The climate science is very clear: to avoid disastrous climate impacts we need to take action now, and it needs to be done at a mass scale. And with the Paris Agreement, almost all the world’s nations agree a net-zero economy is the direction of travel.
Yet there are still frustrations that governments are acting far too slowly to address environmental catastrophe. Subnational actors, such as large corporates, play an increasingly important role in driving climate action internationally. In many cases they are moving considerably faster and further than governments have required.
We’re seeing leadership from some of the biggest brands in the world setting science-based climate targets and committing to 100% renewable energy. Yet those leaders remain in the minority. The quiet majority of companies globally are not taking the steps needed.
To fix this, the best tool in the box is supplier engagement. After all, supply chain emissions are on average 5.5 times greater than a company’s direct emissions. For example, for a supermarket the environmental footprint of the goods they sell far outstrips keeping the lights and fridges on in the store.
Follow the money – reach beyond the usual suspects
The customer-supplier relationship presents an opportunity to reach companies that would not otherwise be engaged, driving environmental action at scale.
Corporate buyers can uniquely influence companies that no other stakeholder can – such as privately-owned companies, or small-to-medium sized firms that don’t have well-known brands to protect.
These companies have one key stakeholder – their customers. What’s important to their customer is important to them. Many, when engaged by buyers, haven’t even considered their environmental impacts, or in some cases don’t even understand the question.
One conversation a couple of years ago stands out in my mind. When asked about their greenhouse gas emissions, a medium sized enterprise with around 400 employees responded that “this doesn’t apply to my company, we don’t own any greenhouses”.
I expect that company would not be thinking about climate impacts if their customer hadn’t asked the question, but suddenly they have a reason to care about it. That’s the power of procurement.
Supplier engagement is also able to drive transparency and impact in markets where the investor relationship just doesn’t have the same traction.
For example, in China, 40 companies disclosed environmental data to their investors through CDP in 2018, while 400 did so for their customers. Similarly, in Latin America the number of companies disclosing through CDP for their customers is four times higher than for investors.
Scaling impact and transparency
Over 125 major corporates and public sector organisations use CDP to shine a light on their supply chains, including the likes of LEGO, Microsoft, L'Oréal and Japan’s Ministry of the Environment. And they’re engaging more companies than ever.
Back in 2008, 2,318 suppliers were asked to disclose by 19 CDP supply chain members and 634 responded.
Fresh 2019 data shows that this year saw over 13,000 requests going out from 125 members and almost 7,000 companies responded to their customers.
This has driven a fundamental shift in supplier behaviour, driving those companies to undertake environmental measurement and reporting for the first time. For climate data, the response rate has soared from 27% to 53% in that time.
Indeed, many members are expanding the number of suppliers they are engaging. Take Stanley Black and Decker for instance.
"Stanley Black and Decker has a bold commitment to cut our scope 3 greenhouse gas emissions by 35% by 2030 as part of our science-based target", says Deb Geyer, Corporate Responsibility Officer at Stanley Black and Decker: "To achieve this, we know we need to get more of our suppliers engaged, educated and taking action. That’s why our first step is to make sure that by 2020 our key suppliers – covering at least 80% of our procurement spend – are disclosing their climate impacts to us through CDP. That’s over 1,000 suppliers, many of which are based in China and Latin America."
We are also seeing members, such as Walmart, take the initiative to target suppliers that are not transparent enough about their environmental impact and push them to disclose this information through CDP:
Zach Freeze, Sr. Director, Strategic Initiatives - Sustainability at Walmart tells us: "We launched Project Gigaton in 2017 with a goal to avoid 1 billion metric tons of emissions from our supply chain, and we can’t achieve that alone. We see CDP disclosure as an important step toward taking action to reduce emissions, and we encourage our suppliers to disclose to CDP as part of their Project Gigaton journey. This year we conducted a campaign with a core group of suppliers to encourage them to disclose to CDP and Project Gigaton for the first time, and we’re excited to be seeing results."
Keep asking the questions – they drive change
We’re seeing more and more big buyers bringing conversations about environmental impact into their core procurement practices. A key component of this is getting procurement teams onboard and able to have conversations with suppliers that lay out expectations of disclosure and action.
Tying supplier performance to your own sustainability targets, and holding suppliers to account with clear environmental KPIs, is a powerful tool for cascading change through the value chain.
To hear directly from the members who have been championing this method of supplier engagement join our webinar Building a Supplier Engagement Strategy. We’ll be discussing challenges, solutions and successes with Accenture and The LEGO Group.
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 to make 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."