Carbon Disclosure Project: Supply Chain Report 2011

Over 50% of an average corporation’s carbon emissions are typically from the supply chain rather than within its own four walls. Managing supply chain emissions is therefore critical if we are going to address climate change effectively.

The Carbon Disclosure Project’s Supply Chain program is a unique collaboration of 57 global corporations who are members of CDP Supply Chain. These companies recognize the significance of the supply chain in carbon management. They are actively engaged in working with their suppliers to manage carbon and have the power and influence to really make a difference. This report is based on this work and is the most significant study of how business is managing supply chain emissions. The insights are informed by detailed data and research conducted with 1,000 participating suppliers across industries all over the world.

There are three core results from this year’s research:
1.  Supplier carbon reduction ambition still does not meet global carbon reduction requirements to limit the rise of global surface temperature. Only one third of responding suppliers have a target for carbon reduction and even the targets that are in place are not sufficient. Should this status continue, this would mean global emissions by 2015 will increase by 6% instead of the necessary 20% reduction.
2.  But there is hope…Compared to last year, companies have improved in assembling the building blocks for dramatic change
– including improved reporting, increased board level responsibility and greater realization that carbon management presents a wider cost and revenue opportunity rather than being a pure risk mitigation activity.

3. CDP Members are leading the way - they have started a chain
reaction for engagement in the supply chain – they are increasingly using their influence and power to drive change. They do this by deploying differentiated levers to engage with their suppliers. These include redesigning products, directly reducing demand for carbon intensive purchases, working collaboratively with suppliers to cut emissions and making effective carbon management a supplier selection criterion.

The report highlights that it is still early days in the quest to reduce emissions. While progress has been made, a major step change is required if business is to meet the global requirements.
Increased engagement and commitment in the supply chain is indispensable for achieving this. This report highlights that although there is work to do, through leadership - as demonstrated by CDP Members in working with their suppliers - a positive snowball and domino effect in the supply chain can bring about the change needed.

Companies’ carbon reduction ambition still does not meet global
carbon reduction requirements the Intergovernmental Panel on Climate Change (IPCC) 2 provides compelling evidence that global surface temperature will rise significantly by 2100 if business as usual continues. The IPCC has calculated an annual reduction of
emissions by 3.9% is necessary to achieve an 80% carbon reduction by 2050. In 2009, only one third of suppliers had a reduction target. Those that did targeted an average reduction of 3.6% per annum, approximating the required reduction. However, two thirds of the companies did not have a target. This ‘business as usual’ attitude meant that by 2020 overall carbon emissions would actually increase by 9%

The 2010 results are similar. Only one third of suppliers have a target, with an average of 3.5% per annum. Another fifth of the companies are developing a target, but even if these targets are implemented next year, still only half of the companies will have a target in place. If this situation persists, with only a portion of global businesses setting a target, global carbon emissions controlled by business will actually increase by 12% by 2020. More positively, almost 90% of the members have committed to targets. At the same time, their ambition has increased from 2.2% to 3.4% per annum since 2009. Members explain these increases as being due to increased insights into their own baseline emissions coupled with a growing level of expertise regarding what they can do to reduce emissions. This is a change in the right direction, but there are only 57 members. The members face a real challenge when it comes to addressing the lack of target
setting by over 50% of their suppliers. Urgent change is therefore required to meet the necessary economy-wide carbon reduction requirements. However, many companies are working very hard
to set the building blocks for dramatic change. Significant successes have been achieved, and members are now forcing a chain reaction, putting pressure on their supply chains and business partners to commit to targets and implement emission reduction.