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More Renewable Energy in Supply Chain Can Reduce Emissions

The global supply chain is in a position to play an important role in reducing emissions.

A gigaton (one billion metric tons) of emissions savings can be unlocked if key suppliers to 125 of the world’s biggest corporate purchasers increase their proportion of renewable electricity by 20 percentage points, according to new research released on December 9 by CPD.

Research from the non-profit organization that runs the global disclosure system, report finds that currently, the average proportion of renewable electricity suppliers purchase makes up 11% of their total electricity. Increasing the proportion of the total electricity they purchase by 20 percentage points next year, (to an average of 31%) would cut a gigaton of greenhouse gas emissions in one year,.This would make a substantial contribution to the global effort to tackle the climate crisis. For comparison, global CO2 emissions from energy rose by around one gigaton between 2017 and 2018, from ~36 to ~37 gigatons. Put another way, a gigaton is equal to the 2017 fossil fuel CO2 emissions of Brazil and Mexico combined.  

The report, Changing the Chain, analyzes environmental data collected from 7,000 supplier companies on behalf of their customers. Customers include 125 big buyers such as Walmart, L’Oréal and Samsung Electronics. 

This report comes as world leaders gather for the second week of talks in Madrid for the COP25 climate conference. Governments are being called on to prepare to upgrade their national climate pledges in 2020 to achieve the goals of the Paris Agreement, limiting climate change to well below 2 degrees Celsius and aiming for 1.5 degrees. Reaching global net-zero greenhouse gas emissions by mid-century is needed to limit warming to 1.5 degrees, according to the IPCC. Current national pledges, if implemented, put the world on course for over 3 degrees.  

With supply chain emissions being on average over five times as high as a corporation’s direct emissions, this makes the trillions in procurement spend by large corporate buyers a critical leverage tool for driving climate action at scale,” said Sonya Bhonsle, global director of Supply Chains at CDP 

 

However, just 4% of analyzed suppliers (or 292 companies) reported a renewable energy target in 2019. To address this, 31 major buyers working with CDP,  with over $741.6 billion in purchasing spend, are actively engaging their suppliers to source more renewable energy. These include global names such as AB InBev, Accenture, BT Group, Signify and The LEGO Group. These five companies have all committed to source 100% renewable electricity in their own operations by joining the RE100 initiative (led by The Climate Group in partnership with CDP) and are now taking steps to drive uptake of renewables in their supply chains.  

Other key findings from the report include:

  • Suppliers reported a combined $1 trillion of financial impact from environmental risks: $906 billion at risk from climate change, $78 billion for potential water security risks and $16 billion at risk from deforestation

     
  • 42 large purchasing organizations (or 95% of respondents to a survey) say they have or will have integrated environmental metrics, including CDP data, into their supplier relationship management (such as 1 to 1 reviews or balanced scorecards). (65% currently are, an additional 30% plan to within two years)

     
  • 42 large purchasing organizations (or 95% of survey respondents) representing a combined purchasing power of $1.9 trillion say that suppliers showing environmental leadership make better business partners

     

“Suppliers just starting out should sign their first renewable electricity contract aiming to source at least 20% of their total power,” said Bhonsle. While more intermediate companies should send a powerful market signal by committing to 100% through the RE100 initiative and report progress towards that north star. Meanwhile, corporations should be rewarding suppliers taking this action in their procurement processes, making renewable energy a matter of business competitiveness.”

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