Major corporates marked out as leaders as action to cut supply chain emissions doubles in just 12 months - but suppliers' own supply chains aren't yet embracing the trend
For major companies committed to tackling greenhouse gas emissions, taking action within their direct operations is no longer enough.
The supply chains of these sprawling multinationals, from the palm oil plantations in Indonesia to the cocoa farms in Africa and the auto factories of the US rust belt, are responsible for four times the emissions than those of corporates' direct operations.
It's also true that supply chains will be one of the front lines of climate change, suffering the shocks threatened by extreme weather, changing rainfall patterns, degraded soil quality, and increased competition for natural resources.
As such many in the corporate community will today cheer the news that number of major companies recognised as 'leaders' in engaging their supply chain on climate issues has doubled in the last 12 months.
Some 58 companies, including household names such as Honda, Apple, Bank of America, Microsoft, Nestle, and Unilever, will today be recognised for their work by CDP in it's new report Closing the Gap: Scaling up the sustainable supply chains. That's up from 29 companies securing top marks a year ago.
To compile its list of leaders, CDP collected climate, water and deforestation-related data from 4,800 suppliers in 2017, securing data from companies which supply into 99 of the world's largest purchasing organisations. Overall, supplier companies for these organisations banked around $14bn in cost savings from climate action and saved 551 million metric tonnes of carbon dioxide - more than Brazil's total emissions for 2016.
But despite this good news, there's still major room for improvement amongst supply chain operators. When broken down, the data reveals some worrying disparities across regions, industries, and supply chain tiers.
Supplying companies in France emerged as leaders in climate action, with 80 per cent of respondents reporting the integration of climate change into their business and 74 per cent reporting that this is done at a board level. This leadership position may well have something to do with France's introduction of a 'Duty of Vigilance' law last year, which requires large multinationals operating in France to implement a "vigilance plan" to protect against human rights violations and environmental damage throughout their supply chain.
But in the US, despite the sizeable groundswell of large corporates pledging climate action in defiance of the Trump Presidency via the 'We Are Still In' coalition, supplier companies in the country are lagging behind the global leaders across almost all of CDP's metrics. And in Brazil, economic and political instability appears to be forcing climate action onto the back foot, with just 21 per cent of supplier respondents reporting that they have set emissions reduction targets.
Meanwhile, although it seems that corporates are catching on to the importance of engaging their suppliers on climate issues, that message isn't being passed down to the next tier of the supply chain. "Despite unprecedented disclosure, only 23 per cent of supplier organisations that responded to the 2017 CDP supply chain questionnaire report engaging on climate with their supply chains," the UN's climate chief Patricia Espinosa said in the report's foreword. "This indicates that large portions of the global supply chain network are not considering climate in their decision making, which represents significant untapped opportunities and financial savings."
Similarly, 23 per cent of supplier companies reported a rise in emissions in 2017, throwing doubt on the assumption in some sustainability circles that what gets measured gets managed.
There is some good news on water management, with more companies than ever before looking at water security in their supply chains. This has driven a 15 per cent rise in the number of suppliers disclosing water data to their customers through CDP in the last year. And more than half of responding suppliers are integrating water risk management into their business strategies, with 62 per cent boasting a company-wide water target.
But the news is less rosy for deforestation. A pilot project with eight corporates to collect supply chain data on deforestation saw CDP request information from 244 supplier companies on their production and sourcing of cattle products, palm oil, timber products, and soy - the items responsible for the majority of global deforestation and forest degradation. Only 88 suppliers responded, despite many being approached by more than one customer. Fewer than half reported data on their consumption or production of so-called "forest-risk" commodities, and just 43 per cent had commitments in place to reduce or eliminate deforestation or forest degradation in their supply chain.
"It is clear that standard management practices required are still far from being mainstream," CDP concluded.
It appears that large corporates are leading from the top on the issue of supply chains, and their efforts are starting to have a tangible impact on the first tier of their supply chain, with an uptick in emissions reductions and water management. But it seems both corporates and their immediate suppliers must redouble their efforts to pass this down, to ensure that the business opportunities associated with carbon and water savings are felt throughout a supply chain.
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