Report claims investment in low emissions decreasing
Companies are increasingly recognizing climate risk in their supply chains, but investment in emissions reductions programs is going down, according to research published today by CDP and Accenture.
Importantly, a clear link is established between stalling progress on emissions reductions within supply chains and the uncertain regulatory framework.
According to the report, “Collaborative Action on Climate Risk,” ever more companies are reporting on their emissions reductions programs and there are clear financial benefits from investment in sustainability measures. However, average monetary savings from emissions reductions efforts have fallen 44 percent in the past 12 months. The report points to an ever widening gap – highlighted last year – between measures taken by large corporates who are members of CDP’s supply chain program and those by suppliers.
The research is based on information from 2,868 companies including some of the world’s largest corporates, reflecting a rise in participation of more than a fifth since last year. These produced 14 percent of 2013’s global industrial emissions. The 64 CDP supply chain members behind the request to this supply chain represent a combined annual spending power of almost US$1.15 trillion.
Almost three quarters of companies identified a current or future risk related to climate change, according to the report, while 56 percent of companies said that consumers are becoming more receptive to low-carbon products and services. Regulatory uncertainty is making companies cautious about investing in emissions reductions and supply chain sustainability. Ninety percent of companies that identify a current or future risk cited regulatory risk as a barrier to investment.
Investment in emissions reductions programs has declined in the past year and is shorter term in focus, according to respondents. Seven out of 10 sectors report investment falling from earlier years. Shorter pay-back initiatives (less than three years) are on the rise with these almost doubling between 2011 and 2013. The average sum invested per reporting company has dropped 22 percent since last year.
To address policy uncertainty, the survey asked which policy programs would be most supported by businesses. Of the companies reporting engagement with policy makers, support was strongest for policies promoting energy efficiency, and clean energy generation, supported by 81 percent of responses. Mandatory carbon reporting was supported by 67 percent, but cap and trade programs received the unqualified support of just 43 percent of responses.
The report reveals that the most important determinant of improved emissions reduction performance is collaboration across the supply chain. There is enormous scope for more collaboration, with program participants identifying 2,186 collaborative opportunities. Additionally, companies that engage with two or more suppliers, customers or other partners are more than twice as likely both to see a financial return from their emissions reduction investments and to reduce emissions.
The CDP and Accenture analysis shows that companies are often misdirecting their emissions reduction efforts with investment not closely correlated with proven emissions or monetary savings. Suppliers and member companies are at odds: suppliers identified process emission reduction and product design as the most promising collaborative approaches. Member companies on the other hand favor behavioral change initiatives and transportation and fleet investments.
To address this, a new CDP supply chain initiative has been launched to incentivize suppliers: Action Exchange will drive targeted action on the most cost effective emissions reductions. Companies that have already joined the initiative and are asking their suppliers to participate include Bank of America, L’Oreal, Philips and Walmart, with significant returns anticipated.
Questioned for the first time by CDP on water risk, suppliers recognize the need for a broader view of supply chain sustainability, with linkages made between water and carbon emissions. More than half the companies cite water scarcity as the greatest water-related concern.
CDP’s chief executive officer Paul Simpson says: “This report establishes that although companies recognize that climate and water risks are on the rise, a mixed regulatory regime is making decisive action difficult. However growing participation in our supply chain program and the positive reception to Action Exchange demonstrates that businesses want to leverage their relationships with their suppliers to realize opportunities and minimize climate and water related risks.
“When governments introduce a more realistic global price on carbon we expect significantly more investment in emissions reductions from corporates.”
“This report provides clear evidence that those who are most transparent about their climate change risks are more likely to achieve the greatest emissions reductions,” said Gary Hanifan, global sustainability lead for supply chain, Accenture. “And they are also more likely to enjoy monetary savings as a result of their responses to climate change risks. But the return on investment by the most proactive companies will not reach its full potential unless those companies can encourage their suppliers to follow their lead.”
UPS Posts Record Second Quarter with Revenues of $23.4bn
Growth across each of its core segments resulted in record results for UPS in the second quarter, with group revenues climbing 14.5% year on year to $23.4bn.
The global logistics outfit achieved consolidated operating profit of $3.3bn, up 47.3% compared to the same period in 2020. It is the second consecutive quarter of record profit, and a significant rise on Q1’s $2.9bn.
UPS Q2 Revenues in Brief
- Consolidated revenues: $23.4bn (+14.5% yoy)
- Domestic: $14.4bn (+10.2%)
- International: $4.82bn (+30%)
- Supply Chain Solutions: $4.2bn (+14.3%)
The US company’s domestic segment performed steadily with 10.2% revenue growth to $14.4bn. But it was its international and supply chain solutions segments where UPS saw the biggest gains. Strong demand in Europe led an increase in international revenues of 30% to $4.82bn. UPS’ supply chain solutions division saw revenue growth of 14.3% to $4.2bn, driven, the company said, “by strong demand in nearly all businesses”.
UPS’ steady growth throughout the pandemic has been led by the overarching vision of its chief executive Carol Tomé to do “better not bigger”, focussing on efficiency and high margin deliveries through its network over pure scale and volume.
“I want to thank all UPSers for executing our strategy and delivering high service levels, which fuelled record financial results in the second quarter,” she said. “Through our better not bigger framework, we are moving our world forward by delivering what matters.”
UPS Completes Sales of UPS Freight
The second quarter also saw UPS complete the divestiture of UPS Freight in a deal worth $800m - with a surprise result for the division, now called TForce Freight, under new owner TFI International.
“The second quarter was historically significant for TFI International, with the closing of our UPS Freight acquisition and record performance across the board,” said Alain Bédard, chairman, President and Chief Executive Officer, TFI International. “Particularly gratifying is the performance of TForce Freight, which has exceeded our operating ratio targets far ahead of schedule, and we have only just begun our work.”
In it first two months of ownership TFI reported that adjusted operating ratio (OR) was 90.1% for TForce Freight, far outperforming its forecasted OR of 96-97%.
“I wish to thank our entire team for their hard work and remarkable efforts, and officially welcome aboard our new TForce Freight colleagues who have seamlessly come under the TFI umbrella and are already making stronger than expected contributions,” Bédard added.