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Significant emissions reductions lacking across supply chains

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Companies have yet to post significant emissions reductions across their supply chains despite the opportunities those actions would mean for cost savings, according to the Carbon Disclosure Project and Accenture.

That disheartening conclusion from an environmental sustainability perspective was revealed in A New Era: Supplier Management in the Low-Carbon Economy, the CDP’s fourth annual global survey of the preparedness of company supply chains for climate change impacts.

CDP has collected data on corporate greenhouse-gas emissions for nearly a decade. The non-profit organization has 50 members, including one city, Denver.

There has been progress on the part of multinational companies in improving their own carbon performance the 2012 report, which covers 49 member companies and more than 1,800 of their suppliers, says. But there is a significant disparity between company emissions reductions and supplier reductions: 43 percent of responding companies say they have achieved year-on-year reductions while only 28 percent of suppliers have done so.

“The gulf between company emissions and those of their suppliers exists despite the fact that 39 percent of responding companies have realized monetary savings from their own emissions reductions activities and more than a third of responding companies have benefited from new revenue streams or financial savings as a result of their suppliers’ carbon reduction activities,” the report says.

Factors that enter into this gap for suppliers include extreme weather events, which disrupted about 30 percent of responding companies’ supply chains in the past year. Also, 50 percent of suppliers cited “certain or likely” exposure to increased operational costs as a direct result of climate change.

On a positive note, the report finds that businesses increasingly are changing their operating models. There’s a rise in the proportion of companies that have implemented climate change strategies that incorporate procurement (i.e. supplier) guidelines—90 percent, which is up from 74 percent in 2009 and 70 percent in 2010.

“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,” says Frances Way, program director for CDP.

CDP also found companies that say they will “deselect” suppliers that fail to meet formal environmental criteria within five years has more than doubled since 2009 to 39 percent in 2011.

One major problem identified in the report is that less than 25 percent of companies actually help their suppliers quantify the return on their low-carbon investments. Other areas that need improvement include supplier evaluation, more effective communications with suppliers and more stringent procurement criteria.

“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,” says Gary Hanifan, Accenture’s global sustainability lead for supply chain.

It adds up to a need for more effective collaboration and partnership frameworks between companies and suppliers. It may be a new era, but there is still a lot of work needed at the basic and vital levels of company operating and distribution networks.

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