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February 11, 2010
Carbon Disclosure Project Publishes Second Annual Supply Chain Report
    by Robert Kropp

The report finds increased engagement by corporations with suppliers on climate change, and growing expectations for improved performance.


The Carbon Disclosure Project (CDP) issued its first report on greenhouse gas (GHG) emissions in corporate supply chains last year, asking the 34 members of its CDP Supply Chain project to request their suppliers to report on emissions and climate change strategies. The report was the first to provide a standard reporting model for the reporting of supply chain emissions, and its importance was beyond question. According to a 2008 analysis published in the McKinsey Quarterly, as much as 60% of corporate GHG emissions originate in supply chains.

On February 1, the CDP published its second annual CDP Supply Chain Report. The report summarizes the responses of 710 suppliers to the CDP questionnaire. The 44 corporations that now comprise the Supply Chain project, including Google, IBM, Newmont Mining, and Pepsico, requested responses from a total of 1402 suppliers.

According to the report, 89% of members have a strategy for engagement with supply chain companies on GHG emissions and climate change, and 56% state that they expect to deselect suppliers for failing to meet their carbon management criteria. Today, only 6% of member companies deselect suppliers for failing to meet their criteria.

The report assesses suppliers according to four standards of emissions management: strategic risk awareness, carbon reduction targets, reporting capabilities, and implementation of emissions reduction plans.

In the area of strategic awareness, 58% of suppliers believe themselves to be exposed to such regulatory developments as cap-and-trade schemes, and more than one-third identified such industry-specific risks as the regulation of waste and water management. Almost three-quarters of suppliers identify themselves as threatened by extreme weather events.

The report found that only 38% of suppliers have emissions reduction targets, compared to 82% of the Supply Chain project’s members. Furthermore, the reduction targets of suppliers last for an average of only five years, while the recommended targets established by the Intergovernmental Panel on Climate Change (IPCC) are to be sustained until 2050.

Sixty-two percent of suppliers now report Scope 1 (directly occurring) emissions, and 63% report Scope 2 emissions, which are generated from purchased electricity. However, only 8% of suppliers report Scope 3 emissions, which include those generated in corporate supply chains. The number of companies that submit their emissions reporting data to external verification nearly doubled since last year’s report.

The report found that 20% of suppliers are now employing at least three approaches to emissions reduction, including energy efficiency, process improvements, and renewable
Energy. However, only about a quarter of respondents incentivize their employees to drive emissions reductions, and about one-third engage with their own suppliers on the topic.

 

 
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