Supply Chains Thwart Climate Risk Management for 75 Major Companies: Report

By Jessica Shankleman | January 26, 2016

Goldman Sachs Group Inc., Coca-Cola Co. and 73 other companies that together buy more than $2 trillion of goods and services are unprepared for climate shocks because suppliers are ignoring requests for data on their exposure to rising temperatures and climate regulation.

Almost half of the 7,879 main suppliers to 75 companies including General Motors Co., Microsoft Corp. and Wal-Mart Stores Inc. failed to respond to requests for data on managing climate risk, according to a report on Tuesday by non-profit organizations CDP, formerly known as the Carbon Disclosure Project, and BSR, a sustainability consultant.

Many large companies pledged to take measures to address climate change to contribute to a United Nations climate agreement between 195 nations sealed last month in Paris. They’re taking steps to prepare for weather extremes such as flooding and drought brought on by global warming. While they’re setting targets to cut their own fossil-fuel pollution, the report shows their suppliers, which are responsible for as much as four times as much greenhouse gas emissions, are out of sync.

“Companies have a vital role to play in implementing the Paris agreement,” Paul Simpson, chief executive officer of CDP, said in an e-mailed statement. “Those that are unable to do so risk being the losers from this inevitable transition.”

Only 4,005 suppliers, about 51 percent of those asked, provided data on their climate risk management, water risks or carbon emissions. Of those which did respond, 72 percent said climate change risks could significantly impact their operations, sales or costs. Nearly two-thirds said climate policies, such as carbon taxes, posed a risk to their business.

But less than half of respondents set a target to cut carbon emissions and only 34 percent reduced emissions in the past year.

“Emissions are not reducing at the rate required to meet the Paris goals, nor are suppliers building the resilience they need to deal with the climate impacts they will inevitably face,” Christiana Figueres, the UN’s top climate diplomat, said in the report.

Companies should work with suppliers to encourage greater action on climate change, according to the report. For example Danish toymaker Lego A/S started hosting “innovation camps” in the hope of creating joint projects with suppliers that could reduce carbon emissions collaboratively. Other companies have threatened to drop suppliers that fail to comply with their environmental policies.

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