Supply Chains Climate Risk Differs by Country

Supply Chains Climate Risk Differs by Country

Suppliers in U.S. Brazil, China and India are more vulnerable to climate risks than those in Europe and Japan, according to a new study by CDP and Accenture.

The CDP Supplier Climate Performance Leadership Index  reveals that:

  • Suppliers in France, the UK, Spain and Germany – in that order – are identified as the most sustainable. They have taken extensive measures despite comparatively low levels of exposure to climate risk. However, the report notes a year-on-year decline in the percentage of German suppliers implementing a number of key environmental performance indicators, such as having a climate risk management processes in place, which has dropped from 82% to 72%.
  • Japan is the only country with suppliers that are well-equipped to respond to high climate risks. They have some of the highest levels of emissions reporting, target setting and climate risk awareness.
  • Suppliers in China, Italy and United States are found to be vulnerable. An imbalance between high exposure to climate risk and the steps that suppliers have taken in response leaves room for improvement in these geographies. However the United States has been identified as a polarized market, given that the majority constituent of the index --  those suppliers identified as taking the most positive actions to address climate change – are headquartered in America.
  • Brazil, Canada and India must do more as suppliers there who participated in the research report fewer emission reduction initiatives than the global average.
  • A collaborative approach and profitable emissions reductions initiatives give China and India a competitive edge. Suppliers in China and India offer the best return on investment in terms of emissions reductions and monetary savings. Further, suppliers in both markets demonstrate the highest propensity to collaborate with partners across the value chain in order to reduce climate risk.

Climate and water data disclosed by suppliers to CDP, the international NGO formerly called Carbon Disclosure Project, were scored and evaluated to create a sustainability risk/response matrix. The new research, which also incorporates information from the United Nations’ World Risk Report, is based on data collected from 3,396 companies on behalf of 66 multinational purchasers that account for $1.3 trillion in procurement spend and include organizations such as Nissan Motor Co. Ltd., and Unilever plc.

The global picture establishes some encouraging signs of global progress. More organizations than ever are assessing and reporting to CDP on their environmental impacts. The 3,396 companies that took part in the program this year represent a substantial increase of more than 40% in the past three years.

"What is concerning is that, despite the increase in the number of companies assessing and reporting on their emissions, the data suggests that suppliers are making either marginal or no improvements in their development of sustainable supply chains capable of weathering climate risks and other natural disasters," says Gary Hanifan, managing director, Accenture Strategy.

However there is good news in that the quantity and percentage of suppliers setting emissions targets, which is a crucial component of climate risk management, shows a steady upward trend: nearly half (48%) of suppliers set targets last year, compared to 44% in 2013 and 39% in 2012.

There has also been an increase in the number of suppliers achieving emissions reductions since 2012, with the percentage rising from 34% to 40% in 2014. As suppliers become more advanced at carbon management, the number of companies realizing monetary savings from their actions to reduce emissions mirrors the rising trajectory, jumping from 29% in 2012 to 33% in 2014.

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