Suppliers that successfully establish their environmental impacts through accurate measurement are proven to be equipped to set ambitious, timebound goals to reduce them. It is therefore concerning that in 2021 – two years into the Decade of Action – only 2.5% of reporting suppliers have approved science-based targets. CDP’s latest supply chain report finds that more than half of suppliers (56%) did not have any climate targets at all. Additionally, only 28% of companies reported having a low-carbon transition plan in place to meet their climate goals.
The number of suppliers setting any climate targets increased on average 5% per year [1]. By extrapolating this trend to the 56% of suppliers that do not have any climate targets, CDP found that 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.
Corporate ambition is also lacking when it comes to cascading measurement and action down the supply chain. Companies are insufficiently tracking Scope 3 emissions, despite value chain emissions being more than 11 times greater than emissions resulting from their own operations. Only 38% of disclosing companies engage with their suppliers on climate change, and this drops even further to 16% for water security. Just 47% of downstream companies – traders, manufacturers and retailers – are working beyond their first-tier suppliers to manage and mitigate deforestation risks.
CDP’s new supply chain report, Engaging the chain: driving speed and scale, analyzes environmental data disclosed through CDP in 2021 from 11,400+ corporate suppliers. The report, written in collaboration with Boston Consulting Group (BCG), 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 environmental crisis.
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.”
However, hope is not all lost. There is progress being made when it comes to reporting and taking action on direct environmental impacts. In 2021, 71% of suppliers reported their Scope 1 and 2 emissions in 2021. Suppliers also reported reducing their emissions by 1.8 billion tCO2e (equivalent to emissions from 454 coal power plants running for a year [2]), resulting in savings of US$29 billion. 60% of suppliers disclosed water consumption data and 68% disclosed production and consumption data for palm oil.
Nicolas Hieronimus, CEO of L’Oréal, said, “Global warming and environmental changes have the potential to permanently degrade human and natural habitats and create a more unstable world. We cannot address these challenges alone. At L’Oréal, alongside our own sustainable commitments, we are committed to actively supporting our business partners to improve their social and environmental performance and have made participation to CDP mandatory for all our strategic suppliers. We want to inspire others to act, and be a catalyst of change in the beauty sector and beyond.”
In 2021, over 200 CDP Supply Chain members worldwide – major buyers representing US$5.5 trillion in procurement spend – requested 23,487 suppliers to disclose (a 50% increase compared to 2020), resulting in a record 11,400 responses. These suppliers reported that engagement from CDP Supply Chain members drove emissions reduction initiatives totaling 231 million tCO2e.
Helping companies to manage supply chain sustainability and product lifecycles
Recognizing that companies may need additional support getting started with measurement and reporting, CDP’s new report includes a ‘Sustainable Procurement Pathway’ tool, designed to help companies go beyond their first-tier suppliers to manage and mitigate environmental risks inherent within their supply chain. The tool offers a flexible and scalable approach to kickstart the process of leveraging influence from the top down to speed up the rate of change.
There is also a growing trend of buyers wanting to understand their Scope 3 impacts at a product level during the procurement process, but suppliers are currently struggling to provide that information; only 2% of suppliers reported any product-level lifecycle footprints to CDP in 2021. CDP is working with BCG to address this – the partnership will see the launch of the CO2 AI Product Ecosystem, a new product lifecycle platform that will enable companies to effectively collaborate and securely share their product-level sustainability data, driving transparency at scale [3].
[1] Suppliers that reported through CDP for the first time three years ago and reported for three consecutive years.