Global supply chains guilty of ignoring climate risks

Many key suppliers to the world's largest firms are still burying their heads in the sand over climate change, according to the first global supply chain study from the Carbon Disclosure Project (CDP).

The investor backed lobby group teamed up with over 30 global companies, including Cadbury, Colgate-Palmolive, Johnson & Johnson, P&G, Unilever, and Vodafone, to request information on carbon emissions and climate change policy from their suppliers.

The companies received responses from over 630 firms and found that while the majority recognise climate change on the risk and have a board level executive in charge of their environmental strategy, a sizable minority are continuing to ignore the issue.

According to the survey, the results of which will be released later today at an event in New York only 58 per cent of respondents considered climate change as a threat to their operations, while a third believed it posed no risk to their business.

Speaking to BusinessGreen.com, ahead of the publication of the report CDP chief operating officer said that the findings posed a major challenge to multinational firms, given between 40 and 60 per cent of their extended carbon footprint is the result of their suppliers.

"The findings suggest that emissions from smaller suppliers are out of control and need to be addressed," he said. "There's a real need for those larger companies that are beginning to act on climate change to work with their suppliers to help them cut emissions."

He added that simply ditching those suppliers that failed to improve their environmental performance was unlikely to help lower overall emissions.

"If everyone just goes to the greenest firms they will not be able to cope with the demand and prices of greener good will rise," he warned. "If over several years a supplier shows no sign of improvement then it can be right to st op using them, but ideally larger firms need to work with their suppliers to help them improve."

Frances Way, head of supply chain at the CDP agreed that the onus was on larger firms to help suppliers develop their own climate change strategies. " With the current lack of awareness and preparedness on climate change risk there is a clear requirement for greater collaboration with suppliers to create transparency and also encourage a willingness to improve," she said, adding that such an approach helps limit the climate change risks faced by larger companies.

"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," she warned. "Companies must take steps to mitigate the impact of these risks to their business."