On earth day 2011, I'd like to applaud all of those organizations that have made great strides to reduce carbon consumption, particularly those in the retail sector who are driving many of the supply chain initiatives related to product packaging and distribution. While progress has been made, many companies are falling short of targets. In fact, the January 2011 Carbon Disclosure Project's Supply Chain Report, written by A.T. Kearney, indicates that many companies are falling short of the Intergovernmental Panel on Climate Change's (IPCC) target of a 3.9% annual reduction of emissions. This is the reduction the IPCC has deemed necessary to achieve an 80% carbon reduction by 2050.
Programs simply are not moving fast enough to achieve these reduction targets. I understand the challenges - I have been a retailer, and I really do recognize the significant successes! But I echo my colleague, Kim Knickle's concerns (see her 2011 Earth Day blog post) that organizational programs to reduce carbon consumption, have not leveraged IT based carbon management tools enough, leaving much of the progress unmeasured and unchallenged until year-end sustainability reports are compiled. Projects are often undertaken independent of stated goals.
Even Walmart, the leading retail champion of sustainability,is slightly behind on its carbon reduction goal, according to its 2011 Global Responsibility Report. According to the report, Walmart had reduced its GHG emissions by 10.6 percent by the end of 2009 -- the most recent year for which it has such data. The company is targeting a 20 percent cut in emissions from stores, clubs and distribution centers by 2012, from a 2005 baseline. So while I commend them for meeting many of their more specific targets and driving significant reductions in the industry related to the reduction of the cradle to cradle carbon cost of products,it seems they have quite a ways to go to meet their own carbon reduction target.
Carbon reduction progress is slower than expected
The 2011 CDP Supply Chain Report is an annual report that reflects the ambitions, targets and results of the 57 CDP Supply Chain member organizations and 1000 of their suppliers' carbon reduction programs. Despite the fact that many of these organizations are actively engaged in collaborating to reduce carbon consumption, the report demonstrates that results are disappointing.
The report summarizes this year's results as follows:
2011 Carbon Disclosure Project's Supply Chain Report, A.T. Kearney
On a more positive note, almost 90% of the CDP members have committed to targets, and these are more aggressive than before - they have increased from 2.2% to 3.4% per annum since 2009. Again, while this appears to be an indicator of change in the right direction, there are only 57 members of the CDP, and more than 50% of their suppliers have yet to set targets for carbon reduction.
Most companies we talk with have a sustainability strategy in place, even if that strategy is simply to take a project based approach to becoming more sustainable (and efficient) without setting real carbon reduction goals. We would argue that companies with this approach should reconsider establishing real metrics to measure progress against, since this is the only way to demonstrate real success and to drive progress among supply chain trading partners. The CDP report states that more suppliers (those reporting) are getting better at tracking their own consumption, but are still challenged by scope 3 emissions reporting (gathering data from suppliers). According to the CDP report about 80% of suppliers report on scope 1 and 2, up from last year's figure of around 60%. This is a very important and significant increase, because it is a building block for setting meaningful targets against a baseline that can then be tracked and monitored.
What needs to be done to set and meet targets
According to the CDP report, over 50% of an average corporation's carbon emissions are typically from supply chain rather than within its own four walls. Managing supply chain emissions is therefore critical to address climate change effectively. Organizations that are ready to formalize or ramp up their sustainability initiatives, should start with the following initiatives:
- Set carbon reduction targets, if you haven't already.
- Start data gathering, internally and externally.
- Identify the IT tools and services that can help make carbon reporting a reality.
- Integrate qualitative and quantitative sustainability criteria into supplier scorecards and evaluations.
If you are still scratching your head, start by engaging organizations that have helped others down this path - the NGO's (non-governmental organizations), including the WWF and the Carbon Disclosure Project, and the technology vendors including SAP, who now provides tools to the CDP. There are of course, many others that can help. We welcome inquiries regarding these organizations.
As CDP member companies have shown, as their ability to measure and report emissions data improved, their opportunities to drive emissions reductions in their own operations increased. This leads to cost reductions, reduced risk and improved brand image.
Finally, the message to take away on this Earth Day 2011 - it is time to take the next steps towards reducing carbon consumption. For many retail organizations, this begins with setting real internal and external carbon emissions reduction targets, holding suppliers accountable and putting the tools in place by which to measure and manage products and processes in the supply chains.