Procurement departments need to work with suppliers to develop a better understanding of the risks climate change poses to their businesses, according to a global report.
The Carbon Disclosure Project’s (CDP) supply chain project – involving 34 big companies such as Cadbury, Colgate-Palmolive, Johnson & Johnson, Procter & Gamble, Unilever and Vodafone – found that 35 per cent of the 634 suppliers surveyed thought there was no physical risk to their organisation, with 34 per cent saying there was no regulatory risk and 29 per cent believing there was no general risk.
Of those suppliers that did identify risks, the most common regulatory fears were cap-and-trade schemes and energy carbon taxes, with extreme weather events and changing temperature and rainfall patterns the main physical risks. Consumer demand and resource scarcity were the most commonly cited general business risks.
“Risks posed to a company’s supply chain from the impacts of climate change include extreme weather events, water scarcity, regulation and associated cost volatility,” said Frances Way, head of supply chain at the CDP.
“With the current lack of awareness and preparedness on climate change risk, there is a clear requirement for greater collaboration with suppliers to create transparency and also encourage a willingness to improve.
“This can only be done through long-term relationships, where ideas are shared and solutions developed in partnership,” he added. “Collaboration is vital if organisations are to futureproof their business.”
Suppliers in Asia were the most likely to be aware of the threats from climate change, with 70 per cent identifying a general risk, 68 per cent a physical danger and 61 per cent regulatory risk.
North American suppliers and those from the rest of the world – largely Brazilian but also Australian – were the least likely to identify these dangers. Fifty-four per cent and 47 per cent of these groups respectively believed there was a regulatory risk, with just over half perceiving a physical threat or a general risk.
This attitude to risk is also reflected in the number of supplier organisations that have made climate change governance a board-level responsibility. This was the case in two-thirds of Asian suppliers and 60 per cent of European ones, compared to 47 per cent in North America and 34 per cent in the rest of the world.
The most common carbon emissions reduction programmes were renewable energy schemes, process/supply chain modifications and energy efficiency initiatives, the research found.
The CDP’s supply chain project aims to identify, and ultimately reduce, carbon emissions throughout companies’ supply chains.
“The main accomplishments achieved by participating were raising supplier awareness and driving the supplier initiatives of establishing long-term goals and strategy setting,” said David Walker, director of environmental sustainability at PepsiCo.
“Suppliers now realise that climate change performance is important to us.”
