New research by CDP found that companies can face up to $120 billion in costs from environmental risks within their supply chains by 2026.
As supply chains run on tight profit margins, increased costs may be passed up the chain, impacting buyers and consumers in the long term. The sectors that report the most potential cost increase are manufacturing ($64 billion), food, beverage & agriculture ($17 billion) and power generation ($11 billion).
“With $120 billion at stake, addressing environmental risks through supply chain engagement is vital for companies to be competitive and resilient in the changing market. Leading companies that address these risks will benefit from lower costs and better reputations. This gives them a more competitive edge today and helps them become more resilient for the economy of tomorrow. Meanwhile, laggard companies risk being left behind. As the climate and ecological crisis worsens and the economy shifts, it’s essential for both business and society that we have a Green Recovery from COVID-19 and build back better. Smart business procurement is key to that transition,” says Sonya Bhonsle, Global Head of Value Chains at CDP.
- The environmental risks causing cost increases stem from climate change, deforestation and water-related impacts.
- To address this risk, increasingly buyers are demanding transparency and action from their suppliers to tackle environmental impacts in their supply chains.
- Climate action is not yet cascading through the supply chain as needed: only 37% of suppliers are engaging their own suppliers to cut emissions.