I wonder whether the Carbon Disclosure Project (CDP), which provides the only global system for companies and cities to measure, disclose, manage and share vital environmental information, is the business equivalent of Alcoholics Anonymous.
The way the NGO, which has backing from 655 institutional investors with assets worth tn (£49tn), works is very similar to AA’s 12-step recovery programme. It helps companies to face up to a major issue they have largely been in denial about, examine past errors, make amends, learn to live a new life with a new code of behaviour and help others who suffer from the same addictions or compulsions.
Reducing risk and driving business value, a new report from the CDP, shows that those multinational companies who have moved beyond basic mandatory reporting – in other words those who admit there is a problem and want to do something about it – are going further than their more reticent competitors in reducing carbon emissions and also saving more money.
The study shows they are more than twice as likely to accomplish year-on-year emissions reductions – 63% who report compared to 29% who don’t.
The reason they are acting is clear. More than two-thirds of respondents identify a current or future risk related to climate change that is likely to seriously affect business or revenue.
More than half of the supply chain risks that are identified, due to extreme weather, are already affecting respondents’ operations or are expected to have an effect within the next five years. Just 13% identified regulation as being a sole driver of change.
Gary Hanifan, global sustainability lead for supply chain at Accenture, which co-commissioned the report, says it shows how much more can be achieved with a little bit more openness: “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.”
What the study also shows is that companies now need to be much more proactive in meeting the last step in the original AA programme: “Having had a spiritual awakening as the result of these steps, we tried to carry this message to alcoholics, and to practice these principles in all our affairs.”
The need to spread the message is made clear because the report shows that companies’ thousands of suppliers are not so keen to admit they have a problem and have a significantly lower level of ambition to mitigate climate change risk.
The survey, sent out on behalf of 52 multinationals with annual spending power of nearly tn, showed that only about a third of the 2,363 suppliers who responded are setting emission reductions targets, compared to 92% of purchasing companies.
Worse still, only about a quarter of these suppliers are investing in activities to reduce emissions, compared with more than two-thirds of CDP’s member companies.
And if you want to know the really bad news: the majority of suppliers didn’t even bother to answer the CDP’s request for information. Of the more than 6,000 approached, 3,627 did not respond and 173 declined to take part, although on the positive side, this was a marked improvement on the previous year.
The higher response rate suggests pressure from big purchasers is working. Although only 42% of suppliers receiving one invitation agree to report physical risks related to climate change, the percentage rises to more than two thirds for those receiving three or more requests.
Paul Simpson, CDP’s chief executive says, in his usual diplomatic style: “This research illuminates fragility in the global supply chain model. The marked difference in the sustainable actions of companies and their suppliers highlights a missed opportunity for suppliers to reduce energy costs and risks.
“The 61% of suppliers that failed to provide information through CDP are an even greater concern since they and their clients are unable to make a full assessment of the substantial climate risks or opportunities they face.”
The analysis of the information, processed through CDP’s global system for natural capital disclosure, demonstrates the attractive returns that leading companies are enjoying from addressing supply chain sustainability. The 29% of suppliers that have reduced their emissions have saved .7bn. This implies aggregate potential savings of all these 2,363 suppliers could reach three times that figure.
Many members of 12-step recovery programmes have found that the steps were not merely a way to stop drinking, but became a guide toward a new way of life. Let us hope that the CDP can have the same impact on the thousands of companies it is seeking to influence.
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