Procurement officers could play a stronger role in reducing supply chain carbon by sharing the benefits of cutting emissions with suppliers.

Four in five companies fail to disclose the paybacks of reducing carbon emissions to suppliers, according to a new study from the Carbon Disclosure Project and Accenture.

While firms, particularly those in Europe and Asia, are making progress, carbon reduction advances are not being extended into supply chains.

Examples of success cited in the report included PepsiCo’s work with suppliers in Chile to help them reduce water usage by 35 per cent.

Wal-Mart was praised for assisting supplier Dana Undies to reduce its energy bill by 71 per cent by encouraging it to adopt energy efficiency measures.

However, the report did find that businesses are demanding more from their suppliers than in the past.

For example, 90 per cent of responding companies have a climate change strategy with at least general guidelines for procurement, an increase from 79 per cent in 2010.

“Suppliers are becoming more transparent about their emissions-related information, in part due to growing pressure from corporate clients,” the report states.

Companies hesitating to invest in the environmental agenda may like to consider a new report from accounting giants KPMG, which has identified 10 environmental ‘megaforces’ with the potential to derail business growth.

Climate change, energy volatility and water availability have been identified as three of the ‘megaforces’ that organisations should be aware of over the next two decades.

The KPMG report aims to put a financial value on the environmental pressures businesses are likely to face and estimates that if companies had to pay for the full environmental costs of their production now it would amount to 41% of earnings.

Climate change, water scarcity, growing populations, deforestation, energy supply volatility, material resource scarcity, wage inflation, urbanisation, food security and ecosystem decline are the top ten environmental measures to be aware of.

KPMG warned that many businesses will have to take account of the external environmental costs on their balance sheets, particularly if governments make good on pledges to scrap certain fossil fuel and water subsidies and roll out carbon pricing schemes.

The research found that the external environmental costs of 11 key industry sectors jumped 50 per cent in the eight years to 2010.

Whilst food production had the largest environmental cost footprint of the 11 sectors studied, the electricity sector faced undeclared environmental costs worth $195bn, and the oil and gas industry’s costs topped $150bn.

Yvo de Boer, KPMG’s special global adviser on climate change and sustainability, and former head of the UN’s climate change secretariat, said businesses will experience an increasingly complex relationship with the environment over the next two decades, and as such will need to develop business plans that take account of climate change and other environmental pressures.

“Without action and strategic planning, risks will multiply and opportunities will be lost,” he said in a statement.

“Corporations are recognising there is value and opportunity in responsibility beyond the next quarter’s results – that what is good for people and the planet can also be good for the long-term bottom line and shareholder value.”

Businesses that want to have the competitive edge over their rivals can now show good evidence that they are committed to reducing carbon by obtaining CarbonLow’s recently approved CLEEAR Standard.

Accredited by the Environment Agency as being a Carbon Trust Standard equivalent under the Carbon Reduction Commitment (CRC), CLEEAR uses best practice in carbon measurement and management to benchmark companies’ carbon emissions reduction.

Depending on a business’s energy spend, CarbonLow will look at between one and three years energy data as well as details of travel undertaken in its own cars to decide whether an organisation has made an absolute or relative (against turnover) reduction in its carbon emissions; these are calculated using the latest figures from Defra. The company is also assessed against a set of management criteria to decide if it has incorporated carbon reduction into its day to day business.

Using methodology based on the Carbon Trust Standard Rules and with independent external verification, the CLEEAR Standard is robust way of evidencing a company’s carbon reduction journey.

CarbonLow’s CLEEAR Certification Manager Molly Warwick said:

“We think the CLEEAR Standard is a good way for a business to get serious about reducing carbon, whether or not they are in the CRC.

“Businesses are increasingly being asked to provide carbon credentials in tenders and pre-qualification questions.

“It is also a chance to have a look at energy data and assess whether the management is factoring carbon into its business practices.

“Whilst assessing for CLEEAR we can also advise on how to cut carbon and show businesses that this almost always leads to monetary savings in the long run.”

CLEEAR can be used by a CRC Participant as an early action metric under the CRC.

For more information about CarbonLow’s CLEEAR Standard see www.carbonlowemissions.co.uk/CLEEAR or call 0845 634 6071

A new study has found that 50% of multinationals look set to select their suppliers based upon carbon performance in the future.

Shareholder pressure is driving multinational companies to look for low-carbon suppliers, according to a new report from Carbon Trust Advisory and they are also willing to pay a premium to ensure these credentials are in place

The study of senior managers, carried out for the Carbon Trust by Dynamic Markets, found that 50% will be selecting suppliers the basis of their carbon performance in the future in a bid to cut ‘cradle to grave’ product-associated emissions.

According to the report, Cutting Carbon in the Value Chain, 29% of suppliers are likely to lose their contracts if they do not have a good carbon performance record, while 58% of the managers surveyed said that they would pay a premium for a low-carbon supplier.

Scrutiny of supply chain emissions marks the next stage of corporate responsibility, since 93% of those surveyed saying that they are already addressing their own emissions.

While 40% of companies are now looking at their indirect emissions originating from their supply chain, its importance is only likely to become more important in future. In the UK, 74% of respondents said shareholder pressure would drive greater scrutiny of the supply chain in future, while in the US the figure stands at 32%.

“Going forward, as carbon becomes more widely understood as a commodity, there will be increasing pressure from external sources, particularly shareholders, to make companies address the carbon intensive area of supply chain emissions,” says Hugh Jones, managing director of Carbon Trust Advisory.

“The rewards are there for businesses to tackle emissions in the supply chain; in the form of new revenue streams, reduced risks, emissions and costs. But the going isn’t easy and requires significant commitment,” he adds.

The research also shows the potential rewards for suppliers that can ensure their place on ‘green’ supply chains by meeting the criterion of carbon efficiency held by multinationals. Of those addressing supply chain emissions:

• 66% are willing to pay a premium of around 10% to purchase a product or service with low emissions
• 65% sell products and services that reduce the carbon footprint of their customers
• 71% procure key products from suppliers with lower carbon footprints

Telecommunications giant, BT, for example, introduced a climate change procurement standard earlier in the year for its 16,700 suppliers.

“This isn’t something that we’re obliged to do, but we see it as key to delivering on our commitments on carbon reduction while also leading broader efforts to decouple business growth from energy use and CO₂ emissions,” explains chief sustainability officer Niall Dunne.