommunications, utilities, health care, financials and energy sectors, with the largest group (31%) coming from the industrial sector.
"The report is demonstrating that sustainability governance, planning and reporting is not a 'nice to have' – it can be the difference between whether you win or maintain your business with major corporations," said Alan McGill, a partner with the PricewaterhouseCoopers LLP sustainability and climate change practice. The firm wrote the report for CDP.
"Business improvement, cost reduction, long term business risk management and reduction: these are the benefits of applying the same discipline and rigor of traditional business processes and reporting to the supply chain," said McGill.
Source: Carbon Disclosure Project (CDP).