Supply chains could unlock one gigatonne of emissions savings
Large corporate buyers with trillions in procurement spending could use leverage to green their suppliers’ energy.
From Walmart and Target to Dell and L’Oreal, a few dozen major corporate purchasers are proactively engaging their suppliers to switch to renewable energy sources.
With a combined procurement budget of more than $741bn, this group of 31 companies aims to use its power over the supply chain to force more progress in the battle against climate change.
Accenture, Anheuser-Busch InBev, BT Group and the Lego Group are among those calling for swifter action.
Changing the Chain, a report released on Monday, details how more than one billion metric tonnes of greenhouse gas emissions – equivalent to the total emissions of Mexico and Brazil together – would be saved if the suppliers for 125 multinational corporations boosted their use of renewables by 20 percent.
Between 2017 and 2018, total global CO2 emissions from energy increased from 36 to 37 gigatonnes. So the envisaged cut is approximately the same amount as that annual jump.
Supply-chain emissions are on average 5.5 times as high as an individual company’s own direct emissions from operations.
The report – produced by international nonprofit CDP for the United Nations climate conference in Spain – also says that suppliers believe almost one trillion dollars in revenue is at risk from climate impacts.
“As world leaders gather in Madrid this week, we stand at a critical crossroads,” said Sonya Bhonsle, the global director of supply chains at CDP. “With just four percent of suppliers reporting a renewable energy target, we’re not seeing that [high a] level of ambition yet.”
“We need to see all buyers engaging proactively with their suppliers to unlock this huge opportunity.”
‘Power of the purse’
The study analysed environmental data from nearly 7,000 supplier companies, collected on behalf of their major customers, such as LinkedIn and Samsung.
Bruno Sarda, head of CDP North America, told Al Jazeera that his research organisation began shifting 12 years ago from mostly using an “investor lens” for listed companies towards a perspective that takes into account the full supply chain.
He said that some of the largest disclosing companies – Walmart at the time being a leader – helped kick off the supply-chain programme.
In an effort to drive transparency, those corporations started to demand that the same disclosure platform and CDP standards be used for their suppliers.
“The power of the purse is stronger than the power of investors, many of whom are passive investors who buy indexes like the S&P 500,” Sarda said. “And they’re not going to not buy [your company’s stock] just because you don’t disclose or take climate risk seriously.”
He added that big companies have a “cost advantage” in negotiating procurement contracts and setting supplier evaluation criteria, “signalling that it’s important to act” on climate, water and deforestation issues.
“The environment is no longer an add-on,” said the CDP report, which covers firms representing $3.6 trillion in procurement spending.
‘Drive positive change’
Among the other heavy hitters included in the report are Banco do Brasil SA, Fujitsu Ltd, Unilever Plc and Volkswagen AG.
Cyril Pourrat, BT Group’s chief procurement officer, said that “building environmental action into our procurement process is key”.
“BT collects data from suppliers through CDP, and our onboarding process ensures our environmental expectations are communicated early,” he added.
“We have a target to be a net-zero carbon emissions (Scopes 1 and 2) business by 2045,” Pourrat said, explaining that the company’s supply-chain emissions are 68 percent of BT’s total end-to-end carbon emissions.
London-based BT, formerly known as British Telecom, has a target to reduce those overall emissions by 29 percent before 2030.
Consulting giant Accenture, based in Dublin, is another firm that “has the purchasing power to drive positive change on a global scale”, said Kai Nowosel, the company’s top procurement executive.
Nowosel said that sustainability is among Accenture’s key priorities, along with “respect for human rights, inclusion, diversity and social innovation”.
“Accenture has committed to using 100 percent renewable energy across our global portfolio by 2023,” he added, suggesting that similar ambition will be demanded “from our value chain”.
“We will actively seek partnerships and suppliers that are even more closely aligned to our corporate values so that, together, we will improve the way the world works and lives.”