Takeaways from the CDP Supply Chain Summit in Las Vegas.
For ten years now, buyers have been working with CDP to leverage their relationships with supplier to drive global environmental action.
As we look to the next 10 years of action, what has the last decade taught us? And where will we be in another 10 years?
At CDP’s recent Global Supply Chain Summit, we brought together 130 sustainable procurement professionals to discuss just that.
Lesson #1: Ambition is key
All the attendees agreed: climate change isn’t waiting for anyone. The Intergovernmental Panel on Climate Change (IPCC) is very clear. We need to take action, and we need to take action now.
Companies have a vital role to play in the fight against climate change – and the best way to have lasting impact is by setting targets that are aligned with climate change.
Gwen Migita, Chief Sustainability Officer of Caesars Entertainment, explained how purchasers can help set the tone for suppliers by setting ambitious science-based targets. “Our target is one way of demonstrating to our stakeholders that Caesars is committed to taking action in line with what is required to combat climate change. But we can’t do it alone. As part of our science-based target, we have established a goal that aims to have 60% of our suppliers, measured by spend, join us and institute science-based GHG reduction targets for their own operations by 2023.”
Secondly, companies attention must turn to how they will deliver on their targets, and one place to start is renewable energy.
Clean energy needs to be scaled up quickly to meet a 1.5 degree world, and companies need to lead the way on this. For many, investing in renewables and getting your supplier to do the same is a “quick win”.
And many companies are already leading the way. Take for example HP Inc. For suppliers in the company's sustainability scorecard program “reporting on renewable energy utilization is an expectation,” says the company’s Supply Chain Responsibility Program Manager James Riddle. “Not doing so will cause these suppliers to lose points on this assessment.”
Lesson #2: Risk assessment and scenario planning are needed
The old adage goes that you can’t manage what you don’t measure and risk assessments and scenario planning are vital for companies to truly understand the current and future threats environmental challenge pose to their business.
For Brazilian petrochemical Braskem no where is this more vital than when it comes to their water risks. “Suppliers are our pipeline, we can’t exist without them. If a lack of water quality or quantity stalls their production, it can severely impact us,” says Jorge Soto, Sustainable Development Director.
“Some suppliers don’t know where to start with water risks, which is why we share the tools and calculations we developed ourselves to help suppliers value water internally and estimate potential financial losses in the event of a drought. Collaborating with suppliers to evaluate and monetize their water usage provides them with foundation to limit their exposure to water risks, which secures our value chain. It also demonstrates the urgent call to action that is needed for businesses to improve their water stewardship.”
Lesson #3: Environmental principles need to become “business as usual” in purchasing practices
Beth Wytiaz, Global Environmental Operations Manager at Bank of America, summarized it best when she said: “We want to do business with suppliers that share our values."
While action taken at the supplier level is vital, the role of large purchasing organizations can’t be ignored.
As Sarah Smith, Senior Manager of Global Sustainability at Kellogg's, says, as a major purchaser it is the company's role to “help suppliers make the business case for why sustainability is important to their own leadership. So, when I’m talking to suppliers, I talk about sustainability, but I use the language and vocabulary that they’re familiar with.”
For Kellogg's, using language a company can engage with is much more effective, allowing “for greater understanding and buy-in and helping to promote accountability by focusing on how measuring and managing sustainability metrics can improve efficiency, reduce costs, and reduce risk for them and their customers.”
Lesson #4: Purchasers can help drive suppliers from disclosure to action
At CDP, the focus of our supply chain work allows companies to scale up engagement, particularly when they engage companies that have not previously analyzed their environmental impact and ask them to calculate and disclose data related to their impact for the first time.
For that reason, disclosure has to be the necessary first objective before companies ask their suppliers to take action. As Jessica Rosman, Vice President of Procurement at Caesars Entertainment, says, “there’s a lot of educating that we undertake with our suppliers. We often have to help them understand what a carbon footprint is.”
Once suppliers have calculated and disclosed their environmental footprint to CDP, they can work with us and their purchasers to draw insight from their data and ultimately take action. This approach has reaped rewards for companies such as Walmart. “After ten years of engaging our suppliers through CDP, it’s so exciting to see over 570 of our suppliers responding to our request to disclose, many going further to take action to reduce emissions,” says Zach Freeze, Senior Director of Sustainability at the company. “Walmart has announced Project Gigaton, a target to avoid one billion metric tons (a gigaton) of emissions from our global value chains by 2030. And to achieve this target, we need all our key strategic suppliers to take part and make a contribution.”
Lesson #5: Set global polices but take local conditions into account
For most companies, supplier engagement requires global participation, as their supply chains often stretch across many countries. Virginia Covo, the Global Director of Supply Chain Sustainability at Anheuser Busch InBev, explains how “setting a sustainability target on a corporate level is only step one. Cascading commitments is fundamental to sustainability. This means engaging one-on-one with strategic suppliers, listening to them, and motivating them to reduce emissions and potentially set targets as well.”
By cascading environmental commitments throughout multiple tiers of the supply chain, while being sensitive to local conditions, companies like AB InBev are leading the way.
Those five takeaways, I believe, can act as signposts, guiding us as we embark on the next ten years of our sustainability journey. It will be an exciting ten years as we go forward together. We’ll no doubt face challenges along the way, but the imperative for action is clear.
As Len DeCandia, Johnson & Johnson’s Chief Procurement Officer says: “Everyone has a role to play. No matter where you sit in the value chain, you can make a difference. As buyers we have the power and the responsibility making day to day decisions that improve our communities and minimize our impact on the environment. The time to act is now - we don’t want to lose momentum building a sustainable future.”