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Companies are increasingly recognizing climate risk in their supply chains, but investments in emissions reductions programs are going down.
Importantly, a clear link is established between stalling progress on emissions reductions within supply chains and the uncertain regulatory framework.
This finding is according to the research in the sixth annual Carbon Disclosure Project (CDP) report, which brings together responses from thousands of companies supplying CDP members.
The results offer a good resource for observing carbon emissions and the management of climate risks. It also shows how suppliers and their customers are collaborating to:
With 64 participating supply chain member companies, CDP provides a platform for these leading firms to collect business-critical information on climate policies from their supply chain.
In 2013, this meant information was gathered from 2,868 companies, including some of the world’s largest corporates, offering a better understanding of where companies stand on climate action and driving change on the supplier and purchaser fronts.
Accenture has participated in the CDP report for the past three years and analyzed emission reports from thousands of companies. Progress has been made, but challenges are all contributing to overall climate change concerns—including:
Key findings of this year’s report include:
Companies must assess the scope of the climate challenge Companies need to place climate change and sustainability at the heart of their strategy and some leading companies are beginning to reposition in this way. Many are finding that substantial emissions reductions and monetary savings are to be found in existing supply chains.
Collaboration along the supply chain is crucialCollaboration is at the very heart of supply chain sustainability and it yields results. For companies that engage with two or more suppliers, consumers and other partners are likely to see a financial return from their emission reduction investments and almost twice as likely to reduce emissions as those who don’t engage with their value chain.
Staff, suppliers and customers must be more effectively motivatedCompanies need to ensure they have the internal capacity to identify climate change risks and opportunities, and they need to better motivate their employees to deliver on their objectives.
Companies must take a wider view of supply chain sustainabilityCarbon and climate risks are linked to other sustainability issues such as water and resource scarcity. Companies can use these as levers to bear down on carbon emissions.
Engage in the policy processWith the current lack of regulatory progress, companies need to engage more with policymakers. According to our analysis, companies that do engage deliver better emissions reduction performance and reap higher financial returns from emission reduction efforts.
Accenture’s research shows the dynamics within supply chains is changing as it pertains to carbon emissions. Next generation digital technology has the potential to drive emission reductions across extended supply chains.
Pressures on resources and the expense of energy will help accelerate progress toward a more circular economy and companies will increasingly embrace principles of reuse, recycle, remanufacture, refurbish and repair.
While there is recognition of climate change as a real risk among the companies surveyed, their actions are not reflecting this fully. Companies expecting to reach their emission targets have risen from 28 percent in 2011 to 34 percent in 2013.
Meanwhile, investment is more worrying—with increases only forecast in utilities, financials and consumer discretionary sectors. Companies, faced with economic uncertainty and concerned with regulatory changes, are only focusing on the short term. While this focus may be understandable, companies have to be prepared to take a longer-term view to achieve the quantum of carbon reductions that will be necessary.
The report reveals that although companies recognize climate risks are on the rise, companies want to leverage their relationships with suppliers to realize opportunities and minimize climate- and water-related risks.
Whether companies are just starting on managing climate and other sustainability risks or have taken their first steps toward addressing supply chain sustainability, there are practical steps companies can take to manage climate and sustainability risks. Accenture recommends a three-step process:
Assess the scope of the climate challenge. Understand where emission reduction investments can be most profitable and make the greatest impact.
Collaborate to drive increased performance. Reduce risks through close ties with suppliers.
Motivate staff, suppliers and customers. Prioritize sustainability with staff and suppliers, and invest in formal employee engagement through incentives.
January 21, 2014
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