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Half of Multinationals to Choose Suppliers Based on CO2 Emissions

A full half of multinational companies plan to select suppliers based on carbon performance, according to a study by Carbon Trust Advisory.

The research says that 29% of suppliers are likely to lose their places on green supply chains if they do not have adequate performance records on carbon. The research also finds that 58% of multinationals will in the future pay a premium for low carbon suppliers to reduce their overall corporate carbon footprints.

In the U.K., 56% of multinationals said that in the future they expect to drop suppliers based upon low carbon performance, compared to just 28% in the U.S.

The research consisted of 100 interviews carried out by Dynamic Markets. Respondents were from the senior manager level or above, working for companies with at least 1,000 employees and with operations, subsidiaries, or investments in more than two countries.

The respondents highlighted a number of challenges to reducing carbon in the supply chain, including:

  • difficulty in demonstrating the financial business case (34%)
  • sustainability considerations being trumped by cost considerations (32%)
  • difficulty in getting suppliers to act (29%)

The research found that 40% of multinationals are addressing their indirect carbon emissions, compared to 93% for direct emissions. Among the companies not addressing supply chain emissions, 42% said they would do so within the next year, and another 42% within the next two to three years.

BT says it was one of the first companies in the U.K. to introduce a climate change procurement standard, in March. The company spends about £12bn ($ ) a year with 16,700 suppliers.

Next month Marshalls Plc, a supplier of hard landscaping, will be hosting a United Nations Global Compact Supplier event to educate first-tier suppliers on its approach to environmental issues.

In October, the GHG Protocol, a coalition led by the World Resources Institute and the World Business Council for Sustainable Development, will unveil the Corporate Value Chain (scope 3) Standard and the Product Lifecycle Standard, in an effort to provide internationally agreed-upon approaches for companies to measure and report their supply chain and lifecycle emissions.

In the Carbon Trust report,  74% of U.K. respondents said shareholder pressure would be a key driver for them in tackling carbon emissions, compared to just 24% in the U.S.

Last week shareholder advocacy group Ceres called on investors to adopt stronger proxy voting guidelines for environmental and social issues. Ceres published what it called 75 leading examples of sustainability-focused proxy voting guidelines.

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2 thoughts on “Half of Multinationals to Choose Suppliers Based on CO2 Emissions

  1. This is a great issue that I hope shareholders latch onto soon. It is a major risk when a company is “disqualified” from contract talks due the carbon emissions associated with their business. Not only will low carbon suppliers garner more work, the report states they will earn a premium for their materials and services. The choice seems clear: clean up your operations and increase your wealth or hold onto an antiquated method of business and struggle to maintain your company’s future relevance.

  2. I applaud the GHG protocol, a step in the right direction. However, I look forward to the stats on companies that make the effort to become certified; and the multinationals that truly stand behind their word to choose carbon conscious companies over cost.

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