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Global firms using ‘buying clout’ to boost sustainability

The world’s largest corporations used their buying power to drive down carbon emissions in their supply chains by 434 million tonnes in 2016, reflecting a growing trend in supply chain management.

The world’s largest corporations used their buying power to drive down carbon emissions in their supply chains by 434 million tonnes in 2016, reflecting a growing trend in supply chain management.

The figure - more than the annual emissions of France - is revealed in a new report from CDP, an international not-for-profit that measures the environmental performance of thousands of large companies.

More than 4,300 suppliers disclosed climate and water-related data to CDP at the request of 89 leading multinational companies, including BMW, Johnson & Johnson, Microsoft and Walmart. 

‘Next frontier’

With supply chains responsible for on average four times a company’s direct emissions, they are a critical focus area for global corporations seeking to demonstrate environmental leadership in the face of mounting investor and consumer pressure.

The number of companies requesting data from their suppliers in 2016 was 20 per cent higher than in 2015. 

There has also been a vast increase in suppliers responding since CDP’s first supply chain programme in 2008, when just 634 companies disclosed climate-related information.

Tom Delay, chief executive of the Carbon Trust, described the growing trend as “the next frontier in sustainability”.

“Managing the environmental impact of your own operations is expected behaviour. But the greatest opportunities for reductions are typically outside of direct operational control, in the supply chain”, he said.

Competitive advantage

CDP’s data suggests that companies in supply chains can benefit greatly by measuring, disclosing and cutting environmental impacts.

The 89 companies now on CDP’s supply chain programme have a combined procurement spend of $2.7 trillion - equivalent to the entire UK economy in 2016. 

However, around half of suppliers did not respond to their customers’ requests for data in 2016 and do not have their own emissions targets in place - giving those that do a competitive advantage. 

There is also a positive benefit to a company’s bottom line. The data shows that suppliers with emissions reduction projects disclosed cost savings of $12.4 billion in 2016, double what was reported in 2015.

Almost half of the top 100 projects by savings were related to energy efficiency and most had a payback period of three years or less. 

Leading the pack

For the first time, CDP has now compiled a supplier engagement leader board to single out the companies most actively engaging with their suppliers on sustainability.

The 29 companies that made the leader board cover a range of sectors, including car manufacturing, food and drink, technology and financial. 

For example, tech giant Philips targets ‘risk suppliers’ for participation in its sustainability programmes and has developed a tool to help its suppliers to quantify their carbon emissions.