DISCLOSURE INSIGHT ACTION CDPTRANSPARENCY AFRICA REPORT TO TRANSFORMATION: BENCHMARKINGA CHAIN REACTION PROGRESS TOWARDS CLIMATECDP Global SAFE Supply CITIES, Chain STATES, Report AND REGIONS2020 MARCH 2020 FEBRUARY 2021 With the kind support of CDP GLOBAL SUPPLY CHAIN REPORT 2020 2 CONTENTS Foreword 03 Executive summary 04 About this report 06 Risks in the supply chain 09 Climate: Encouraging trends, insufficient action 12 Forests: Supply chains without chainsaws 17 Water: Trickling improvements but a wave of 22 change is needed Looking ahead 25 Appendix 27 Breakdown of risks by sector and geography CDP Supplier Engagement Leaderboard Important notice publication without obtaining specific professional advice. directors, officers and / or employees, may have a position To the extent permitted by law, CDP does not accept or in the securities of the companies discussed herein. 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Guest commentaries where included in this report CDP Worldwide, a registered charity number 1122330 and based on responses to the CDP 2020 information request. reflect the views of their respective authors; their inclusion a company limited by guarantee, registered in England No representation or warranty (express or implied) is is not an endorsement of them. number 05013650. given by CDP as to the accuracy or completeness of the CDP, their affiliated member firms or companies, or their information and opinions contained in this report. You © 2021 CDP. All rights reserved. respective shareholders, members, partners, principals, should not act upon the information contained in this CDP GLOBAL SUPPLY CHAIN REPORT 2020 3 FOREWORD made climate a focus of everything can go it alone -- government, we do: how we run our data centers, communities, business and build our offices and products and individuals all must do their part. how we work with our supply chain. For example, Renewable Energy We have been carbon neutral since Buyers Alliance (REBA) and the 2007, and in 2019 we matched 100% RE100 initiative help us work with of our electricity consumption with hundreds of other businesses and renewable energy for the third year in non-profit organizations to advocate a row. for renewable power. These efforts align with our efforts toward greening However, we know that minimizing energy grids worldwide, such as our own footprint is insufficient to our commitment to add 5GW of address a problem of this magnitude. clean energy in key manufacturing Our supply chain is part of our strategy regions through renewable energy for comprehensive climate action. As investments. just two examples of our supply chain Climate change is a constant work; last year all of the new Pixel and Finally, we must have a clear Nest products were designed with understanding of how we can threat to the global economy recycled material, and today shipping influence our partners and and humanity more broadly. of Google hardware to and from our stakeholders to push their climate Business must do our part to direct customers is carbon neutral. work further. At Alphabet we are committed to driving change through address the problem in our own Although we are still learning and our work with suppliers, and need our operations and in the way we adapting, we believe lessons from suppliers’ ambition to match our own. work with our supply chains. past crises, most recently the To nudge that along, we have recently pandemic, can provide direction as That is the focus we need to announced a plan to develop an open- we take fast action on climate change. create a better future. source collaborative platform to drive Specifically, data-driven solutions, down the cost of renewable energy, collective action, and stakeholder making it accessible to more suppliers Ruth Porat engagement will be critical. Chief Financial Officer and companies. First, we should build consensus Alphabet We are committed to going even around solutions grounded in data. further. Looking forward, we aim to Drilling down on data is one of operate on 24/7 carbon-free energy 2020 brought us the unprecedented our best tools, and enables us to by 2030, and help one billion people global crisis of the COVID-19 accurately gauge the magnitude of the live more sustainably through our pandemic. The tragedy and challenge problem. CDP Supply Chain is a core products. We will also continue rolling of COVID has been layered on top part of our efforts at Alphabet to build out technology to industry partners to of the crisis that we recognize as data-driven solutions to understand drive climate action at scale. climate change. Both threaten the our total carbon footprint. With CDP, global economy and lives worldwide, we can measure and influence how There is so much more to be done, both demand strong action from the our suppliers integrate climate change of course. We must look outside business community. We have seen into their operations. In 2020, 96% of the edges of our own businesses. the leadership role businesses have our surveyed suppliers reported their We need our supply chain partners, taken in the pandemic response. carbon footprint, and 75% shared and of course, they need us, and our Business has increasingly come their targets to reduce it. This visibility climate priorities can and should be to focus on the actions needed to allows us to better select, support, part of their climate priorities. The address climate change, both through and partner with our suppliers on their world is out of time on this topic, and individual corporate operations and climate-related targets. this simple focus and prioritization those in their supply chains. is essential. We must act now if Second, COVID has proven that we are going to avert the worst At Alphabet, we take our climate collective action is critical to solving consequences of climate change. obligations seriously, and have long urgent, global challenges. No group CDP GLOBAL SUPPLY CHAIN REPORT 2020 4 EXECUTIVE SUMMARY Response rate of suppliers: To understand the environmental Companies must engage their impact of a company’s economic supply chains and address activity, it is not enough to look at environmental risk to remain its direct emissions and risks. The competitive and resilient entire value chain must be engaged to evaluate and improve its performance. 52% This report explores the state of environmental risks in supply chains Climate and what approaches businesses are US$1.26 tn taking to mitigate them. Total financial impact reported by Data is drawn from over 8,000 suppliers due to environmental risks companies at all stages of the value (climate change, deforestation and chain who disclosed through CDP in water insecurity) expected in the 57% 2020. These companies responded next five years. Forests to requests for transparency from 154 major buyers who are members of the CDP Supply Chain program. Together these buyers spend US $4.3 trillion in procurement annually and ask suppliers to provide data via 59% CDP’s disclosure platform to help US$120 bn them understand and address the A subset of the environmental Water environmental impacts and risks of risks will lead to direct costs of their value chain. US$120 billion within five years which are likely to be passed up the chain to buyers. CDP GLOBAL SUPPLY CHAIN REPORT 2020 5 Suppliers are cutting their own emissions, Percentage of suppliers but must improve engagement in their own driving upstream change supply chains. in their own supply chain 619 million 7% 37% In aggregate, suppliers undertook of the companies who completed the Climate activities reducing GHG emissions CDP climate questionnaire made it by 619 million metric tons and saved onto the CDP Supplier Engagement US$33.7 billion in the process. Rating Leaderboard. The scale of impact in the supply 26% chain is increasingly being Forests recognized by suppliers 11.4x higher 1,000+ 18% Supply chain emissions are on Setting targets to reduce emissions Water average 11.4 times higher than throughout the value chain (Scope 3) operational emissions, more than is becoming a new business norm. double previous estimate, due to This is only achievable with strong more comprehensive emissions supply chain engagement. 1,000+ accounting. companies have set or committed to set science-based targets, which usually require Scope 3 targets. CDP GLOBAL SUPPLY CHAIN REPORT 2020 6 ABOUT THIS REPORT This report has been written by CDP, time. In total 15,637 companies were using CDP’s Supply Chain program invited to participate, with over 8,098 data submissions to evaluate the unique responses received.