Seventy percent of companies believe that climate change has the potential to negatively impact their revenue; but there is a gap between major multinational companies that belong to the Carbon Disclosure Project (CDP) and their suppliers, according to a new study.
The report “Reducing Risk and Driving Business Value,” published by the CDP and Accenture, is based on information from 2,415 companies, including 2,363 suppliers and 52 major purchasing organizations that are CDP Supply Chain program members. Those members, which include Dell, Coca-Cola and Walmart, represent a combined spending power of $1 trillion.
The research finds that suppliers are significantly less prepared than their clients in responding to climate change. Suppliers demonstrate a lower level of ambition to mitigate climate change risk, with just 38 percent setting emission reductions targets in comparison to 92 percent of purchasing companies. Similarly, at 27 percent, the percentage of suppliers investing in activities to reduce emissions is less than half that of CDP member companies (69 percent).
CDP members are more than twice as likely to accomplish year-on-year emissions reductions (63 percent versus 29 percent) and are better positioned to capitalize on the financial benefits of carbon management. While 73 percent of members are achieving monetary savings, such as reduced energy costs from emission reductions activities, only 29 percent of suppliers are enjoying such returns.
The CDP/Accenture survey found that extreme weather such as drought or floods is a catalyst for company action on climate change, with physical climate risk identified in the report as a greater driver of investment than climate policy. Of the 678 companies investing in emissions reduction initiatives, 73 percent say they feel that climate change presents a physical risk to their operations; while 13 percent identify regulation as a sole driver.
The 29 percent of suppliers that have reduced their emissions have saved some $13.7 billion as a result. This implies aggregate potential savings of all 2,363 suppliers could reach three times that figure if the remaining proportion of suppliers were to achieve reductions at that rate.
The report provides advice on how companies can use data, process and governance to create a more sustainable supply chain and capitalize on the correlations between climate risk, performance and accountability to realize financial benefit.
The CDP is an international non-profit, providing a global system for companies and cities to measure, disclose, manage and share carbon and water information. CDP Supply Chain member companies are: Accenture, Acer Inc., Amdocs Ltd., AT&T Inc., Banco Bradesco S/A, Bank of America, Braskem S/A, British Sky Broadcasting, BT Group, City of Denver, Colgate Palmolive Company, Dell Inc., Diageo Plc., Domtar Inc., EADS N.V., Eaton Corporation, Eletropaulo Metropolitana Eletricidade de São Paulo S/A, Elopak, Endesa, Eni SpA, FIBRIA Celulose, Ford Motor Company, Goldman Sachs Group,, Groupe Steria, Imperial Tobacco Group, Jaguar Land Rover Ltd, Johnson & Johnson, Johnson Controls, JT International SA, Juniper Networks, KAO Corporation, Kimberly-Clark Corporation, KPMG UK, L’Oreal, Marfrig Alimentos, MetLife, Inc., Microsoft Corporation, National Australia Bank, National Grid, Nestle, Nokia-Siemens Networks, PepsiCo, Philips Electronics N.V., Reckitt Benckiser, Rexam, S.C. Johnson & Son, Inc., SAB Miller, Starwood Hotels & Resorts Worldwide, Inc., Suzano Pulp and Paper, The Coca-Cola Company, Unilever, Vale, Vodafone Group, Walmart.