Blue chips told to clean up their supply chain

When US President Barack Obama last week pledged to draw up a plan for protecting the country’s $14.6tr economy from interruptions to global supply chains, he could well have been given a sneak preview of the latest report from the Carbon Disclosure Project (CDP).

The green investor-backed group, which lobbies companies to report on their carbon emissions and water use, will today release its latest annual report examining how companies and their suppliers are preparing for climate change impacts, such as drought and flooding.
The survey of 49 CDP members, including household names such as L’Oréal, Philips and Walmart, and more than 1,800 suppliers, will warn that while many blue chip firms have taken steps to change their operating models to improve their environmental performance, there is a gulf between the measures adopted by their own operations and those embraced by their supply chain.

A third of the suppliers surveyed said they were disrupted by extreme weather events in the past year, while more than half expect climate change to increase their operational costs in the future.

However, CDP’s report will say that while 43 per cent of responding blue chip firms have taken steps to reduce their emissions, only 28 per cent of suppliers have done so.

Moreover, less than a quarter of companies help suppliers to identify the financial returns associated with low-carbon investments, a move that is seen as a critical to emissions reductions.

“Companies are evolving the way they operate to better capitalise on the opportunities presented by carbon efficient supply chains,” said Frances Way, programme director for CDP. “Such a large shift in companies’ procurement models is encouraging but since these trends are only now emerging, we are yet to see a transformational impact on suppliers’ emissions.”

The report marks the first year that CDP scored suppliers on their carbon performance as well as their willingness to disclose their carbon footprint, with scores suggesting that North American suppliers are trailing European and Asian companies in their engagement with climate change issues.

Asian and European suppliers received an average score of 52 and 53 for the quality of their disclosure reports, while North American suppliers scored just 45 of a possible 100.

However, CDP found a marked rise in the number of companies with climate change strategies that incorporate procurement guidelines, rising to 90 per cent, up from 79 per cent in 2010.

The number of firms that said they would reject a supplier that failed to meet formal environmental criteria within five years has also more than doubled from 17 per cent in 2009 to 39 per cent in 2011.

Gary Hanifan, global sustainability lead for supply chain at Accenture, which collaborated on the report, urged suppliers to position themselves to benefit from the opportunities offered by climate change.

“As companies examine and modify their supply chains to make them more flexible and able to withstand the winds of economic change and the ripple effects of natural disasters, they need to also consider how their supply chains will stand up under environmental scrutiny,” he said.

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