Climate change has become a mainstream business issue, and large global corporations are now extending their gains in internal carbon management to the next opportunity: their supply chain.

GLOBE-Net, February 15, 2012 -  Large companies such as Walmart and PepsiCo are reaping the benefits of climate change strategies in multiple ways, according to the most recent  Supply Chain Report by the Carbon Disclosure Project (CDP).

Emissions reductions along the supply chain are translating into clear cost savings and a  previous CDP report found that companies with strong climate change strategies most often also demonstrate strong financial performance relative to competitors.

Similar research found that  stock prices rose slightly immediately after companies disclosed their carbon data. The data from the CDP show that companies taking a leading and assertive stance on climate change are benefiting financially.

Carbon Disclosure Project (CDP) has been collecting data on corporate greenhouse-gas (GHG) emissions for almost a decade. Global companies that have been exposed to these information requests over the years understand the value of measuring and reporting their emissions, and they are now pushing their suppliers to report more climate change-related information and take greater action to reduce their emissions.

This represents a much larger opportunity: indirect emissions (meaning those from the supply chain) represent as much as 86% of a company's total emissions. In 2011, CDP conducted its fourth annual information request for member companies and their suppliers, and describes its findings in this report, published in collaboration with Accenture.

The results indicate that companies are making real changes to their operating models, most frequently in procurement, resulting in greater reductions in greenhouse-gas emissions and greater monetary gains across the entire supply chain.

Of the 49 CDP Supply Chain member companies-the companies who are requesting climate information from their suppliers-90% of responding companies have a climate change strategy with at least general guidelines for procurement, an increase from 79% in 2010 and 74% in 2009.

Some 62% reward suppliers that employ good carbon-management practices (up from 19% in 2009 and 28% in 2010), 39% will soon begin deselecting suppliers that do not adopt such measures (compared to 17% in 2009 and 23% in 2010), and 30% factor climate change into their evaluation of suppliers.

These have all increased significantly over prior years, which shows growing momentum for supplychain engagement. Monetization of these efforts remains a significant challenge: only 20% of responding companies report an estimated monetary value for the supply chain initiatives they have undertaken to improve carbon management.

"Those companies that are able to use this information to create sustainable, profitable growth through climate resilient and emissions efficient supply chains will be better positioned to capture market opportunities in the long term, as companies increasingly make carbon emission reductions not only the price of market entry, but a point of competitive differentiation,"  says Gary Hanifan, global sustainability lead for supply chain, Accenture, 

"As companies examine and modify their supply chains to make them more flexible and able to withstand the winds of economic change and the ripple effects of natural disasters, they need to also consider how their supply chains will stand up under environmental scrutiny," he adds.

Companies do reveal positive shift toward new low-carbon business models, Asia and Europe lead on supplier transparency of climate change strategy

The results also indicate that suppliers are becoming more transparent about their emissions-related information, in part due to growing pressure from corporate clients. In 2011, 1,864 suppliers responded to the information request, a substantial increase from prior years (1,000 in 2010, and 715 in 2009).

This parallels the way that sustainability measures have become more prevalent in the business community at large.

Over the past decade, major global corporations have increasingly taken steps to address climate change, partly in response to greater awareness of climate change among investors and consumers. Now, suppliers are realizing the business value for emissions information due to growing requests for such information among their corporate clients.

The business case is strong and growing: suppliers that do not measure, quantify, and manage their greenhouse-gas emissions will soon see their business move to competitors that can provide better information and clearer evidence of change.

At the same time, while disclosure is strong among global suppliers-67% of suppliers that responded to the information request report scope 1 and scope 2 emissions-these companies must build on this foundation of communication and begin taking meaningful actions to reduce their emissions.

Finally, the survey results indicate ways in which corporations can serve as a catalyst for these changes among their suppliers, working to engender sound carbon-management practices among their suppliers. While the opportunity is clear, the precise means of capturing these gains are not.

While 43% of CDP Supply Chain member companies have achieved reductions in their GHG emissions, only 28% of their suppliers have.

Some 39% of companies have realized monetary savings from their own emissions reductions activities and over a third (34.5%) have benefited from new revenue streams or financial savings as a result of their suppliers' carbon reduction activities. However, less than a quarter (24%) help their suppliers to quantify the return on their low-carbon investments.

The next step is to more effectively evaluate suppliers, improve performance through more effective procurement, and improve the tools and metrics used to quantify and monetize the gains from emissions reductions. Executed correctly, supply-chain engagement will not simply generate benefits for the environment but for the balance sheet as well.

The full report is available here.

Supply Chains in the 21st Century: Transparency, Standards & Responsible Sourcing

More than ever, organizations are integrating social and environmental considerations into their purchase decisions in order to address increasing costs, reduce risk factors, adapt to changing regulations and new industry standards, and align corporate values with business practices. At GLOBE 2012, taking place in Vancouver March 14-16, a distinguished panel of experts will discuss how organizations are considering product life cycles across the entire supply chain in order to plan, design, and implement sustainable procurement practices and policies that meet or exceed the evolving expectations for social and environmental performance, responsibility, and transparency.

Confirmed Participants: 

Coro Strandberg, Principal, Strandberg Consulting, Canada (Moderator)

Jim Hartzfeld, Managing Director, InterfaceRAISE, USA 

Jan Spencer, Senior Vice President of Sustainability, Procurement & Continuous Improvement, Kimberley-Clark Corp., USA 

Bob Willard, Sustainability Author and Speaker, Sustainability Advantage, Canada 

Get more information here