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British Rubber & Polyurethane Products Association

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Companies must green their supply chains or fail – report

Posted on 24 January 2013

The vast majority of companies believe that climate change could soon
significantly affect their revenue, and that it's their supply chains
which may be their Achilles heels.

70% of respondents to a questionnaire sent to almost 2,500 major
global companies, with a combined spending power of around $1 trillion,
by the Carbon Disclosure Project (CDP) and Accenture, identified climate
change as a near-term, not a distant risk.

They said that even though many of them have adopted sustainable
business practices, their suppliers have not, and this could jeopardise
their operations.

Extreme weather conditions, like drought or extreme rain, are already
responsible, or are expected to be within five years, for 51% of the
risks with which companies associate them, posing a threat to normal
business, they say.

Extreme weather is the most significant of all catalysts for company
action on climate change, presenting a greater driver of investment than
climate policy. It follows a year in which droughts, unusual rainfall,
and hurricanes have featured largely in headlines.

“Major climate events are already impacting today’s business bottom
lines. Insurance costs and availability are being dramatically affected
in many parts of the world," comments Rachel Kyte, vice president of
sustainable development at the World Bank. "Private companies cannot and
should not wait for international climate agreements.”

Of the 678 companies investing in emissions reduction initiatives,
three quarters (73%) said they feel that climate change presents a
physical risk to their operations; just 13% believe that regulation is
the sole driver.

The report also shows that
European and Asian companies are still outperforming companies in North
America in their response to climate change and the benefits they are
reaping from taking action.

CDP says that membership of its organisation has been responsible for
stimulating companies to respond to the threat of climate change over
the last two years.

Its analysis shows that leading companies are enjoying great
financial benefits from addressing supply chain sustainability. The 29%
of suppliers that have reduced their emissions have saved some $13.7bn
as a result.

“This report provides clear evidence that those who are most
transparent about their climate change risks are more likely to achieve
the greatest emissions reductions”, says Gary Hanifan, global
sustainability lead for supply chain, Accenture.

“And they are also more likely to enjoy monetary savings as a result
of their responses to climate change risks. But the return on investment
by the most proactive companies will not reach its full potential
unless those companies can encourage their suppliers to follow their
lead.”

Nevertheless there remains a performance gap between companies and
their suppliers, who are significantly less prepared than their clients
in responding to climate change, with just 38% setting emission
reductions targets in comparison to 92% of purchasing companies.

Similarly, just 27% of suppliers are investing in activities to reduce emissions, compared to 69% of CDP member companies.

While 73% of members are saving money from reducing their energy use
and emissions, only 29% of suppliers are reaping such benefits.

Paul Simpson, CDP’s chief executive officer says: “This research
illuminates fragility in the global supply chain model. The marked
difference in the sustainable actions of companies and their suppliers
highlights a missed opportunity for suppliers to reduce energy costs and
risks.

"The 61% of suppliers that failed to provide information through CDP
are an even greater concern since they and their clients are unable to
make a full assessment of the substantial climate risks or opportunities
they face.”

The free report provides advice on how companies can create a more
sustainable supply chain and capitalise on the correlations between
climate risk, performance and accountability to realize financial
benefit.

 

Credit: Link2Portal