Report: Companies Going Green, and Expecting Suppliers to Follow Suit

Not only are corporations getting on the green bandwagon, but they are beginning to demand the same from their suppliers, to the point of cutting loose any suppliers that don’t have carbon management plans of their own, according to a new report from the non-profit Carbon Disclosure Project and consultant firm A. T. Kearney.

Sean Murphy — Supply Chain Management Review, 2/12/2010

If your company acts as a supplier to larger corporate clients, you’d better be prepared to discuss sustainability and environmental business practices, because you can bet your clients will want to.

That’s the message of the results of a new survey conducted by the Carbon Disclosure Project (CDP), a nonprofit organization that collects climate change data from the corporate world. The CDP conducted the survey with the help of global management consulting firm A. T. Kearney, which released the results this week.

The survey contacted 44 of the CDP’s member companies, and the responses from these companies show a strong interest in carbon footprinting and management. According to the report, 63 percent of the companies have “a formal, documented corporate climate change strategy.” Even the remaining 37 percent, according to the report, have “general guidelines” in place, and 90 percent of the member companies have plans in place to reduce carbon emissions.

But corporations don’t exist in a vacuum, and these same respondents, the report shows, are looking to their partners to follow their “green” example. According to the survey, 89 percent of respondents have “an established strategy” for working with suppliers on carbon-related topics. In addition, 91 percent of members have high-ranking executives dedicated to climate change-related issues within their respective companies.

A. T. Kearney Principal Stephen Easton told SCMR that the strong response from the corporate community on this issue is telling. While the jury remains out on whether or not the December 2009 climate change conference in Copenhagen was a success, Easton said the corporate world has already begun addressing carbon management needs, regardless of what governments are doing.

“We’ve actually got private sector companies who are driving carbon awareness,” he said. “They’re getting on with it because they know it’s important.”

Easton said companies should continue to build that dialogue, along with offering incentives to suppliers to become more environmentally friendly.

In the worst-case scenario, it’s certainly possible to take a heavy-handed approach and threaten to de-select the supplier, but “You shouldn’t jump to that too quickly,” he said.

If it comes to that level of negotiation, Easton said, “There’s an element of threat, but also there’s an element of collaboration.”

But some of the member company respondents are already preparing for that possibility. According to the report, 6 percent of the companies already are ready to de-select suppliers who won’t manage carbon emissions, and 56 percent said they planned to do so in the future.

“It is clear that some companies are now requiring their suppliers to address carbon management as a core business issue,” said CDP CEO Paul Dickinson. “This is no longer a ‘nice to have’ for the leaders, it is becoming a ‘need to have’ and we expect to see this trend growing across the whole business sector.”

So are the suppliers listening? Easton said he believes they are. The firm invited 710 suppliers to take part in the survey. Of those, 51 percent responded, a much larger number of respondents than anticipated. “I think suppliers are taking this seriously,” he said.

Easton said the suppliers are taking the right steps, too. He advised they begin exploring carbon-reduction plans. According to the survey, 60 percent of the responding suppliers have appointed a board member to be responsible for climate change issues.

So far, though, only 38 percent of the respondents indicated they have set targets for carbon management and stuck to them.

Suppliers looking to be proactive, Easton said, should be taking these steps. Most important of all, he said, suppliers need to communicate with their customers. In particular, he said, they need to let customers see what their future plans are for carbon management.

“I think they need to be showing customers that this is what they’re doing,” he said.

You can access the report by clicking here.