Almost half of suppliers failed to respond to requests for information on climate risks, according to the latest survey by CDP.
Almost 8,000 companies supplying 75 multinationals were asked for data on their carbon emissions and climate risk strategies by the NGO. Only 51% of suppliers responded, meaning that the biggest companies have a substantial blindspot in terms of their supply chain emissions, CDP said in a report.
Analysis of information from suppliers that did provide information reveals a substantial risk from climate change, the report states. Almost three-quarters (72%) of respondents said they believe the issue poses risks that could significantly impact their operations, revenue or expenditure.
And nearly two-thirds (64%) of suppliers specifically identified climate regulation as a risk, with the most commonly cited consequences being increased costs from fuel, energy and carbon taxes.
However, despite a high perception of the risk, less than half (45%) of the participating suppliers have set a target to reduce their emissions, while just one third (34%) have lowered their GHGs in the past reporting year, CDP found.
The report, which was written with US-based sustainability organisation BSR, highlights ways in which companies can improve engagement with their supply chain. The recommendations include:
- introducing financial incentives for buyers for meeting procurement targets linked to suppliers’ carbon management;
- incorporating environmental key performance indicators from their CDP response into supplier performance reviews; and
- establishing capacity-building programmes to raise the level of understanding among suppliers of the relevance of environmental reporting.
CDP found that suppliers of 24 of its members that engage in these ways were more likely to demonstrate climate resilience than average suppliers, for example, by integrating climate into their business strategy (52% of suppliers with targets versus 45% of those without targets), and by developing emissions reduction initiatives (50% versus 42%).
Next year, CDP is going to publically rank companies according to how well they manage their supply chains for climate risk. ‘It is no longer acceptable for large corporations to avoid the wider climate impacts of their supply chains. CDP will aim to highlight the efforts of those that are managing this issue effectively and shine a light on those corporations that are not engaging with their suppliers on the issue,’ the report states.
CDP says it will consult with businesses, investors, consultants, and other NGOs on the methodology for this research. It is likely to focus on governance, supplier engagement, reporting, integrating data into procurement, and ambition.
Aron Cramer, president and CEO of BSR said: ‘Collaboration between companies and their suppliers is crucial when it comes to understanding climate risks and opportunities and is key to building inclusive, resilient and transparent global supply chains.’
