Wednesday, July 3, 2019

The Power of Procurement to Reduce Both Emissions and Costs

Leveraging action across supply chains is a critical part of efforts to address the climate crisis.  We are seeing tremendous growth in companies investing in sustainability and these corporations are helping to drive the transition to a low-carbon economy. Reports demonstrate that this is both an indispensable strategy to manage risk and an important part of cost cutting efforts. The financial and environmental benefits include energy and resource efficiency.

According to a 2019 CDP/Carbon Trust global supply chain report, over the last decade some of the world's biggest purchasers have leveraged their buying power and demanded transparency from their suppliers. In the process they have cut carbon emissions by 633 million metric tons and saved an average of almost $20 billion annually.

The report is titled Cascading Commitments: Driving Upstream Action Through Supply Chain Engagement is derived from data disclosed through CDP by 5,562 suppliers representing a $3.3 trillion annual procurement spend. This includes companies like Bank of America, Dell, Kellogg Company, Unilever, and Walmart.

The report makes the point that big corporations have tremendous power to drive meaningful change. Disclosure is the first step and the number of suppliers disclosing to CDP has increased from 634 businesses in 2008 to 5,545 in 2018. Such disclosures help firms to identify weaknesses and opportunities in areas like climate mitigation, water conservation, and deforestation.

The CDP survey indicates that sustainability is a mainstream phenomenon. Almost three quarters of companies are or may soon select suppliers based on environmental considerations. In 2008, just 4 percent of the 27 major purchasing organizations said they were deselecting suppliers based on environmental performance. Today that number is 43 percent and and additional 30 percent are considering doing so.

In the last ten years the relevance of environmental factors in the contracting process has grown from less than 10 percent to almost two thirds (63%). More than 9 out of 10 indicate that they will do so in the future.

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