During the recession and the global financial crisis there has been considerable speculation that major corporations would consider abandoning their carbon emissions initiatives. We have found in recent research that A.T. Kearney produced for the Carbon Disclosure Project (CDP) that this is not correct. Despite the financial crisis, the 44 Supply Chain members of the CDP are intensifying efforts to reduce carbon from their external purchases. This is driven by longer-term business considerations. Supplier performance has also improved since 2009.

However, there remains a major gap between the performance of CDP Members and the majority of their suppliers. Members recognize the importance of the supply chain as a source of their own emissions footprint – whereas suppliers need to address the performance gap in order to remain competitive. CDP members, as customers, are eager to collaborate and there is also the potential threat of deselecting a supplier.

How do suppliers need to improve performance?

We assessed supplier performance along the following key dimensions:

Strategic awareness

Strategic awareness of suppliers is at a level similar to last year. A large part of the supply base feels exposed to regulatory risks and physical risks related to climate change, although Member awareness is higher than for suppliers.

Carbon reduction ambition

The success of long-term carbon reduction amongst suppliers will depend on the ability of those who set good targets today to sustain these levels in the long run. It also depends on how quickly those who do not have targets put ambitious ones in place. The proportion of suppliers who clearly commit to reducing their company-wide emissions is significantly lower than for members.

To meet the aspirations of their customers, more suppliers need to set targets and these need to be over a longer time period than currently.

Reporting capabilities

Reporting capabilities are crucial because they enable performance to be tracked. More than a third of suppliers are still not able to report the direct carbon emissions of their own operations.

Implementation practices

The most commonly used approaches for implementing emission reduction plans are energy efficiency increases, process improvements and renewable energy use. More than 20 percent of suppliers are using three or more approaches at the same time to reduce emissions.

Nevertheless, there are questions over the depth of supplier commitment to implementation: for example, whilst 91 percent of members have board-level accountability for climate change, only 60 percent of suppliers have this in place.

The way forward

While some suppliers are performing exceedingly well and have positioned themselves as role models and catalysts for change, suppliers in general will need to improve their capabilities quickly and continuously if they are to bridge the gap with members. Collaboration and best practice sharing are expected to show the most significant potential when it comes to closing the gaps. The survey finds that 88 percent of CDP members have an active strategy of engagement with suppliers to reduce emissions. However, there is also a likely penalty from not responding: 56 percent of members expect to deselect suppliers in the future if carbon management does not improve.