2017 CDP Supply Chain Report

Missing link: Harnessing the power of purchasing for a sustainable future Written on behalf of 89 organizations representing US$2.7 trillion of procurement spend CDP Supply Chain Report 2016 | 2017 Written by Contents 3 CDP’s supply chain member 25 CDP Supply Chain – Forests organizations Managing Deforestation in the Supply Chain 4 Foreword from Patricia Espinosa 26 Cascading change throughout the supply chain: Effective approaches towards sustainable 6 Executive summary and resilient supply chains 8 The Carbon Trust perspective 30 A framework approach for reducing carbon emissions and water impacts 10 Introduction: in the supply chain Engaging the supply chain is the key to unlocking a sustainable future 39 Global commentary Supply chains: A missing link for sustainability 12 About this report 40 Supplier Engagement Ratings 14 The state of supplier climate action: A stronger business case and a need for deeper buyer-supplier engagement 42 The Supplier Climate & Water A-List 24 Focus on China 47 Acknowledgements 2 CDP’s supply chain member organizations In 2016 the following 89 organizations engaged their suppliers through CDP. As CDP supply chain members they leveraged their US$2.7 trillion of procurement spend to request information from over 8,200 suppliers, on which the data in this report is based. Lead members Corporate members Bank of America Abbott Laboratories Jaguar Land Rover Ltd. Dell Inc. Accenture Johnson & Johnson Goldman Sachs Group Acer Inc. Johnson Controls Imperial Brands Alliance Data Systems KAO Corporation Juniper Networks, Inc. Amdocs Ltd. Kellogg Company JT International S/A Arcos Dourados KPMG UK L’Oréal AT&T Inc. Los Angeles County Microsoft Corporation Banco Bradesco S/A Metropolitan Transportation Northrop Grumman Corp Barclays Authority PepsiCo, Inc. BMW Group MetLife, Inc. Philip Morris International Braskem S/A METRO AG Royal Philips Bridgestone Corporation National Grid The Coca-Cola Company Bristol-Myers Squibb Nestlé The Lego Group British American Tobacco Nissan Motor Company Wal-Mart Stores, Inc. BT Group Nitto Denko Corporation Caesars Entertainment Nokia Group Caixa Econômica Federal Pirelli California Department of PricewaterhouseCoopers LLP General Services (DGS) S.C. Johnson & Son, Inc. CIA Ultragaz SABMiller Cisco Systems, Inc. Sky plc CNH Industrial NV Stanley Black & Decker, Inc. Colgate Palmolive Company Swisscom CSX Corporation Taisei Corporation Deutsche Telekom AG TD Bank Group Diageo plc Toyota Motor Corporation Eaton Corporation Unilever plc EcoRodovias United States Department Electronic Industry of the Navy Citizenship Coalition U.S. General Services Enagás Administration (GSA) Endesa Vodafone Group Fiat Chrysler Automobiles NV Volkswagen Group Ford Motor Company W.W. Grainger, Inc. Gas Natural Fenosa Wal Mart de Mexico General Motors Company World Resources Institute (WRI) Hewlett Packard Enterprise Santander Asset Management Climate change ICL Ourofino Saude Animal Water Intel Corporation SSE Action exchange Itaú Unibanco Holding S/A 3 Foreword from Patricia Espinosa Executive Secretary, United Nations Framework Convention on Climate Change Action on climate change has never been more necessary or more achievable. Year after year we see the hottest temperatures on record and the impact this has on the ecosystems that sustain us all. Against this backdrop, the Paris Agreement has entered into force. This decisive statement of intent, born of unprecedented global consensus, marks a truly meaningful step towards a low carbon future. The stage is set, the world is watching, now we must act. Effectively addressing climate change requires action By raising awareness of the positive aspects of across the supply chain. Millions of businesses supply chain action, it is possible to deliver tangible, By raising awareness of the operate within the complex supply networks of meaningful results for the bottom line and the planet. positive aspects of supply the world’s biggest purchasing organizations, and chain action, it is possible to greenhouse gas emissions within the supply chain are I applaud the public and private sector purchasing deliver tangible, meaningful often at least four times greater than those from direct organizations that are taking climate action to their results for the bottom line and operations. Amidst increasing climate policy, investor supply chains. It is encouraging to see the power of the planet. awareness and consumer engagement, competitive addressing climate change in supply chains. I also companies increasingly look to their supply chain to congratulate the companies highlighted by CDP as reduce negative environmental impacts from business leaders on climate action in the first-ever Supply Chain activity and realize more sustainable practices. Engagement