With 86% of large company carbon footprint estimated to rest in scope 3 emissions the Carbon Disclosure Project says more can be done to enforce the reduction of supplier carbon emmissions.
Scope 3 emissions are those which take place outside the direct operations of a company. Carbon Disclosure Project (CPD) research with 49 member companies including L’Oreal, Philips and Walmart, shows that just 28% of suppliers are achieving emissions reductions year-on-year compared to 43% of CPD members.
The CPD research was undertaken in partnership with the global management
consultancy, technology service and outsourcing company, Accenture. It is the
fourth annual study of supply chain preparedness for climate change and,
released today, is titled A new era: supplier management in the low-carbon economy.
To motivate a more proactive approach to scope 3 emissions reductions CPD reveals that 39% of member companies have experienced cost savings as a direct result of their own reductive activities but that a further 34.5% have discovered new revenue streams or financial savings through supporting supplier emissions reductions.
Although only 28% of the identified supply base for this research reported emissions reduction success, 53% said that climate change was likely to expose them to additional operational costs.
As the cost incentive rises and companies at the head of extended supply chains become aware of the size of scope 3 emissions, CPD does say that member business models are changing, demanding more of suppliers.
The number of CPD member companies with procurement guidelines for suppliers. While 79% of CPD member companies incorporated climate change considerations in procurement guidelines in 2011 today’s research release shows that 90% are now doing so.
Furthermore, the penalties for suppliers failing to meet standards are becoming more stringent.
Thirty nine per cent of responding companies now claim that they will deselect suppliers who fail to meet identified environmental criteria within five years of the standard’s introduction. This is double the figure recorded in 2009 and will be a concern to some smaller firms lacking the administrative and finacial resources to gain the stamp of standards like those from the International Organisation for Standardisation (ISO) and the British Standards Intstitute (BSI).
Taking on greater responsibility for supplier emissions, CPD member companies are increasingly investing in training for procurement staff which includes supply chain carbon management. Two thirds (63%) of companies responding to the latest CPD research said that they were doing this compared to just 41% in 2010.
In contrast to this however, the 2011 CPD research showed that only 24% of responding companies were assisting suppliers in quantifying the return on investment for better carbon management.
This said, an increasing number of CPD members are now using incentives to encourage proactive supplier activity on carbon emissions reduction. While only 28% of these companies said they offered preferential treatment or reward to suppliers with good carbon management regimes in 2010, 62% of companies contributing to the latest research said that they do so.
Frances Way, programme director for CDP commented on the findings released today saying: “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.”
See the February issue of TM for more on the extension of carbon management across supply chains in our article ‘Carbon accountability’.