At Davos two weeks ago, global leaders underscored the urgency of climate action, and environmental threats topped the World Economic Forum’s Global Risks Report 2018. As the world economy decarbonizes, global trade is projected to grow fourfold by 2050.
This makes corporate supply chains more important than ever.
Large corporates can have extensive supply chains that wrap around the globe. These companies have effectively outsourced their environmental impact to other companies – and often countries – in the value chain.
For the average company, the emissions in their supply chain are four times that of their direct emissions.
Not to mention the huge water footprint of manufacturing and extractive industries or impact on forests by logging companies, all sectors found in the majority of global supply chains.
This presents a powerful lever in the transition to a sustainable economy. To meet the Paris Agreement, we have to unlock the exponential power of our supply chains.
Huge opportunities for positive impact – but further action needed
Our new report, Closing the Gap, shows that suppliers are rising to this challenge, with 52% of responding companies integrating climate change into their business plans.
Together they reported saving 551 million metric tonnes of emissions. That’s more than Brazil’s total emissions in 2016.
And the actions they took helped them see collective savings of around $14 billion, showing that cutting emissions doesn’t have to cost the earth.
Yet, only 23% of suppliers are in turn working with their own suppliers. This must change.
Imagine what could be achieved if all companies cascaded climate action through the whole value chain?
Aligning supply chains with climate science is vital for business resilience
In 2017, global commitment to the Paris Agreement gathered pace.
Global supply chains are not only at risk from the physical impacts of climate change, water scarcity and deforestation, but from a plethora of new regulations that will punish those companies underperforming on environmental action.
Plus, consumers are increasingly looking to their brands to source their products sustainably. When companies are found to be connected to environmental destruction in their supply chain, they risk losing customers.
These regulatory, physical and reputational risks make supply chain sustainability crucial for business resilience. Companies need to align with a below 2-degree pathway as outlined in the Paris Agreement, or risk being rendered uncompetitive.
The best way for companies to get on track: science-based targets.
By setting a science-based emissions reduction target, companies will be fully aligning themselves with what the science says is necessary to hold global temperature rise to below 2 degrees Celsius.
Science-based targets require companies with significant supply chains to include a target to limit emissions within their supply chain. This means global brands have the power to set off a domino effect of climate action throughout the world – through their global web of suppliers.
The power of this approach was highlighted by Christiana Figueres at CDP’s supply chain report launch. In her keynote speech she issued a bold challenge to the almost 100 CDP supply chain program members:
Call three of your key suppliers and ask them to commit to setting a science-based target before the Global Climate Action summit in September 2018.
As Christiana Figueres highlighted, we only have two years to bend the emissions curve and keep on track for the Paris Agreement.
Supply chain engagement is the key to mainstreaming science-based targets throughout the world economy, and science-based targets are what we need to achieve the Paris Agreement.
By unlocking the exponential power of supply chains, a tipping point is within reach.