Saturday 17th Aug 2019 - Logistics & Supply Chain

Climate change threat to supply chains

Seventy per cent of companies believe that climate change has the potential to affect their revenue significantly, a risk which is intensified by a chasm between the sustainable business practices of multinational corporations and their suppliers, according to research published today by the Carbon Disclosure Project and Accenture.

The study “Reducing risk and driving business value” is based on information from 2,415 companies, including 2,363 suppliers and 52 major purchasing organisations who are CDP supply chain programme members.

Climate change presents near-term risks to businesses, according to the report. Fifty-one per cent of the risks that disclosing companies associate with drought or extreme rain are already having an adverse effect on company operations, or are expected to within five years, say those businesses.

Of the 678 companies investing in emissions reduction initiatives, three quarters (73 per cent) say they feel that climate change presents a physical risk to their operations; just 13 per cent identify regulation as a sole driver.

The study also found that suppliers are significantly less prepared than their clients in responding to climate change, potentially threatening customer relationships and heightening supply chain vulnerability. Suppliers demonstrate a lower level of ambition to mitigate climate change risk, with just 38 per cent setting emission reductions targets in comparison to 92 per cent of purchasing companies. Similarly, at 27 per cent, the percentage of suppliers investing in activities to reduce emissions is less than half that of CDP member companies (69 per cent).

CDP members are more likely to yield results from their environmentally sustainable business practices than suppliers, according to the survey. They are more than twice as likely to accomplish year-on-year emissions reductions (63 per cent vs 29 per cent) and are better positioned to capitalise on the financial benefits of carbon management. While 73 per cent of members are achieving monetary savings, such as reduced energy costs from emission reductions activities, only 29 per cent of suppliers are enjoying such returns.

Paul Simpson, the CDP’s chief executive officer says: “This research illuminates fragility in the global supply chain model. The marked difference in the sustainable actions of companies and their suppliers highlights a missed opportunity for suppliers to reduce energy costs and risks. The 61 per cent of suppliers that failed to provide information through CDP are an even greater concern since they and their clients are unable to make a full assessment of the substantial climate risks or opportunities they face.”

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