New research from CDP paints a concerning picture on the lack of action on climate through companies’ supply chains. The findings show that whilst the number of corporate suppliers setting any climate targets increased on average 5% per year, 56% of suppliers do not have any climate targets. Additionally, CDP found that only 28% of companies reported having a low-carbon transition plan in place to meet their climate goals.
Its new supply chain report – Engaging the chain: driving speed and scale analyses environmental data disclosed through CDP in 2021 from 11,400+ corporate suppliers. It highlights the urgent need for companies to cascade measurement and action down the entire supply chain, to achieve the speed and scale required to avert an environmental crisis.
Lack of supply chain engagement
The report says that two years into the ‘Decade of Action’, at the current pace, at least another decade is required to ensure that all suppliers reporting in 2021 set any climate target, let alone a science-based target. At present, only 38% of disclosing companies engage with their suppliers on climate change, and just 47% of downstream companies – traders, manufacturers and retailers – are working beyond their first-tier suppliers to manage and mitigate deforestation risks.
Whilst progress is being made on direct environmental impacts with 71% of suppliers reporting reductions in their Scope 1 emissions and 55% reporting Scope 2 emissions, CDP believes companies are insufficiently tracking Scope 3 emissions. Despite downstream emissions being 11.4 times more than Scope 1 and 2 emissions combined, only 20% of suppliers reported Scope 3 emissions from purchased goods and services, and 62% aren’t engaging suppliers on the topic.
Whilst there is a growing trend of buyers wanting to understand their Scope 3 impacts at a product level during the procurement process, suppliers are struggling to provide that information with only 2% of suppliers reporting any product-level lifecycle footprints in 2021.
Sonya Bhonsle, Global Head of Value Chains & Regional Director Corporations at CDP, said: “Our data shows that corporate environmental ambition is still far from being ambitious enough. Alongside that, companies have blinkers on when it comes to assessing their indirect impacts and engaging with suppliers to reduce them. Companies must act urgently to cascade action and manage environmental impacts throughout their supply chains to scale the level of action to secure a 1.5°C future. This is essential for the transition towards a sustainable net-zero, deforestation-free and water-secure economy.”