Carbon Offsetting: Multinationals threaten to axe firms that fail to cut carbon

Research reveals 40 per cent of large companies are taking action to cut indirect emissions and will choose suppliers accordingly

While almost all multinational companies are now addressing their own greenhouse gas emissions, two in every five are also taking steps to reduce the carbon output of their supply chain, according to a major new report released recently.

The poll of over 100 large businesses undertaken by the Carbon Trust shows the increasing impact of green purchasing practices, with 71 per cent of respondents saying they buy key products from low carbon suppliers.

Just under 60 per cent said they would pay more for products from greener suppliers, two thirds stating that they are prepared to pay a 10 per cent premium.

Moreover, 56 per cent said that suppliers were likely to lose contracts if their performance in cutting carbon emissions was not up to scratch.

Companies reported that anticipated pressure from shareholders to go green was the key driver for tackling emissions. However, this was seen as a much greater consideration in the UK, where 74 per cent predicted increased demand from shareholders, compared to the US, where shareholders were cited as a concern by just 34 per cent of those surveyed.

"Currently responsibility for carbon stewardship falls to CEOs and the board; so far they have catalysed many significant carbon reduction projects, especially internally, in order to exploit reputational and efficiency gains," said Hugh Jones, managing director of Carbon Trust Advisory.

"But, as carbon becomes more widely understood as a commodity, there will be increasing pressure from external sources, particularly shareholders, to make companies address the carbon intensive area of supply chain emissions."

Some 42 per cent of companies not currently addressing carbon in their supply chains said they were planning to do so in the next year, with another 42 per cent set to tackle the issue within the next two to three years.

But, while the report details progress on tackling supply chain emissions, Carbon Trust Advisory warned that companies must approach carbon stewardship systematically.

"Of those that have begun tackling this area only 43 per cent have a defined strategy, and just 60 per cent have set targets to do so," Jones said. "These two steps are critical for organisations to plan and capitalise on green growth opportunities over the next 12 months."

Companies cited difficulty in demonstrating the financial business case, cost considerations trumping sustainability, and difficulty in getting suppliers to act as major obstacles to cutting supply chain emissions.

"The rewards are there for businesses to tackle emissions in the supply chain in the form of new revenue streams, reduced risks, emissions and costs," Jones added. "But the going isn't easy and requires significant commitment."

source: www.businessgreen.com

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