Reducing Risk and Driving Business Value—CDP Supply Chain Report 2012-13

The Carbon Disclosure Project (CDP) Supply Chain Program is designed to promote information sharing and innovation between CDP Supply Chain members—organizations that have begun to integrate carbon management strategy into their supply chains—and the companies that provide goods and services to them, as we transition to a low-carbon economy.

In 2012, the CDP conducted its fifth annual information request for member companies and their suppliers. Findings from the study show that growing percentages of respondents are making investments to reduce emissions and drive cost savings, though a notable capability gap exists between the best-performing CDP Supply Chain members and their suppliers.

Companies are also increasingly aware of the potential business value that can be created through more sustainable supply chains—from new products to premium pricing to improved brand value to better awareness of consumer trends.

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In 2012, the CDP conducted its fifth annual information request for member companies and their suppliers. Companies that responded said that they are more aware than ever of the considerable risks that climate change poses to their global supply chains. Growing percentages of respondents are making investments to reduce emissions and drive cost savings, though a notable capability gap exists between the best-performing CDP Supply Chain members and their suppliers.

In addition, companies are increasingly aware of the potential business value that can be created through more sustainable supply chains—from new products to premium pricing to improved brand value to better awareness of consumer trends.

For this study, the CDP information request was sent to more than 6,000 suppliers on behalf of 52 of the 54 Supply Chain members. Responses were received from 2,415 organizations, including 52 members. The findings are significant in that the members represent combined spending power of almost US$1 trillion.

Key findings of this year’s report include:

• Supply chain risks from climate change are greater than ever
  The business continuity risk to the global corporate supply chain posed by climate change is clear—70 percent of the respondents this year identify a current or future risk related to climate change—risks with a potential to significantly affect business or revenue.

• A persistent performance gap exists between CDP Supply Chain members and their suppliers
  This year’s questionnaire results affirm a persistent gap between CDP Supply Chain members and their suppliers when it comes to sustainable supply chain performance.

• Leading companies are investing and making a difference
  Compared with 2011 figures, we see an increase in the proportion of suppliers realizing benefits in areas of both monetary savings and emissions reductions. For example, the proportion of suppliers reporting emissions reductions has increased from 19 percent in 2011 to 29 percent in 2012.

• Supply chain sustainability is creating additional business value
  There is a stronger business case than ever before for supply chain sustainability. We see business value manifesting itself in the following ways—operational efficiency, emissions reductions, product and service innovation and premium pricing for low-carbon products. Better integration of climate change strategy with overall business strategy is another success factor.

• To achieve a leadership position in supply chain sustainability, companies should have strong capabilities in data, process and governance
  Making investments in sustainable supply chains is important, but it must also be accompanied by efforts to improve capabilities in several areas: the ability to manage data and measure progress; to embed sustainability in day-to-day processes; and to manage multiple parts of the organization more effectively.

Why is attention to supply chain sustainability good for business? The supply chain accounts for between 50 percent and 70 percent of both total expenses and greenhouse-gas emissions for most manufacturing companies. Supply chains can also be exceedingly fragile. As supply chains have been extended in response to globalization, they have become increasingly vulnerable to natural disasters, civil conflict and many other common risks.

Companies participating in this year’s CDP Supply Chain Program are deeply engaged with the risks that climate change poses to their global supply chains. These risks mean that supply chain professionals have a tremendous opportunity to help their organizations reduce greenhouse gas emissions and cut costs.

It is an exciting and a challenging time for supply chain practitioners. Recognition of their function’s importance has increased markedly in recent years. The supply chain is playing a more central role in coping with ongoing volatility and looming scarcity risks, while also helping the business as a whole to become more competitive.

Increasing numbers of companies have concerns about risks to their supply chains caused by climate change. Precipitation extremes, major weather events, water shortages and more are causing corporate executives to look to their supply chain function for answers. At the same time, companies are also increasingly aware of how much the supply chain function has to offer in terms of innovations that drive new, low-carbon products, sustainability-related services, better product and packaging design, and other developments that can increase revenues and/or command premium pricing.

The supply chain affects the broad footprint of a company; it has effects on the environment and on the performance of suppliers and other partners in the overall value chain. Supply chain innovators have an enormous opportunity to improve environmental sustainability on a global basis, while also increasing the value of their own companies.