This is the first of a two part series looking at how supply chains can hinder (or help) sustainability performance. Part 1 looks at GHG Emissions. Part 2 covers Human Rights.
Part 1: GHG Emissions
Every company participates in the complex network of suppliers and customers, connected through a supply chain, in today’s globally interconnected world. Within that supply chain, your company participates both as a customer (procuring the equipment, materials, supplies, etc. that it needs) and a supplier (selling the goods and/or services it produces) no matter what business your company is in. And through these connections to customers and suppliers, your company shares with them the risks and the opportunities that exist within the network.
Each participant in the network has responsibilities to the others. Responsibility to perform to expectations and requirements. Responsibility to refrain from damaging a supply chain partner. When those responsibilities are not met, all participants in the chain can be damaged.
Consider, for example, the growing number of corporate commitments to reducing greenhouse gas (GHG) emissions. In the wake of the Paris Climate Change Agreement, companies across the globe are making ambitious commitments to measure, manage, and reduce their GHG emissions. More than 80% of the world’s 500 largest companies have now established emissions reduction targets. That’s great news, but meeting these targets will require the participation of their supply chain partners. The reality is that, for many companies, the vast majority of overall GHG emissions occur in the supply chain. In fact, in some sectors (service and retail, for example) GHG emissions from the supply chain can account for more than 80% of a company’s overall emissions.
And yet not enough is being done to view GHG targets and performance as a supply chain responsibility. In a previous post, we reported on the CDP’s 2016 Supply Chain Report which found that only a few of the suppliers (about 15%) to the world’s largest, most sustainability-engaged companies, have done much of anything to start measuring and managing their GHG emissions.
And the failure is not just on the supplier side. ClimateWorks, a global climate-focused NGO, analyzed 65 of the corporate commitments to GHG reduction. It found that only four companies — just 6 % — had emissions targets that covered their supply chains.
The failure to engage critical participants in the supply chain poses a real impediment to achieving emission reductions targets. But beyond avoiding failure, there are solid business reasons to create supply chain partnerships to tackle emissions. Participants can:
- Reduce supply chain risk
- Forge closer relationships with suppliers and customers
- Reduce costs through increased efficiencies
- Foster innovation in energy efficiency and conservation
Some leaders are starting to act by including supply chain emissions. For example, the Kellogg Company set a goal of reducing emissions across its entire chain by 50% by 2050. Similarly, HP has pledged to reduce its supply chain emissions by 20% by 2020. And Diageo, owner of such global drinks brands as Smirnoff, Guinness, and Jonnie Walker, has committed to reduce GHG emissions throughout its entire supply chain by 30% by 2020 (it is doing the same with water stewardship, also across its entire supply chain).
These companies, along with other leaders, recognize that carbon management in the supply chain is the next great step, and an absolute imperative, to reduce global GHG emissions.
As global supply networks grow ever more connected, it is likely that at some point in the near future, your company will be asked (or required) by a customer to measure and manage your emissions. You will be asked (or required) to set emissions targets and monitor and report your performance. To protect your own company’s performance, you need to be sure that your supply chain partners are also engaged and performing. With pressure to manage GHG emissions across supply chains certain to increase, companies taking steps now to move forward with a comprehensive, strategic plan that includes the supply chain will be positioned to seize opportunities for leadership and growth.
Need help getting started managing your GHG emissions? Not really! Take a tour of Sustrana’s technology to see how you can become a pro in no time and then start working on your supply chain.
Next up: Part 2, a look at human rights abuses that permeate many supply chains (and how you can protect your company from complicit).