US companies lead the way in terms of “green” procurement, according to a new report from McKinsey and environmental disclosure platform CDP. Apple, Microsoft and Bank of America are among 58 corporate giants recognized as the world’s greenest buyers, 32% of which are US companies, the research shows. Besides doing their part to reduce emissions and lower environmental risks in their supply chain, what sets these companies apart? They’re making money: companies on the CDP leaderboard outperformed the market by 6% over four years, according to STOXX.
The Closing the Gap: Scaling Up Sustainable Supply Chain Practices report also shows that companies disclosing to CDP saved a collective $14 billion due to carbon emissions reduction activities.
While the number of companies focused on responsible procurement has soared, engagement on the supplier side is less prevalent. Just 23% of supplier respondents are in turn engaging with their own suppliers to reduce emissions, suggesting that many may be missing out on business opportunities and financial savings, the report states.
Smart Business Decisions
Procuring materials throughout the supply chain in a manner that addresses climate risk is simply a “better way of doing strategic business planning,” Dexter Galvin, Director of Corporates and Supply Chain at CDP, told Environmental Leader. “This starts with disclosure, by sending an annual information request out to their suppliers.”
The process of identifying and analyzing supply chain risks and opportunities helps companies ensure supply chain resilience. “They can assess where they are on a pathway to a well below 2-degree world and this drives better understanding of the business, competitor landscape, governance, procurement and decision-making,” Galvin told us. “Purchasing organizations are using disclosures to make judgements about how prepared their supply chain is for the low-carbon transition, and which suppliers may need support to help make this transition.”
The analysis, which looks at companies doing the most to reduce emissions and lower environmental risks in their supply chain, also found that:
- Greenhouse gas emissions in supply chains is, on average, four times that of company’s direct operations.
- Total emission reductions from over 4,800 suppliers in 2017 reaches 551 million metric tonnes of carbon dioxide.
- The number of companies forging ahead with tackling emissions in the supply chain has doubled in a year. In the report, CDP awarded 58 companies – out of a total of +3,300 – a place on its second annual Supplier Engagement leaderboard, double the 29 identified in 2017.
- Actionable and quantifiable emissions reduction targets are a reality.
—47% of responding suppliers have an emissions or renewable energy target;
—20% of responding suppliers indicated their emissions targets were science-based
—12% of responding suppliers report consuming renewable energy.
Companies Increase Focus on Water and Forests
More companies than ever before are looking at water security in their supply chains, leading to a 15% rise in suppliers disclosing water data to their customers through CDP in 2017. Nearly two-thirds (62%) of responding suppliers report a company-wide water target.
And organizations including Klabin, L’Oréal and McDonald’s are among the first to work with CDP to tackle deforestation in their supply chains.