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“At the end of the day, it’s the responsibility of the buyer to really demand this – if not, it’s not sustainable.”
Fibria
“L’Oréal’s CPO and COO have implemented a strategy designed to give buyers the information they need to evaluate suppliers on climate change action in their quarterly business reviews. The solution starts with a scorecard document that is effectively a summary of suppliers’ CDP responses, which the sustainability team puts together with support from CDP. L’Oréal’s plan is to make responding to CDP mandatory for all key suppliers, with emphasis on reporting scope 1 and 2 emissions and a reduction target.”
L’Oréal
A Changing Business Model
Global corporations that have succeeded in managing the carbon emissions from their own internal operations are now shifting their business models to drive strategy, innovation and long-term change along the entire value chain. While these efforts started as an experiment in what was broadly termed “greening the supply chain,” they have emerged as a serious business imperative that is critical to the success of global commerce. Why? Because companies are now able to quantify the benefits in financial terms. This has not become commonplace just yet, but as information becomes more available and companies are able to better manage it, these practices will become more prevalent.
To date, the most direct progress has come in the form of more comprehensive procurement strategies. Some 90% of CDP Supply Chain members now include procurement in their formal climate change strategies up from 79% in 2010 and 74% in 2009, and 67% state that they now include carbon management in their overall procurement policy on some level, and another 17% are currently developing such criteria. Similarly, 30% of these companies include carbon management criteria in supplier scorecards.
The CDP Supply Chain members also use incentives to encourage their suppliers. In 2011, 62% of respondents reported having a policy that recognizes or rewards suppliers that employ good carbon management practices. That is up significantly from past years (19% in 2009, and 28% in 2010). Some 7% of companies award preferential status to suppliers who show strong sustainability measures, 17% recognize them through external communications such as press releases, and 38% highlight their performance in internal documents.
Other member companies apply more rigid standards: half of responding companies are developing or already have in place a contractual obligation for suppliers to manage greenhouse-gas (GHG) emissions and include information about emissions management in RFPs. Furthermore, many large corporations say they will soon deselect suppliers who fail to implement formal environmental criteria. While only 4% of respondents say that they routinely do this today, 39% project that they will soon implement this policy in the future, up from past survey results (17% in 2009 and 23% in 2010). In addition, 37% of companies are looking to get involved in supplier outreach and training programs.
Accordingly, the number of companies that actively train their procurement staff in supply-chain carbon management is increasing steadily (Figure 4). These do not need to be comprehensive or overly technical— the goal is not to make corporate buyers into carbon experts. Instead, procurement leaders should aim to educate staff about the business benefits of working with climate-savvy suppliers.
Figure 4 – Companies are increasingly training their procurement staff in carbon management along the supply chain.
Procurement Staff Training in Supply Chain Carbon Management
63% 2011
41% 2010
26% 2009
4 fig 4
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