Suppliers Trail Multinationals in Sustainability

by | Jan 22, 2013

A persistent gap exists between the sustainable business practices of multinational corporations and their suppliers, highlighting a lack of preparation to respond to climate change and the near-term risks it presents to businesses, according to research published by the Carbon Disclosure Project and Accenture.

The study “Reducing Risk and Driving Business Value,” which breaks down the results from the CDP’s survey of 52 major purchasing companies and more than 2,363 of their suppliers around the world, found 70 percent of companies believe that climate change has the potential to affect their revenue significantly. The purchasing companies, who are CDP Supply Chain program members, include Accenture, Bank of America, Coca-Cola Co., Dell, Ford Motor Co., Juniper Networks, L’Oreal, Microsoft, PepsiCo and Walmart.

More than half (51 percent) of the drought and precipitation-related supply chain risks identified by responding companies are already affecting respondents’ operations or are expected to have an effect within the next five years. For instance, an incessant drought has plagued Texas, the southern Plain states and the Midwest, ruining crops and driving up feed costs for meat producers and, in turn, consumers. Cargill has just announced it is closing one of its beef processing plants because the drought has tightened cattle supplies.

The survey found suppliers are significantly less prepared than their multinational clients in responding to climate change, potentially threatening customer relationships and heightening supply chain vulnerability. Just 35 percent of suppliers have set emissions reductions targets, compared to 92 percent of purchasing companies, according to the survey.

The same disparity exists when it comes to taking action, with 27 percent of suppliers investing in activities to reduce emissions, compared to 69 percent of multinational purchasing companies.

CDP member companies also are more likely to yield results from their sustainable business practices, with 63 percent reporting year-on-year emissions reductions, compared to 29 percent of suppliers indicating such an achievement.

Of the 678 suppliers and purchasing companies investing in emissions reduction initiatives, three quarters (73 percent) say they feel that climate change presents a physical risk to their operations.

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