Three success stories To capitalize on these opportunities, several companies among CDP’s members have launched substantial supply chain carbon-management programs. For example, PepsiCo estimates its total potential exposure to ingredients and agriculture from changes in the climate at $12 billion per year. Accordingly, the company has created several programs to improve resource conservation and crop yields along its supply chain, through more efficient use of water and less reliance on synthetic fertilizers. In southern Chile, for instance, it helped its suppliers upgrade their irrigation systems, leading to a 35% reduction in water use.
Similarly, Walmart established a goal to eliminate 20 million metric tons of GHG emissions from its supply chain by the end of 2015, in large part through collaboration with its suppliers.9
estimated that its 60,000 suppliers contributed 72% of the company’s total emissions as of 2006.10
As a result,
Walmart has taken steps to identify GHG reduction opportunities in more than 20 product categories, working with CDP in this effort. The company specifically focused on China – setting a goal of becoming 20% more energy efficient, per unit of production, in its top 200 factories. As part of this program, Walmart helped several apparel mills undergo on-site energy assessments. One supplier, Dana Undies, subsequently saved 71% from its annual energy bill by implementing energy efficiency practices identified through the assessment. Another, Intex, reduced coal consumption by nearly 12,000 tons, equal to almost 30 million metric tons of CO2 emissions. Intex later invested another $1.2 million into 16 energy-saving projects.11
Vodafone is another example—the company assesses its key suppliers every six months on a scorecard that includes six pillars, one of which is focused on sustainability. Vodafone is also working closely with 12 of its major suppliers, which represent 22% of relevant procurement spend, on CO2-reduction projects, primarily to develop more energy efficient equipment.12
Walmart
Overcoming challenges These companies have managed to overcome several significant challenges to establish their supply- chain leadership. The principal theme among these is quantification—many companies have struggled to determine the best means of allocating the costs and benefits of new measures to individual organizations along the supply chain. For example, suppose that a large food manufacturing company helps its growers reduce their fertilizer use and invest in a more fuel-efficient fleet of trucks. Those changes will clearly lead to emissions reductions, but there is no system in place to determine how such reductions should be reported or accounted for between the supplier and the corporate client. To overcome this, companies need to adapt existing financial evaluation models to accurately assess the results of their efforts to reduce emissions.
A related challenge is determining a clear return on investment for supply chain measures. Some 34.5% of responding member companies claim to have realized new revenue or savings from their suppliers’ carbon-reduction activities, but only 24% help suppliers identify those factors in their own organizations. More fundamentally, only 20% of companies report an estimated monetary value for the supply chain initiatives they have undertaken to improve carbon management.
“We must extend beyond our own operations to promote best practices among our business partners, in order to deliver on our commitment to protect natural resources and mitigate business risks through innovation and more efficient use of land, water, energy, and packaging. PepsiCo will work with our strategic suppliers to ensure effective environmental sustainability programs in their organizations.”
PepsiCo
9 Company website;
http://walmartstores.com/Sustainability/8141.aspx 10 Company website;
http://www.bsr.org/reports/BSR_WBSCC_Backgrounder.pdf 11 Company website;
http://walmartstores.com/sites/ResponsibilityReport/2011/ 12 Vodafone, 2010/2011 Sustainability Report
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