If you follow our yearly release of the Business Sustainability Risk and Performance Index, you know it offers key insights on the sustainability performance of thousands of companies around the world. This year’s 4th Edition Index (covering 2015-2019) takes things a step further and includes a deep dive on carbon and GHG emissions reporting, shining a spotlight on the supply chain’s role in driving climate strategy.
Why Carbon and GHG Emissions Reporting?
The ongoing pandemic has forced business leaders to revamp their supply chain strategies and focus on building in resilience. In May, as part of their commitment to the Science Based Targets initiative (SBTi) and Business Ambition for 1.5°C campaign, CEOs from 155 global brands, including Mars, Nestlé and Unilever, outlined their plans to pair COVID-19 recovery with groundbreaking climate action, leading to a resilient, zero carbon economy.
More and more companies are accelerating investment in supply chain sustainability monitoring, including carbon reduction efforts, as a foundational element forbuilding long-term viability. Stonyfield Organic last year announced their plan to cut carbon emissions by 30% by 2030 by focusing on energy and waste conservation, sustainable packaging and logistics. Home Depot has made the commitment to invest in eco-friendly products, including lumber from sustainable tree farms, and updated energy usage at its stores to promote conservation and Patagonia is committed to having at least 75% of its materials sourced from sustainable places, and it donates a percentage of its profits to groups cutting carbon emissions and helping the environment.
Climate change remains one of the most significant threats to society and, as a typical company’s supply chain accounts for over 80% of its greenhouse gas emissions, the supply chain is a key lever for change. To address the bulk of corporate emissions, the Index highlights the need to drive effective GHG reduction actions beyond a company’s own operations. When assessing their own direct and indirect operational carbon emissions (scope 1 and 2 emissions) as well as the large share generated in their supply chain (scope 3 emissions), corporations are perfectly positioned to reduce their carbon footprint and improve their Environmental performance, one of four sustainability themes measured by the Index year-over-year.
Uneven Maturity and Readiness for GHG/Carbon Action
Eighteen percent of North American companies report on direct GHG and carbon emissions compared to just 15% of organizations in Europe and AMEA. However, Europe leads in implementing actionable steps as it continuously surpasses other regions on overall sustainability performance. Perhaps more significantly, small and medium-sized enterprises (SMEs) drastically underperform large ones in emissions reporting at 2.6% vs 18.9% respectively. Given the scope of business volume that SMEs contribute to global supply chains, this represents a huge gap in the climate strategy of many multinational players.
Although several organizations, such as the GRI and the Sustainability Code, support SMEs when it comes to formal reporting, there is little regulatory pressure and few incentives for those companies to adopt best practices. This highlights a need for engagement strategies that develop management system maturity across the supply base. Buyers can leverage their procurement spend and relationships with supply chain partners to align incentives and drive GHG action in their networks. Engaging with SME suppliers allows companies to build capacity across their value chains, that will lead to improved quality and detail of emissions tracking and reporting, thus setting a baseline to ultimately drive improvements for the most significant part of their GHG footprint that originates in the supply chain.
The climate crisis is creating a $26 trillion race to innovate around low-carbon readiness and adaptability, which will impact entire value chains. As performance initiatives continue to be developed, climate and carbon action must become a mainstream element of sustainability management systems for all companies across industries and regions.
You can read the full Index report, in which the Carbon/GHG Deep Dive starts on page 45, or view the new infographic in our resource center. Or visit our Index Online microsite to create your own comparison graphs of sustainability performance across regions and industries. Also, keep your eyes peeled for additional blogs that’ll go more in depth on the various topics covered in the report.
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