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Suppliers are now expected by some of their global customers to demonstrate greenhouse gas emissions management, awareness and action, in order to maintain business relationships, a Carbon Disclosure Project (CDP) report shows.
The second annual CDP Supply Chain Report, produced by A.T. Kearney, summarizes climate change information* from 710 suppliers. Members, who include global customers, such as Dell, Juniper Networks, National Grid, PepsiCo and Reckitt Benckiser are requesting their suppliers to disclose data via the CDP Supply Chain program. Although this report shows significant improvement in best practices over last year’s results, suppliers still have a long way to go.
The 44 CDP Supply Chain member companies (see below) are leading in carbon management within their own businesses and expecting their suppliers to also demonstrate strong carbon management strategies:
The majority of CDP Supply Chain members (56 percent) have also stated they actually expect to deselect some suppliers in the future for failing to meet carbon management criteria set by the companies. This is an increase from just 6 percent of members who would deselect suppliers today for failure to manage carbon. Some also indicate that they intend to develop contracts which require improved carbon management. These companies are choosing to take these steps ahead of regulation, because they make good business sense.
“We see carbon management as an increasingly important part of supplier engagement. It makes good business sense for us to work with suppliers who understand how climate change is impacting their business and manage these issues properly,” said Brad Minnis, director of Environmental, Health, Safety and Security at Juniper Networks.
The report shows that the importance granted by CDP Supply Chain members to managing carbon targets versus classic procurement targets is expected to triple in the next five years.
”It is clear that some companies are now requiring their suppliers to address carbon management as a core business issue. This is no longer a ‘nice to have’ for the leaders, it is becoming a ‘need to have’ and we expect to see this trend growing across the whole business sector,“ said Paul Dickinson, CEO, CDP.
However, the report shows that despite the fact that a significant proportion of carbon emissions are typically found in the supply chain, it is still a challenging area for member companies to measure and just 20 percent report figures for supply chain emissions.
A.T. Kearney partner and study co-leader Daniel Mahler said, “Major corporations are taking carbon reduction seriously and are developing strategies to address carbon emissions in their supply chains. Corporate CEOs and boards of directors are demanding results from company carbon reduction programs not only for the environmental benefits, but for cost-reduction benefits as well. The challenge moving forward is for additional corporations and suppliers to operationalize their carbon-reduction strategies.”
In 2009, of the 710 suppliers disclosing to their customers through the CDP Supply Chain program, 48 percent were reporting for the first time. The majority (60 percent) have appointed a board member responsible for climate change and while 56 percent have a reduction plan, 38 percent have committed to clear targets; which tend to be short term (majority under two years). Companies are also reporting considerable cost benefits of carbon reduction programs - HP and Allianz report significant commercial benefits in addressing climate change related issues.
A full copy of the CDP Supply Chain Report 2010 is available at www.cdproject.net.
Participating companies include: Acer, BAE Systems, Bank of America, Baxter International, Cadbury, Carrefour, Colgate-Palmolive Company, ConAgra Foods, Dell, EMC Corporation, ENEL, FIJI Water, GlaxoSmithKline, Google, H.J. Heinz Company, HP, IBM, Imperial Tobacco Group, Johnson & Johnson, Johnson Controls, Juniper Networks, Kao, L'Oréal, Logica, National Australia Group, Europe, National Grid, Newmont Mining Corporation, PepsiCo, Procter & Gamble Company, Reckitt Benckiser, Royal Mail Group, Sony Corporation, Unilever, Vivendi, Vodafone Group.
* Suppliers are asked to report on greenhouse gas emissions and reduction targets; governance and assessment of risks and opportunities associated with climate change.
** 82 percent of the world’s largest 500 companies also report through CDP.
The Carbon Disclosure Project (CDP) is an independent not-for-profit organisation collecting key climate change data from some 2,500 companies around the globe and has assembled the largest database of corporate greenhouse gas emissions and climate change information in the world. Founded in 2000, CDP facilitates the collection of climate change data within investment portfolios – representing some 475 global institutional investors with more than US $55 trillion in assets under management – as well as through corporate and public sector supply chains. To find out more visit www.cdproject.net.
About A.T. Kearney
A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been advisors on CEO-agenda issues to the world’s leading corporations across all major industries. A.T. Kearney’s offices are located in major business centers in 36 countries.