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Are your suppliers serious about sustainability and risk management?

Around half of global suppliers are taking climate change seriously and are incorporating climate considerations and targets within their business strategy. Roughly half of the companies are also seeing savings from emissions reduction projects, suggesting that it pays to adopt a green corporate ethos. But more needs to be done to engage partners within the supply chain.

A survey of 4,300 supplier organisations around the world, who sell to 89 of the world’s biggest purchasers, representing $2.7 trillion of procurement spend, found that:

  • 52 per cent are integrating climate into business strategy;
  • 49 per cent are reporting savings from emissions reduction projects;
  • 47 per cent have set climate targets.

Need to engage supply chain partners

These figures show how sustainability, environmental and climate concerns are becomings central to business decisions in the supply chain. However, fewer companies – 36 per cent – are engaging value chain partners on emissions reduction, according to data from CDP, formerly the Carbon Disclosure Project. This is an area that could see more cooperation and alignment between companies in the supply chain. Put simply, you may have green, climate-related targets, but are you purchasing from companies who have the same environmental goals?

“In the past, companies would talk to their suppliers and then leave them to get on with it. But there has been a realisation that this is not good enough. Now there is a much more hands-on approach,” a supply chain sustainability expert at PwC, speaking to Raconteur magazine.

80% of emissions in your supply chain

Scrutinising the carbon emissions and environmental impact of suppliers should no longer be a secondary consideration for companies. According to Dexter Galvin, head of the supply chain programme at CDP, the supply chain represents four times an average company's direct emissions. In other words, the vast majority – about 80 per cent on average – of a company's greenhouse gas emissions come from its supply chain. Galvin says: “Far too little is being done to engage supply chains, but there is a huge opportunity from doing so.” 

Provenance

Other factors are also influencing the growing awareness that corporates need to monitor their supply chains more closely. Part of this comes from the need to monitor risks, including reputational risk, and ensure sustainability, as well as the growing consumer demand to understand the provenance of products.

The use of big data to track and analyse risks will help companies manage sustainability risk in the supply chain more effectively. Blockchain also has potential to be a game-changer in the supply chain, as it could form the basis of systems that can identify the provenance of individual items in the supply chain. Introducing stricter supplier requirements will also push green initiatives further down the supply chain, while industry initiatives to share resources and collaborate will also create supply chain efficiencies.

Read CDP's report in full here: Harnessing the power of purchasing for a sustainable future.


CTMfile take: From a treasury point of view, this is so important because, as the bastion of corporate risk management, treasurers should be looking deep into the corporate supply chain to see where the majority of risks lie. Sustainability should also be a prominent efficiency issue, as CDP's survey shows, almost half of suppliers reported savings from an emissions reduction scheme.


This item appears in the following sections:
Sustainable Green Treasury
Green Corporate Treasury Department
Sustainable Business Models
Sustainable Risk Management
SustainableTrade

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