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Climate change and environmental degradation present material risks to companies, supply chains, and financial markets as weather pattern shifts and extreme weather events threaten to disrupt operations and impose significant costs. Central to addressing these risks, is ensuring resilient, net-zero and nature-positive supply chains.
With corporate supply chain emissions (scope 3) on average 26x greater than operational emissions (scopes 1 and 2), companies must cascade transparency and action down the supply chain to reduce environmental impacts and future-proof their businesses.
Download our report
Analyzing data from the 23,000+ companies that disclosed to CDP in 2023, this report explores the business imperative for companies to enhance the sustainability of their supply chains in response to climate change. The report also identifies buyer practices that are effective at driving climate action from suppliers, based on insights from more than 340 major corporate buyers engaging their suppliers through CDP’s Supply Chain Program.
Key findings
1. Measuring and managing supply chain emissions makes business sense.
Failure to tackle climate-related risks in supply chains costs nearly 3x more than the actions required to mitigate these risks. Disclosing companies estimate that upstream climate-related opportunities could result in US$165 billion in potential financial gains. Companies that invest in these initiatives stand to gain.
2. Scope 3 emissions remain a significant blind spot for too many companies.
Just 1 in 4 disclosing companies are factoring supply chain climate-related risks into their risk management processes. While more than half of disclosing companies report that they have initiatives to reduce their emissions, only a small leading 15% are targeting their value chains in the process. This leaves the vast majority of a company’s carbon footprint completely untouched.
3. Through CDP’s Supply Chain Program, leading corporate buyers are shining a light on the climate risks in their supply chains.
CDP Supply Chain members are demonstrating that engagement and collaboration lead to action. Suppliers disclosing through CDP reported that engagement from buyers led to 43 million tonnes in emissions reductions, more than the total annual emissions of Sweden.
4. Banks can support large buyers and their suppliers make the transition to net-zero by offering preferential financing terms, linked to environmental criteria.
These financial incentives are highly effective in driving emissions reductions at scale, as suppliers were 52% more likely to reduce their annual emissions when their buyers offered financial incentives when compared to if their buyers only provided training.
Become a CDP Supply Chain member
330+ CDP Supply Chain members, or purchasing organizations, are engaging over 47,000+ suppliers on environmental issues.
Join them now to measure and manage your business-critical upstream environmental impacts. Contact us to learn more about membership benefits, options and costs.