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North America Lags on Supplier Emission Cuts

North American suppliers are likely to fall behind in the race to capitalize on climate change opportunities, scoring a D average on emissions performance compared to the C average for European and Asian suppliers, according to research published today by the Carbon Disclosure Project and Accenture.

A New Era: Supplier Management in the Low-Carbon Economy, a report on 49 CDP Supply Chain member companies including L’Oréal, Philips and Walmart, as well as over 1,800 of their suppliers, also revealed that while 43 percent of multinational companies have achieved year-on-year emissions reductions, only 28 percent of their suppliers have done so. The gulf is surprising given that 34.5 percent of responding companies have benefited from new revenue streams or financial savings as a result of their suppliers’ carbon reduction activities – not far below the 39 percent that have realized savings from their own emissions reductions.

But less than a quarter (24 percent) of responding companies said they help their suppliers to quantify the return on their low-carbon investments – a method that the report identifies as a critical path to reducing supply chain emissions.

The CDP notes that all the percentages in the report refer to the proportion of companies able to provide information in response to the particular question, with the number of respondents ranging from 29 to 49.

This is the first year that CDP has scored suppliers on their carbon performance as well as disclosure. According to the scoring by FirstCarbon Solutions, Asian and European suppliers received an average score of 52 and 53 for disclosure but North American suppliers scored just 45 of a possible 100. Only those suppliers with a disclosure score of 50 or above were scored for performance.

The report does reveal, however, that leading businesses are changing their operating models. The proportion of responding companies with climate change strategies incorporating procurement guidelines rose to 90 percent in 2011, from 79 percent in 2010 and 74 percent in 2009, and 67 percent of responding companies include carbon management in procurement policy.

The proportion of responding companies that claim they will deselect suppliers who fail to meet formal environmental criteria within five years has more than doubled from 17 percent in 2009 to 39 percent in 2011, and 63 percent of responding companies are also training their procurement staff in supply chain carbon management, a dramatic rise from 26 percent in 2009 and 41 percent in 2010.

CDP program director Frances Way said the large shift in companies’ procurement models is encouraging, but since that trend is only just emerging, it has yet to reveal a substantial impact on suppliers’ emissions.

The proportion of responding companies that use incentives, such as positive external communications or preferential treatment, to reward suppliers with good carbon management has increased more than threefold in three years.

Half of responding companies have or are developing contractual obligations for suppliers to include information on their greenhouse gas  emissions management in response to requests for proposals.

According to the report, extreme weather events disrupted 30 percent of responding companies’ supply chains in the past year alone, and 53 percent of the suppliers say they face certain or likely exposure to increased operational costs as a direct result of climate change. Accenture global sustainability lead for supply chain Gary Hanifan says that companies able to create sustainable growth through climate-resilient and emissions-efficient supply chains will be better positioned to capture market opportunities in the long term.

CDP Supply Chain currently has 50 members, of which the majority are located in North America (41 percent) or Europe (35 percent). They are Accenture, Acer Inc., ASUSTeK Computer, AT&T Inc., Banco Bradesco, Bank of America, British Sky Broadcasting, BT Group, City of Denver, Coca-Cola Company, Colgate-Palmolive Company, ConAgra Foods, Dell, EADS, Eaton Corporation, Eletropaulo Metropolitana Eletricidade de São Paulo, Elopak, Endesa, ENEL, eni, FIBRIA Celulose, Ford Motor Company, Goldman Sachs Group, Imperial Tobacco Group, IBM, Jaguar Land Rover, Johnson & Johnson, Johnson Controls, Juniper Networks, KAO Corporation, Kraft Foods, L’Oreal, National Australia Bank, National Grid, Nestle, Nokia-Siemens Networks, Oil & Natural Gas, PepsiCo, Philips Electronics, Reckitt Benckiser, Rexam, Royal Mail Group, SABESP, Starwood Hotels & Resorts, Suzano Pulp and Paper, Tyco International, Unilever, VALE, Vodafone Group and Walmart.

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