Rating. Many innovations that reduce impacts are available. By shining a light on leading company practices, this CDP supply chain data is testament to the report provides insight into the evidence for action. resourcefulness of global suppliers to reduce their It also highlights the tools and practices needed to greenhouse gas emissions and water footprint while deliver positive outcomes by taking greater action benefitting the business, customers and communities. outside the direct operations of global companies. Savings of USD $12.4 billion in 2016 were reported by suppliers, proving that action on climate change and water is not only the right thing to do, but the smart thing to do. With the help and authority of the Supply Chain Member companies, CDP collected data from more than 4,300 suppliers around the world in 2016. Even though this is the largest data set ever gathered by the CDP supply chain program, many suppliers around the world still lack awareness of the risks and opportunities that climate and water issues pose to their business and customers. Only 22% of supplier organizations that responded to the 2016 CDP Supply Chain information request actively engage with their suppliers. It is not enough. 4 5 Executive summary The supply chain is the new frontier in environmental responsibility – an area rich with opportunity that remains mostly unexplored, where a number of pathfinders are 4:1 starting to show others the value that can be found. average ratio of indirect Large public and private sector organizations have The positive case for action is becoming increasingly supply chain emissions enormous purchasing power, often engaging with compelling, especially when it works in parallel with compared to direct thousands – or tens of thousands – of direct and improved operational efficiency. But despite the operational emissions indirect suppliers. By harnessing the power of their fact that 68% of respondents recognize positive procurement decisions it is possible for them to opportunities from action on climate change, the cascade their own commitments throughout the overwhelming majority of businesses appear to be supply chain. focusing their sustainability efforts exclusively on areas that are within their own direct control and not yet Among these large organizations there is now a engaging with key suppliers, customers and other broad recognition that within their vast, complex and stakeholders. sometimes opaque supply chains there are a number of sustainability challenges, resource risks, and Fewer than half of the suppliers in 2016 report cost efficiency opportunities. But despite this awareness, savings from emissions reduction activities, but those most have not been taking sufficient action to who do are realizing substantial savings – and these address them. investments will continue to pay back for years to come. These leading suppliers disclosed reductions However, this is starting to change. Today a growing equivalent to 434 million tonnes of carbon dioxide number of leading organizations, such as CDP’s from reduction projects, an amount greater than supply chain members, are developing an emerging the annual emissions of France.1 This resulted in a body of knowledge and best practice on how to reported US$12.4 billion in savings, more than double increase visibility and have a positive impact on their the figure from 2015. But it is likely that the full total supply chain. Sharing these effective strategies as including unreported savings significantly exceeds this widely as possible could be the missing link in creating sum. And this may only be the beginning. a sustainable, low carbon economy. Supplier disclosed However, supplier efforts are still insufficient to tackle reductions equivalent to Sustainability needs to move beyond organizational the scale of the challenge of climate change. Indeed, boundaries into the supply chain. only 34% of suppliers report an overall year-on-year decrease in their operational emissions, with a further 434 The science tells us that the world is facing very 36% having insufficient data to track progress. serious environmental challenges, which are already beginning to have a negative effect on human Unfortunately, only 22% of supplier respondents are million development and the economy. It also tells us that in turn engaging with their own suppliers to reduce the collective sum of action today leaves us well off carbon emissions. And just 4% have put supply chain tonnes the necessary trajectory to mitigate the most carbon emissions targets in place. This is a challenge dangerous impacts. because – although it varies significantly across sectors – on average an organization’s supply chain of CO2 with associated cost savings of Suppliers

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