Carbon Disclosure Project: What's In Your Supply Chain?

The Carbon Disclosure Project, which secured a remarkable 634 responses to the first supply chain questionnaire of its kind, is looking for fuller disclosure: Later this year it will issue a "lighter questionnaire" in hopes of convincing hundreds or thousands more suppliers to participate.The results, released this morning, reflect vastly different levels of trust and sophistication among suppliers to some of the largest companies, including Acer, Heinz, and PepsiCo. Of the 2,318 suppliers invited to participate by 34 CDP member companies in 2008, 136 (6%) formally declined to participate. The remaining 1,548 (67%) did not log on or formally respond to CDP. Many of those that failed to respond did so out of fear that their disclosures would hurt them, for example, that they would be cut off as suppliers to one of the member companies. "[C]oncerns have been expressed by many suppliers that open disclosure of what they are (or are not) doing may result in penalties or loss of contract," the report states. "This demonstrates the need for conversation, education, and ultimately trust both up and down the supply base."

The lack of sophistication was shown by one-third of the respondents that said climate change posed no threat to their businesses. The global interdependence of businesses means that climate change -- whether or not you believe in it -- will ultimately affect your business. You can't run or hide.

Getting more suppliers to participate will be an awkward task. CDP needs to get data from them without scaring them off. It needs to convince them that there will be no short-term penalties for disclosing their carbon emissions -- while acknowledging that the clock is ticking and their manufacturing partners or government regulators may well demand details of, and reductions in, carbon emissions in the future.

In the meantime, to reduce carbon emissions, businesses must embed carbon and climate change into overall supply chain management processes, rather than treating it as a bolt-on to traditional procurement processes, says Paul Simpson, chief operating officer of the CDP. "What we tend to find is the procurement department in one area of a business and the sustainability in another department," says Simpson.

The "light questionnaire," due later this year, will ask suppliers to disclose direct emissions (known as Scope 1); and indirect emissions, such as those created on behalf of the company in the generation of electricity or the delivery of energy via hot water or steam (known as Scope 2). It will not ask them to calculate and disclose emissions in their supply chain (known as Scope 3), says Simpson.