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Supply chain climate engagement is needed!

Updated: Sep 25, 2022

A report published by Net-Zero Tracker late last year found the post-COP26 stocktake of net-zero targets included an “explosion” of interest in the private and public sectors – but still only gradual improvements in the integrity of delivery plans.

The stocktake revealed that the total cumulative combined global revenue covered by public company net-zero targets amounts to around $19.5trn. This figure is up almost fourfold year-on-year and represents almost 75% of total revenues. Only publicly listed companies are included in the stocktake.

Also revealed is a gradual improvement in the credibility of corporate targets, with the stocktake accounting for whether they are science-based and whether companies are properly planning for delivery. 207 businesses had set targets that met what Net-Zero Tracker has dubbed the minimum procedural standards, up from 110 last year. The amount of revenue from this cohort of businesses stood at around $8trn, up from around $2.1trn last year.

However, the stocktake revealed that most businesses (68%) have not set net-zero targets that cover all of their indirect (Scope 3) emissions. 43% of businesses have targets that cover no Scope 3 emissions.

This could majorly undermine the credibility of net-zero targets. CDP has estimated that, for the average large multinational firm, Scope 3 emissions will be 11.4 times higher than direct emissions.

CDP also found that less than 3% of suppliers to large corporates have approved science-based emissions targets in place. The analysis also found that more than half (56%) of these suppliers have no climate targets at all.

The research, based on more than 200 CDP Supply chain corporate members, is based on requested data from 23,487 suppliers to disclose non-financial data. While the requests grew by 71% compared to 2020 with 11,400 responses, the research found that corporates aren’t adequately engaging with suppliers on climate target setting.

The number of suppliers setting climate-related targets has actually grown by 5% year on year, but CDP notes that 56% of suppliers do not have any related targets in place. CDP claims that, at the current pace, it would take at least 10 years to ensure all responding suppliers set climate targets, let alone science-based ones.

CDP’s global head of value chains and regional director corporations Sonya Bhonsle said: “Our data shows that corporate environmental ambition is still far from being ambitious enough. Alongside that, companies have blinkers on when it comes to assessing their indirect impacts and engaging with suppliers to reduce them.

“Companies must act urgently to cascade action and manage environmental impacts throughout their supply chains to scale the level of action to secure a 1.5C future. This is essential for the transition towards a sustainable net-zero, deforestation-free and water-secure economy.”

CDP found that only 38% of end-user businesses were engaging with suppliers on climate, dropping to 16% for discussions on water security.

On the good news front, 71% of suppliers that did report Scope 1 and 2 emissions, results have been promising. CDP found that suppliers had reduced emissions by 1.8bn tCO2e – the equivalent to emissions from 454 coal power plants running for a year. These carbon reductions translate to cost savings of around $29bn.

And more good news, all of the UK’s major supermarkets, as well as the likes of Danone, Nestle, Nando’s, KFC UK&I and McDonald’s UK&I, recently committed to eliminate soy that has resulted in deforestation or land degradation from their animal feed and product supply chains.

And more good news, major corporates have joined a partnership enabling large businesses to support suppliers to measure and reduce emissions, spearheaded by Mars, PepsiCo and McCormick & Company.

The Supplier Leadership on Climate Transition consortium was created last year by the three FMCG giants. Under the initiative, large businesses pay for their suppliers to attend a series of educational seminars on how to measure their greenhouse gas emissions, develop and implement plans to reduce them in line with science-based pathways, and report on progress.

Now, on the first anniversary of the initiative, nine additional businesses have signed up, including General Mills, The Coca-Cola Company, Keurig Dr Pepper, Mondelez International and Nestle. Also signing up are Atlantic Packaging, The Estee Lauder Companies and two major restaurant firms – Yum! Brands and Restaurant Brands International. Yum! Brands owns the likes of Pizza Hut, KFC and Taco Bell, while Restaurant Brands International is the parent company of chains including Burger King and Tim Hortons.

Collectively, the 12 participating businesses have signed up 1,200 representatives from 400 of their supplier firms for educational seminars. Following on from the seminars, participants are able to access mentoring services. The next round of seminars is due to begin in September.

The Science-Based Targets initiative (SBTi) notably requires businesses whose Scope 3 (indirect) emissions account for 40% of their total annual footprint to set targets addressing at least two-thirds of Scope 3 emissions, if they wish to gain 1.5C verification. 1.5C verification will soon become the SBTi’s minimum target-setting requirement.

“Effectively delivering against net-zero will require a deep transformation of global supply chains, which will only be possible if companies embed climate action deep into the core of their procurement strategy,” said Mars’s chief procurement and sustainability officer Barry Parkin.

“With more than three-quarters of our emissions coming from the materials that we purchase at Mars, we recognise that supporting our suppliers on a low-carbon transition will be critical in mitigating our impact on the planet. Pre-competitive collaboration between global businesses and suppliers, such as through the Supplier Leadership on Climate Transition Supplier LoCT, will be vital in driving the scale and reach needed to overhaul global supply chains.”

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