Despite some shafts of light, this year’s CDP data shows that change is not happening at the scale required; companies need to engage their suppliers now to avoid falling behind.
Companies are not only falling behind in tracking supply chain emissions, but are also running the risk of entirely missing new mandatory regulations for reducing impacts on nature in supplier chains, according to new data provided this month by CDP, the world's most comprehensive voluntary environmental disclosure platform.
With only 41% of businesses reporting on any category of supply chain emissions despite their impact significantly outsizing that of scopes 1 and 2 for most companies (11.4x), CDP's new 2022 supply chain study, Scoping out: Tracking nature across the supply chain, indicates that environmental leadership is not happening at the size and scope necessary to keep warming below catastrophic levels.
It’s not just the environment that's at risk from inaction. Mandatory public disclosures of scope 3 emissions are likely to be required imminently from all large companies in the EU from the European Sustainability Reporting Standards or ESRS (which covers climate and nature), the United States under the Securities Exchange Commission regulation, and in the International Sustainability Standards Board (ISSB) global baseline standard for climate-related financial disclosure.
Only one in ten businesses incorporate climate-related clauses in their agreements with suppliers, and it's also worrying to note that only 1% (0.04%) of all enterprise businesses require their suppliers to set Science-Based Targets, and the majority of these requirements are not currently in line with 1.5°C climate science.
Sonya Bhonsle, Global Head of Value Chains & Regional Director Corporations at CDP, said: "This year’s report shows that environmental action is not happening at the speed, scale and scope required to limit global temperature rises to 1.5 degrees, with many companies still not acknowledging that their impact on the environment extends far beyond their operations and that of climate change.
"Quite simply, if a company wants to be in business in the future, they need to start embedding nature into the way that they buy and collaborating with suppliers to drive action in the supply chain.
"Therefore, we need to see environmental leadership from companies right now by tackling their impacts on climate change and nature together, working with their suppliers in an integrated way that includes nature as standard, and incentivising this engagement within their organisation."
According to CDP data, senior management teams are not being sufficiently motivated to address important problems like supply chain deforestation and water security. Only 3% of organisations have water-related incentives in place for their Chief Procurement Officer, while 70% of top management positions in businesses will not be rewarded to take action on deforestation before 2025. The situation with regard to climate change is better, with 74% of businesses reporting board-level oversight and 41% of the remaining businesses expecting to implement it within the next two years, but it still isn't going to be enough to turn things around.
"Awareness and ambition on nature are growing, but the challenges we face are also accelerating. We must act urgently to halve emissions and become nature positive by 2030" - CDP Global Supply Chain Report 2022
There is, however, a small but growing cohort of trailblazing companies paving the way to truly meaningful environmental action. These companies have been recognised on CDP’s annual Supplier Engagement Rating (SER) Leaderboard.
Their suppliers reported saving 70mt CO2, equivalent to the energy use of 9.8 million homes in a year, due specifically to CDP supply chain member engagement – showing that supplier engagement, collaboration and innovation does drive action.
Vizibl is delighted to congratulate our customers and colleagues at British American Tobacco, Astellas Pharma, Santander, Vodafone and Heineken for making it onto CDP’s SER Leaderboard for 2022 and being part of this leading group who are doing all they can to make a difference. By working together to engage their suppliers on the Vizibl platform, they are playing a crucial role in the transition towards the net-zero sustainable economy.