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Carbon Management Becomes Key Part of Corporate Supplier Management Strategy
Six percent of leading companies already deselect suppliers who fail to manage carbon; 56 percent committed to do so in the future, Carbon Disclosure Project reports
London — February 17, 2010 — Suppliers are now expected by some of their global customers to demonstrate greenhouse gas emissions management, awareness and action, in order to maintain business relationships, a Carbon Disclosure Project (CDP) report shows.
The second annual "CDP Supply Chain Report," produced by A.T. Kearney, summarizes climate change information from 710 suppliers. Although this report shows significant improvement in best practices over last year's results, suppliers still have a long way to go, according to the CDP.
Members of the project, which include such global companies as Dell, Juniper Networks, National Grid, PepsiCo and Reckitt Benckiser, are working on carbon management within their own businesses and expecting their suppliers to demonstrate strong carbon management strategies, too, according to the report.
For example, the report shows that 89 percent of CDP Supply Chain members have an established strategy to engage with suppliers on carbon related issues, and a majority (56 percent) have stated they actually expect to deselect some suppliers in the future for failing to meet carbon management criteria set by the companies, an increase from just 6 percent of members who would deselect suppliers today for failure to manage carbon.
Some members also indicate that they intend to develop contracts that require improved carbon management. These companies are choosing to take these steps ahead of regulation, because they make good business sense, the report suggests.
"We see carbon management as an increasingly important part of supplier engagement," said Brad Minnis, director of Environmental, Health, Safety and Security at Juniper Networks. "It makes good business sense for us to work with suppliers who understand how climate change is impacting their business and manage these issues properly."
The report shows that the importance granted by CDP Supply Chain members to managing carbon targets versus classic procurement targets is expected to triple in the next five years.
"It is clear that some companies are now requiring their suppliers to address carbon management as a core business issue," said Paul Dickinson, CEO of the CDP. "This is no longer a 'nice to have' for the leaders; it is becoming a 'need to have,' and we expect to see this trend growing across the whole business sector."
However, the report shows that while a significant proportion of carbon emissions are typically found in the supply chain, it is still a challenging area for member companies to measure, and just 20 percent report figures for supply chain emissions.
"Major corporations are taking carbon reduction seriously and are developing strategies to address carbon emissions in their supply chains," said Daniel Mahler, A.T. Kearney partner and study co-leader. "Corporate CEOs and boards of directors are demanding results from company carbon reduction programs not only for the environmental benefits, but for cost-reduction benefits as well. The challenge moving forward is for additional corporations and suppliers to operationalize their carbon-reduction strategies."
In 2009, of the 710 suppliers disclosing to their customers through the CDP Supply Chain program, 48 percent were reporting for the first time. The majority (60 percent) have appointed a board member responsible for climate change, and while 56 percent have a reduction plan, 38 percent have committed to clear targets, which tend to be short term (majority under two years).
Companies are also reporting considerable cost benefits of carbon reduction programs — HP and Allianz report significant commercial benefits in addressing climate change related issues.
A full copy of the CDP Supply Chain Report 2010 is available at www.cdproject.net.
The 44 CDP Supply Chain member companies include: Acer, BAE Systems, Bank of America, Baxter International, Cadbury, Carrefour, Colgate-Palmolive Company, ConAgra Foods, Dell, EMC Corporation, ENEL, FIJI Water, GlaxoSmithKline, Google, H.J. Heinz Company, HP, IBM, Imperial Tobacco Group, Johnson & Johnson, Johnson Controls, Juniper Networks, Kao, L'Oreal, Logica, National Australia Group, Europe, National Grid, Newmont Mining Corporation, PepsiCo, Procter & Gamble Company, Reckitt Benckiser, Royal Mail Group, Sony Corporation, Unilever, Vivendi, Vodafone Group.
The second annual "CDP Supply Chain Report," produced by A.T. Kearney, summarizes climate change information from 710 suppliers. Although this report shows significant improvement in best practices over last year's results, suppliers still have a long way to go, according to the CDP.
Members of the project, which include such global companies as Dell, Juniper Networks, National Grid, PepsiCo and Reckitt Benckiser, are working on carbon management within their own businesses and expecting their suppliers to demonstrate strong carbon management strategies, too, according to the report.
For example, the report shows that 89 percent of CDP Supply Chain members have an established strategy to engage with suppliers on carbon related issues, and a majority (56 percent) have stated they actually expect to deselect some suppliers in the future for failing to meet carbon management criteria set by the companies, an increase from just 6 percent of members who would deselect suppliers today for failure to manage carbon.
Some members also indicate that they intend to develop contracts that require improved carbon management. These companies are choosing to take these steps ahead of regulation, because they make good business sense, the report suggests.
"We see carbon management as an increasingly important part of supplier engagement," said Brad Minnis, director of Environmental, Health, Safety and Security at Juniper Networks. "It makes good business sense for us to work with suppliers who understand how climate change is impacting their business and manage these issues properly."
The report shows that the importance granted by CDP Supply Chain members to managing carbon targets versus classic procurement targets is expected to triple in the next five years.
"It is clear that some companies are now requiring their suppliers to address carbon management as a core business issue," said Paul Dickinson, CEO of the CDP. "This is no longer a 'nice to have' for the leaders; it is becoming a 'need to have,' and we expect to see this trend growing across the whole business sector."
However, the report shows that while a significant proportion of carbon emissions are typically found in the supply chain, it is still a challenging area for member companies to measure, and just 20 percent report figures for supply chain emissions.
"Major corporations are taking carbon reduction seriously and are developing strategies to address carbon emissions in their supply chains," said Daniel Mahler, A.T. Kearney partner and study co-leader. "Corporate CEOs and boards of directors are demanding results from company carbon reduction programs not only for the environmental benefits, but for cost-reduction benefits as well. The challenge moving forward is for additional corporations and suppliers to operationalize their carbon-reduction strategies."
In 2009, of the 710 suppliers disclosing to their customers through the CDP Supply Chain program, 48 percent were reporting for the first time. The majority (60 percent) have appointed a board member responsible for climate change, and while 56 percent have a reduction plan, 38 percent have committed to clear targets, which tend to be short term (majority under two years).
Companies are also reporting considerable cost benefits of carbon reduction programs — HP and Allianz report significant commercial benefits in addressing climate change related issues.
A full copy of the CDP Supply Chain Report 2010 is available at www.cdproject.net.
The 44 CDP Supply Chain member companies include: Acer, BAE Systems, Bank of America, Baxter International, Cadbury, Carrefour, Colgate-Palmolive Company, ConAgra Foods, Dell, EMC Corporation, ENEL, FIJI Water, GlaxoSmithKline, Google, H.J. Heinz Company, HP, IBM, Imperial Tobacco Group, Johnson & Johnson, Johnson Controls, Juniper Networks, Kao, L'Oreal, Logica, National Australia Group, Europe, National Grid, Newmont Mining Corporation, PepsiCo, Procter & Gamble Company, Reckitt Benckiser, Royal Mail Group, Sony Corporation, Unilever, Vivendi, Vodafone Group.
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