Interview with Frances Way, Carbon Disclosure Project (CDP)

Carbon Disclosure Project

Frances Way has been at the Carbon Disclosure Project (CPD), an independent not-for-profit organisation which holds the largest database of corporate climate change information in the world, since 2007. She heads the CDP Supply Chain Programme, an initiative established under the CDP umbrella aimed primarily at facilitating dialogue between companies and their suppliers on issues associated with climate change. Initially, the CDP comprised only the Investor Project, a mechanism whereby information requests are sent out to a number of corporations worldwide on behalf of investors.

Corporations such as Walmart, through participating in this programme, were able to see their operations through a ‘carbon lens’ and to identify the key risks and opportunities associated with their carbon emissions. Walmart, who submitted an information response for the first time in 2006, noted that the same risks and opportunities must be applicable to their supply chain, thus instigating the growth of the CDP Supply Chain Programme in 2007.

Organisations face three main areas of risk:

• Regulatory risk – The regulatory landscape is continuously changing. Current and potential legislation such as cap and trade initiatives pose a real risk, especially to organisations that do not have an effective carbon reduction strategy in place. Whilst we are seeing ever-increasing clarity and certainty with respect to legislation facilitating more accurate forecasting of risk, large companies, in particular, continue to face the challenge of managing the risk associated with their complex, global supply chains.
• Risk from climate change itself – The physical impact of climate change may pose a real risk to many businesses, either directly through their own operations or indirectly through their supply chain. Consequences of climate change include flooding, extreme weather conditions and lower agricultural yield.
• Risk of changes to consumer demand – As awareness of climate change increases, new markets and technologies emerge. Businesses who wish to remain competitive will need to adapt to the demands of the low carbon market.

Through the CDP questionnaires, companies are able to report what risks they perceive climate change brings to their business. Surprisingly, out of all companies responding in the first Supply Chain programme, 58% reported that they did not believe that climate change presented any risk to their operations!

CDP responses generally vary across different sectors, regions and countries. The Supply Chain Project has found the overall response from larger developing markets such as China to be higher than expected. Specific sectors such as retail and consumer goods manufacturing generally provide more comprehensive responses to the CDP questionnaire, owing to the fact that they were motivated by consumer demand to start early.

Despite these observations, however, there has not been enough of a consistent sample to make accurate generalisations here.

The CDP is in its seventh year and it is clear that across all sectors and countries, the way in which organisations report their carbon emissions is becoming increasingly sophisticated and a growing number of companies are setting carbon reduction targets and outlining the processes and systems to achieve them year on year. Organisations may choose their own method for calculating emissions, although CDP does point companies to the GHG Protocol.

The complexity of carbon footprinting is a challenge. For the CDP, companies are requested to report Scope 1 and 2 emissions which include all direct emissions associated with onsite operations and electricity use, as well as Scope 3 emissions which covers everything else! Scope 3 emissions can include anything from emissions associated with business travel to the final disposal of products, and obtaining accurate primary data on these can often present a significant challenge.

The supply chain programme will help with part of the Scope 3 emissions challenge in time.

In addition to this, the process of collating and managing the data tends to improve year on year, which often results in a change in scope and accuracy with which a company reports emissions. This can make comparability a challenge.

A company will often end up with a larger footprint than the year before simply because the scope of the calculation has expanded and the accuracy improved. The main point to bear in mind here is that even though continuous improvement is important, it is more important not to lose sight of the real purpose for carbon footprinting i.e. to inform a wider carbon reduction strategy. Often companies can forget the ‘end game’, which is to understand how to reduce emissions. Companies should be thinking more about what they need to do to survive in a low carbon economy.

The CDP formerly represented a high-level group of companies, thus excluding an enormous number of SME’s. The Supply Chain Project has changed this, and now includes the supply chain of the corporate members. To date through this wider reach it has been identified that many companies, in particular SME’s, still do not see this process as relevant to their business and therefore one of the tasks of CDP is to organise training and work with procurement departments to help with engagement.

The CDP has also created a simplified version of its questionnaires, specifically geared towards SMEs to support engagement and participation.

Another thing I have learned is that the first step towards managing carbon emissions is to measure them. Companies have, as a result of reporting to us, increased their awareness of which areas of the business produce the most emissions. Many are better able to set reduction targets as they have the information needed to focus attention and allocate resources accordingly.

However, although the CDP provides companies with a structure and an incentive to report carbon emissions, this is only the first critical step of a wider carbon reduction strategy. We want to see more and more companies taking those next steps on the carbon reduction journey.

‘Top 5 Tips’ for maximising value in a carbon reduction programme?

1. Increase energy efficiency: In the UK, our energy mix means that maximising energy efficiency will result in carbon emissions reductions as well as cost savings
2. Identify ‘carbon hotspots’: Conducting a carbon footprint will enable an organisation to identify areas where carbon reductions can be made which will result in the best returns on investment.
3. Trust that your investment will be paid back: Often investment in carbon reduction initiatives has long pay back periods, but they will pay back in the end.
4. Seek buy-in throughout the company: A carbon strategy should not just be an ‘add-on’ conducted through the Corporate Responsibility department: It needs to infiltrate every department. It is especially important that your purchasing department is provided with the tools and knowledge required to incorporate carbon strategy within the procurement process.
5. Collaborate with suppliers: Investing in your suppliers can identify innovations and bring financial benefits to all.

Click here to download the PDF

<< Back