Investor research group urges more corporates to push suppliers to deliver cost effective emissions reduction
Greenhouse gas emissions from corporate supply chains are on average 5.5 times higher than the direct emissions attributed to big businesses, according to a new analysis by CDP that underscores the huge potential for blue chips to drive carbon savings through their global supply chains.
Researchers at the investor-backed non-profit research organisation scrutinised data from almost 7,000 suppliers to 125 major corporate buyers, including Walmart, BT Group and L'Oréal, with together boast an annual combined procurement spend of $3.6tr.
It found that companies have huge potential to use their purchasing power to encourage suppliers to switch to greener practices, such as using more renewable power.
The report found that suppliers to the large corporates analysed purchased an average of 11 per cent of their total electricity from renewable sources.
It calculates that increasing suppliers' share of renewables to an average of 31 per cent of their power use would cut a gigaton of greenhouse gas emissions in one year - the equivalent to the 2017 fossil fuel CO2 emissions of Brazil and Mexico combined.
Renewables are cost competitive in many markets around the world, offering power at comparable or lower cost than fossil fuel power plants.
CDP found more than 31 major corporates are actively engaging with suppliers to help them switch to renewables, including brewer AB InBev, telecoms company BT Group, lighting company Signify, and toy manufacturer the Lego Group.
Sonya Bhonsle, global director of supply chains at CDP said: "With supply chain emissions being on average over five times as high as a corporation's direct emissions, this makes the trillions in procurement spend by large corporate buyers a critical leverage tool for driving climate action at scale."
Increasing the proportion of renewable power by 20 percentage points would be a big step, but was nonetheless achievable, she added.
"However, with just four per cent of suppliers reporting a renewable energy target we're not seeing that level of ambition yet," she said. "We need to see all buyers engaging proactively with their suppliers to unlock this huge opportunity."
Luc Broussaud, chief procurement officer at Signify, said that 160 of its suppliers had reported carbon emissions reduction activities this year, including purchasing renewable electricity.
"Signify has committed to source 100 per cent renewable electricity by 2020 as a member of the RE100 initiative," he said. "We want to see our suppliers matching our ambitions, setting renewable electricity targets, and reporting progress towards achieving them year on year."
Suppliers just starting out on cutting emissions should aim to source at least 20 per cent of total power from renewables, while more advanced companies should commit to sourcing 100 per cent of power from renewables through the RE100 initiative, Bhonsle advised.
Corporations should also take steps to encourage renewable energy procurement amongst supplier by providing them with incentives to curb their emissions, she added.
