For most large global companies, carbon tracking and management has become standard practice. Organizations that started working to reduce their greenhouse gas (GHG) emissions several years ago are reaping the benefits of efficiency improvements and energy management programs in the form of emissions reductions and cost savings. And now these companies are starting to look down their supply chains for ways to squeeze even more carbon out of their overall footprint.
The Carbon Disclosure Project (CDP), which has been collecting GHG emissions data from companies for nearly a decade, recently released a report which revealed that there is a gap that exists between the carbon reduction performance of companies and that of their suppliers. The study, conducted in partnership with Accenture, was conducted with 50 CDP member organizations including L’Oréal, Philips and Walmart, and more than 1,800 of their suppliers. It found that while 43 percent of companies surveyed have achieved year-over-year reductions in their carbon emissions, only 28 percent of their suppliers have done so.
This gap exists despite the fact that emissions reductions have produced monetary savings for 39 percent of these companies and 34.5 percent have also benefitted financially from their suppliers’ carbon reduction efforts. These findings indicate that there is clear opportunity for companies to realize additional carbon and financial savings by reducing their Scope 3 emissions – those that result from within the supply chain rather than from a company’s direct operations.
Companies are waking up to this reality and are starting to encourage their suppliers to take appropriate action. According to Frances Way, program director for CDP, “Companies are evolving the way they operate to better capitalize on the opportunities presented by carbon efficient supply chains.” Evidence of this can be seen in the shift in supply chain policies that’s happening within the companies surveyed:
- 67 percent are now including specifications for carbon management in their procurement policies.
- 90 percent are including procurement in their climate change strategies, up from only 74 percent in 2009.
- The number saying they will deselect suppliers who fail to meet formal environmental criteria within five years has more than doubled from 17 percent in 2009 to 39 percent in 2011.
- 63 percent are investing in training their procurement staff on supply chain management. This a drastic increase from only 26 percent in 2009.
- 62 percent are offering incentives to suppliers with good carbon management practices, up from just 19 percent in 2009.
The large shift in these numbers from just two years ago demonstrates how new this trend really is. And as a result, suppliers have yet to fully react. As Way points out, “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.” I’ll be keeping an eye out for CDP’s reports over the next few years to find out just how quickly suppliers can shift their operations to meet the low carbon expectations of their customers.