Global trade is projected to grow fourfold by 2050, making corporate supply chains more important than ever – but companies need to look to their supply chain to tackle the real sources of carbon emissions and environmental impact, according to this article by Dexter Galvin, the CDP's global director of corporations and supply chains. It points out that emissions directly from a company's operations (e.g., fuel and energy consumption from manufacturing) are only a small part of the picture. Four times more emissions can come from elsewhere in the supply chain – and with supply chains set to become more complex as global trade increases in the next 30 years, it means companies can no longer turn a blind eye to the environmental impact (including through water usage, deforestation) of their suppliers. All too often, what happens in other companies, or even other countries, is not considered as part of a company's sustainability footprint. Of course these factors should be considered from an environmental viewpoint but also from a risk management perspective.
Cascading climate action
While the CDP's latest report, Closing the Gap, brings the encouraging news that more than half – 52 per cent – of the companies surveyed are integrating climate change into their business plans, fewer are actively extending sustainability policies to their suppliers. Galvin writes: “Yet, only 23% of suppliers are in turn working with their own suppliers. This must change. Imagine what could be achieved if all companies cascaded climate action through the whole value chain?”
He adds science-based targets are the best way for companies to tackle this issue: “By setting a science-based emissions reduction target, companies will be fully aligning themselves with what the science says is necessary to hold global temperature rise to below 2 degrees Celsius.”
4 steps to get a science-based target
Getting a science-based target for your company is achievable – the Science Based Targets (SBT) initiative helps companies do just that by setting out four stages to setting clear corporate targets for sustainability:
- Sign a commitment letter indicating that your company will work to set a science-based emission reduction target and submit the letter to the Science Based Targets (SBT) initiative. This will register you for the initiative and get your targets verified by the programme.
- Once you've submitted the letter to register your intent, you have 24 months to develop the target, with support from the initiative.
- Then submit the target to the SBT initiative, which will then verify the target against its criteria and give it final approval or suggest amendments.
- Following approval, the target can be publicly announced and your company can use the SBT logo in its communications and will be featured on the SBT website.
Will you take the supplier challenge?
What might be trickier is what Galvin alludes to as “cascaded climate action through the whole value chain” - in other words, can you persuade your suppliers to follow you in reducing carbon emissions and other harmful environmental impacts? This is the challenge laid down by Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change, at the launch of CDP's report. She challenged companies to extend the use of science-based goals to their supply chain: “Call three of your key suppliers and ask them to commit to setting a science-based target before the Global Climate Action summit in September 2018.”
52% of companies integrate climate risks into business strategy
There is increasing awareness among organisations of the risks and opportunities associated with climate change, with a fifth setting science-based emissions targets
EU sets out roadmap to a green, clean economy
The European Commission's High-Level Expert Group on Sustainable Finance has published its recommendations for a financial system that supports sustainable investment
Big-picture risk report shows environmental disruption more likely
2017 was the warmest year without El Niño on the historical record so it's no surprise that the 2018 WEF report on business risks found that environmental risks are more prominent than in the past