SUSTAINABILITY FEATURE
SUSTAINABILITY FEATURE
Sustainable SRM: how supplier relationships affect risk and growth on a global scale
Supplier collaboration curbs carbon
Whenmeasuring end-to-end environmental impact, most companies discover that their value chain carbon emissions outstrip those from their own operations. As climate action becomes more urgent, relationships between supply chain partners will need to come to the fore, says Hugh Jones, managing director of the Carbon Trust’s business services team
insurance premiums. As climate-related impacts become more obvious, the urgent need for action to reduce emissions becomes ever clearer. At the same time expectations are increasing. Investors are actively demanding improved disclosure of climate-related risks and opportunities. With the notable exception of the Trump administration, in most parts of the world climate regulation is driving up the cost of carbon. And within the business community a committed group of leading companies are acting out of enlightened self-interest and pushing hard to create a sustainable, low carbon future.
another, for more than 100 years. They may well be around for another 100 years. If they are, they must succeed in a world facing an average increase in global temperatures of 2 degrees centigrade by the end of the century. When people talk about sustainable business, they tend to focus on just a few things: businesses should seek to minimise carbon emissions and other forms of environmental damage. They should also consider ethical business practices, human rights and working conditions. Sustainability means all these things, but there is a second definition. Businesses that want to thrive and grow in the 21st century need to ask themselves: will the business be able to sustain itself in the years to come? What do we need from customers, suppliers, governments, and the third sector? How are we affected by changes in the environment? In the following pages, we discuss the impact of supply chains on the environment, the ability of the private and public sector to sustain successful SRM programmes and the changing face of ethical business. With guest contributions from a global CEO, an independent carbon emission advisory organisation, a former leader of a number of world-renowned British institutions and the UK government’s chief commercial officer, we aim to show how environmental impact and sustainable business are inextricably linked to supplier relationships.
Since we founded State of Flux in 2004, global temperatures have risen, on average, by nearly half a degree centigrade 1 . It doesn’t sound like much, but that’s just the average. Anyone experiencing record-breaking temperatures in the 2018 UK summer heatwave has a visceral sense of the extremes climate change is helping to bring. Human activities made the heatwave more than twice as likely, according to the World Weather Attribution consortium 2 . The “signal of climate change is unambiguous,” in the summer’s heat, it said. State of Flux started small and grew quickly. After 15 years of operation (and 10 years of research!) we hope to build a business that lasts. All companies do. Some of our clients are global firms which have been around, in one form or
Climate change has become an increasingly recognised risk to business in a number of ways, not least from its direct physical effects. For the financial year up to April 2018, 73 of the companies listed on the S&P 500 reported a weather-related effect on earnings. For more than 90% of those businesses this impact was negative and – where quantified – the average materiality was a significant 6%. Higher incidence of extreme weather is inevitably bad for business. Among other things these events can reduce crop yields, hamper productivity, disrupt logistics, depress consumer spending and raise
Hugh Jones Managing director, Carbon Trust
Operational energy use is only the tip ofthe iceberg... How different sectors measure up when it comes to energy consumption in the supply chain?
Own operations
Upstream transportation & dostribution
Tier 1 suppliers
Tier 2 + suppliers
Automotive
Aerospace
Home appliances
Constructions
Food & drink
Machinery
Electronics and ICT
Pharmaceutical
1 NASA, Global Land-Ocean Temperature Index https://climate.nasa.gov/vital-signs/global-temperature/ 2 Heatwave made more than twice as likely by climate change, scientists find https://www.theguardian.com/environment /2018/jul/27/heatwave-made-more-than-twice-as-likely-by-climate-change-scientists-find
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4 STATE OF FLUX
2018 GLOBAL SRM RESEARCH REPORT
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