Purchasing organizations have a huge opportunity to scale ambition levels in the run-up to COP26. Engaging, influencing and supporting suppliers to take steps to transition to a low-carbon economy is critical for scaling the global action needed. The next big steps companies can take include integrating climate-related issues and environmental impacts into procurement processes and, crucially, decision making.
COP26 priorities and the power of procurement
COP26, taking place in Glasgow from 1 –12 November 2021, is poised to be one of the most consequential climate events since the Paris Agreement negotiations in 2015. We need to bend the emissions projection curve back towards the 1.5°C trajectory; currently, we are heading for 3.7°C. As we add up all the commitments issued by governments in the run up to COP26, we are seeing that we’re falling short, gigatons short, of where we need to be. Therefore, the need for corporates to collectively step up is critical.
What can companies do? When looking at company emissions profiles, the 2020 CDP Supply Chain report found that supply chain emissions were, on average, 11.4 times higher than operational emissions.
Purchasing organizations have the power to set the agenda for suppliers to move towards 1.5°C-aligned targets and a net-zero future. Business in the Community (BITC) and CDP Supply Chain UK are excited to support UK companies to set an example and integrate emissions reduction into procurement processes.
BITC is the largest and longest established business-led membership organization in the UK dedicated to responsible business. BITC has set a goal to have 80% of their members commit to climate resilience plans with ambitious net-zero carbon targets. Their Challenge 2030 campaign calls on businesses to put the climate at the heart of building back responsibly after COVID-19, so that together we can make the climate crisis history. Through their work across Climate Action and Circular Economy, they are preparing their membership to meet these collective goals.
CDP’s Supply Chain Program was started in 2008 to help companies measure and manage environmental risk and impact in their supply chains. We now work with over 200 members to collect data and engage suppliers, including supporting member efforts to track and meet the Scope 3 portion of their Science-based Targets.
COP26 will be a crucial moment for international efforts to reduce emissions and send meaningful signals to state and non-state actors alike. So how should your company be using its purchasing power to support the aims of COP26?
Cascading Commitments
Ambitious reduction targets drive change. Through their Challenge 2030 initiative BITC is urging its membership to align with Race to Zero, and at CDP we encourage companies to join the Race to Zero flagship initiative, Business Ambition for 1.5 (BA 1.5).
Over 1,600 companies have committed to Science-based Targets (SBTs) to date – over 800 of which have approved SBTs in place. 660+ companies have doubled down on limiting the worst impacts of climate change and committed to BA 1.5. Net-zero or SBTs should include value chain emissions if they are above 40% of a company’s overall emissions. As the number of commitments grows, more and more companies are engaging their suppliers to measure and drastically reduce emissions.
Companies should also be directly engaging suppliers to set their own SBTs and to commit to material reductions in emissions, in line with 1.5°C of warming and net-zero by 2050. Targeted campaigns, such as the SME route to Science-based Targets launched last year, are fast becoming an accessible and impactful focus for engaging with suppliers.
Speeding up the Energy Transition
There’s no doubt that one of the biggest areas of mass change we need to see is a global energy transition. Moving away from fossil fuels and towards renewables is a change that all companies will need to make in the next couple of decades. The International Energy Agency’s flagship Roadmap to Net-Zero report released in May 2021 advised that to keep to a 1.5°C trajectory and arrive at net-zero by 2050, there should be no new investment in fossil fuel supply.
The COP26 Presidency is urging commitments to phase out coal power by 2030 and scale up clean energy. Transition plans must be put in place and purchasing organizations have a golden opportunity to ensure their suppliers are not left behind but are, in fact, leading the charge.
Encouraging uptake of renewables has a very solid business case. In markets where there are options available, switching to renewables is increasingly more cost effective. It is also fast becoming a stable, future-proof option for businesses, offering protection from fossil fuel price fluctuations.
By advocating for suppliers to draw a high percentage of their overall energy usage from renewable sources, purchasing organizations can support them to rapidly decrease operational emissions. This sends large-scale demand signals to energy markets to increase the provision of renewable sources and change national electricity grid mixes.
Smaller suppliers that do not have renewable market options available in their locations may struggle as self-generation is a significant investment. However, sparking conversations in markets without renewable options will still be invaluable in demonstrating demand, both to governments and non-state actors, inching us all even closer to where we need to be.
Championing the Race to Resilience
What were previously seen as competing priorities for companies are increasingly being revealed to be intrinsically linked. The Ellen McArthur Foundation has established that 45% of emissions globally are linked to material consumption, while Circle Economy’s Circularity Gap report identifies that up to 39% of emissions can be eliminated through circular economy approaches in key value chains.
Circular procurement reduces demand for carbon intensive materials and builds financial and environmental resilience, lowering dependence on virgin resources and protecting biodiversity. On a practical note, WEF identifies that circular economy approaches are the most cost-effective emissions reduction lever in supply chains, averaging <$10/ton CO2 saved.
For example, there is an undeniable link between climate change and global water security. Businesses and communities alike stand to suffer harshly from depleted water supply and quality, so engaging water-intensive or potential polluting suppliers to improve their water stewardship should be an integral part of building resilience.
Deforestation accounts for 15% of global greenhouse gas emissions with five million hectares of natural forest lost every year. Deforestation also constitutes a huge threat to natural resilience thresholds due to its effects on biodiversity. The primary driver of this destruction is the demand for forest-risk commodities – in particular cattle, soy, palm oil and timber.
Immediate action to halt deforestation in global value chains and put practices in place to regenerate land ecosystems will make a significant impact. This requires companies at the end of the value chain, those driving the demand for these commodities but far removed from their origins, to set clear expectations for sustainable sourcing and follow through.
Companies need to engage and educate their tier one suppliers towards cascading positive forests practices around traceability, certification and regeneration down further tiers of the supply chain. Ultimately, suppliers on each tier should demonstrate year-on-year progress towards time-bound zero deforestation targets. At present only 26% of suppliers reporting to CDP can trace forest risk commodities back to forest, plantation or farm.
Purchasing organizations committed to bringing better visibility to their risks and opportunities will ensure biodiversity is protected; an imperative which directly contributes to reducing global emission.
Lead with your Purchasing Power
The links between emissions, circularity, deforestation and water security are undeniable and require a joined-up approach centered on advocacy, innovation and data-driven tracking of supplier progress.
Over the next decade, integrating environmental factors and data into procurement will be central to kickstarting mass global change and bringing suppliers, large and small, along on the emissions reduction journey. For many of the priorities for COP26, purchasing organizations have significant influence that can increase the pace of change in their supply chains.
In the run up to COP26, BITC and CDP look forward to working with you as you take this next step by providing the guidance, thought leadership and data you need to act on your supply chain impact and make sustainable procurement the new business as usual. Our practical procurement guide will be available in September 2021.
Work with Us
BITC
Join and work with BITC to create and deliver ambitious climate action plans that deliver a just transition for people and nature. Plans need to increase:
- The scale of ambition in climate action plans, using Task Force on Climate-related Financial Disclosures (TCFD) to embed risks and opportunities into core strategy.
- The speed with which net-zero will be achieved, aligned with the United Nation’s Race to Zero campaign.
- The scope of influence of the business by developing and implementing a strategy in collaboration with diverse stakeholders.
CDP Supply Chain
CDP’s Supply Chain Program exists to help companies measure and manage environmental risks and impact in their supply chains. As a mission-based NGO we work with our members to collect data, build supplier capacity, and scale up action on Climate Change, Water Security and Deforestation. We are welcoming new members to join us for the 2022 disclosure cycle right up to February 28 2022. For a further conversation on how we work with our members please contact [email protected].