Most firms failing to track supply chain emissions - CDP
Companies are failing to track supply chain emissions, and are risking falling foul of sustainability regulations, according to new research from CDP.
CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.
Its 2022 supply chain report, Scoping out: Tracking nature across the supply chain, shows that leadership in disclosure on environmental impacts is not happening at the scale and scope required, with only 41% of companies reporting on any of their supply chain emissions.
Nearly 70% of companies told CDP they did not assess the impact of their value chain on biodiversity in 2022.
Disclosure on Scope 3 emissions could be required in a matter of months in the EU, under the European Sustainability Reporting Standards. It’s a similar story in the US, under the Securities Exchange Commission regulation. Internationally, reporting will also soon be required under the International Sustainability Standards Board (ISSB) global baseline standard for climate-related financial disclosure.
Yet across the 18,500 companies disclosing to CDP in 2022, only 7,000 said they had engaged suppliers on climate change.
Few firms taking lead on sustainability reporting
CDP says a small but growing number of companies are taking the lead, “by building nature into business as usual”. CDP works with 280 sustainability leaders via its Supply Chain program, which represents $6.4tn in procurement spend.
CDP also reports that one in every 10 companies include climate-related requirements in their contracts with suppliers, and that “this is also happening to some extent with deforestation”.
However, it adds, “most of these requirements are not yet aligned with 1.5°C climate science, with under 1% of companies requiring their suppliers to set Science-Based Targets.”
CDP data shows senior management teams are not being incentivised at anywhere near the level needed to address key issues such as water security and deforestation in the supply chain.
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.
“COP 15 couldn’t have been clearer in the call to action on corporate reporting on nature.
“If a company is not preparing for future regulation on nature in the supply chain, they are open to a wide range of risks and could also be missing out on the opportunities that safeguarding nature will bring.
“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.”
She added: “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.”