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Canadian Suppliers Not Doing Enough to Manage Climate Change Risks

Posted February 06, 2015

Lack of preparation currently leaves Canadian and U.S. supply chains more vulnerable to climate risks than those in Europe and Japan, according to a study released this week by CDP, the organization formerly called Carbon Disclosure Project, and the consulting firm Accenture.

The new research, which incorporates information from the United Nations’ World Risk Report, is based on data collected from 3,396 companies on behalf of 66 multinational purchasers that work with CDP to better understand and manage the environmental impacts of their supply chains; they account for $1.3 trillion in procurement spend and include high profile organizations such as Nissan and Unilever.

Climate and water data disclosed by suppliers to CDP were scored and evaluated to create a sustainability risk/response matrix which provides a comparison of how well-prepared suppliers across 11 major economies are to mitigate and manage environmental risk which comprises not only the physical climate, but also regulatory and consumer preference changes.

The report found that while Canadian suppliers have moved rapidly in recent years to introduce climate risk procedures, partly in response to climate-linked damages such as those from widespread flooding in 2013, performance generally is below the global average and is sliding. “Suppliers need to up their game,” the study’s authors say.

Canadian firms are also lagging in carbon and monetary savings, with only 33% reporting that they have implemented initiatives that reduce emissions, below the global average of 40%, while those reporting monetary savings stands at 26%, seven percentage points below average. However, both of those metrics are moving in the right direction compared with previous years, the report notes. Water risk assessment remains low and in fact was the second lowest among the 11 countries covered.

Among the recommendations included, it is suggested that major purchasing companies should encourage Canadian suppliers to set emissions targets to help drive performance. Suppliers and their customers are called on to enhance collaboration as a means to increase the effectiveness of emission reduction initiatives. Collaboration along the supply chain in terms of transportation optimization makes it more likely that those initiatives succeed in reducing carbon, and saving money, the report says.

The global picture, which is presented alongside the country-by-country analysis, establishes some encouraging signs of global progress such as an increase in the number of companies assessing and reporting on their emissions. The downside to this however is that “the data suggests that suppliers are making either marginal or no improvements in their development of sustainable supply chains capable of weathering climate risks and other natural disasters,” says Gary Hanifan, managing director, Accenture Strategy.

Click here to download the report.