Greenhouse Gas Reduction Being Driven By Nonregulatory Forces

In its January 22, 2013 publication, Reducing Risk and Driving Business Value, the Carbon Disclosure Project (CDP) reported that 38 percent of suppliers in the U.S. product supply chain have set internal targets for greenhouse gas (GHG) emission reductions, with 29 percent achieving year-on-year reductions.   Interestingly, 92 percent of the CDP Supply Chain Project companies (large companies at the top of the supply chain, such as Coca Cola, Dell, Microsoft and Walmart, which initiated the survey) set targets for GHG emission (compared to the 38 percent of suppliers).   The 29 percent of the suppliers that reduced GHG emissions actually saved $13.7 billion.   Only 13% of the suppliers that reduced GHG emissions were motivated by regulation as the sole driver with the vast majority (73 percent) acting due to a “physical risk to their operations,” e.g., drought.

The Report also outlines the “business case” for engaging with suppliers on sustainability, citing factors such as  cost savings, changing consumer behavior, and reputation concerns.  This survey is significant because the CDP Supply Chain Program involves corporate purchasers asking critical questions of their suppliers.  Also, there were 2,415 responses from supplier companies, representing spending power of almost $1 trillion.  The results of this survey are consistent with a 2010 survey that found that 88% of CEOs believe they should integrate sustainability into their supply chains.

In summary, in the near term, GHG reductions are most likely to be initiated by supply chain pressures (except in the few States (such as California) that continue to pursue GHG regulatory mandates).

 William J. Walsh, Esq.



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