Our thinking

Chain reaction

12 February, 2021

Although supply chains form an essential part of the smooth day to day operation of a business, it can be easy to underestimate the significance of supply chain as a source of risk for businesses.

But a new report from CDP (formerly known as the Carbon Disclosure Project) makes clear why it would be unwise to – over and above the fact that supply chains account for an average of over 90% of greenhouse gas emissions.

CDP has analysed data from its 8,000+ supplier companies disclosing to their corporate customers via its platform in 2020 and predicts a combined US$120 billion of increased costs among those companies alone within the next five years from environmental risks.

These risks are broad ranging, including physical, reputational and regulatory risks across all three of CDP’s focus areas: climate, forestry and water.

These environmental risks are outside of a business’ direct control – and shared across sectors, which can make it seem even more challenging. However, as we’ve written before, the shared nature of the risks is also a powerful lever for change. Engaging suppliers by asking them questions about their risks, increasing disclosure and setting targets is a mutually beneficial process. This will reduce risks and costs for all actors in the supply chain and set off the right kind of chain reaction.

By Patrick Bapty