With greenhouse gas (GHG) emissions in supply chains on average 5.5 times those of company’s direct operations, a new report from CDP, New York, reveals a step-change in corporate awareness and action on environmental impacts within the supply chain in the last decade.
In 2018, 115 organizations wielding a combined purchasing power in excess of $3.3 trillion requested environmental information from 5,500-plus of their key suppliers. This is an increase from just 14 organizations 10 years ago. Suppliers reported emissions reductions of 633 million metric tons of carbon dioxide – greater than the emissions of South Korea in 2017 – leading to collective cost savings of $19.3 billion.
The report, “Cascading commitments: Driving upstream action through supply chain engagement,” is based on data disclosed by 5,562 suppliers. It also reveals a 35% growth in targets for water use among suppliers, compared to 2017, while the number of companies disclosing information to their customers on their forest-related impacts has more than tripled, from 88 in 2017 to 305 in 2018.
The research finds that for some big buyers, sustainability is now a major factor in their purchasing decisions. Nearly three quarters (73%) of a subset of 27 major purchasers said they are either currently de-selecting or considering de-selecting existing suppliers based on their environmental performance. In addition, 63% are either currently using or considering using data from CDP disclosures to influence whether they contract with suppliers or not. This is in stark contrast to the 4% and 9% respectively, who were doing this a decade ago.
“In the 10 years that we have been working with purchasing organizations, we have seen a fundamental shift in expectations around business action on sustainability,” says Sonya Bhonsle, global head of supply chain. “Leading purchasers are using disclosure to push positive change down the supply chain, with data playing an increasingly important role in their decision-making. If suppliers continue to cascade good practices further down the supply chain, this has the potential to play a huge role in the rapid transition to a sustainable, low-carbon economy. However, with only 57% of suppliers reporting emissions reductions activities and less than half (47%) with emissions reduction targets in place, the transformation in their customers’ expectations means that those suppliers failing to act sustainably may increasingly see it impact their bottom line.”
As organizations take an increasingly holistic approach to environmental management, the number of companies demanding transparency on water security in the supply chain continues to grow:
- 43 major purchasing organizations asked their suppliers to report on water in 2018, up from 37 in 2017. Nearly 1,709 suppliers submitted responses, an 11% increase from last year.
- There has been a rise in suppliers reporting water targets, growing from 51% in 2017 to 69% this year.
- But, with less than half of companies reporting board-level oversight of water issues – compared to 69% for climate issues – governance of water security remains low.
Meanwhile, with deforestation and forest degradation accounting for approximately 10-15% of the world's GHG emissions, protecting forests is rising up the corporate agenda:
- This year, 305 suppliers provided disclosures to 14 purchasers, a 247% increase on the 88 businesses that responded to seven purchasers in 2017’s pilot phase.
- However, just 17% of those suppliers report setting any sort of target related to deforestation; not enough to slow the 18.7 million acres of forests lost annually.
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