A company’s supply chain is responsible for substantial environmental impacts. Last year, CDP found that GHG emissions in a company’s supply chain are, on average, 11.4 times higher than its operational emissions.

This chain of environmental risk is not just an opportunity to look beyond companies’ own emissions and cascade their ambition; it is now the only way to leverage change at the scale required. This report explores the environmental impact caused by supply chains and the actions buyers are taking to reduce them.

This year, over 11,000 companies submitted environmental data to CDP. The results show moderate action on measuring and tackling environmental impacts resulting from direct operations. On climate change, 75% of suppliers reported their Scope 1 and 2 emissions and took actions to reduce these emissions by a total of 231 million tons CO2e.

However, suppliers must think beyond climate change alone. Harm to the environment encompasses deforestation and water scarcity, but this realization is not widely reflected in the reported data across themes. Many suppliers that operate in water-stressed areas – or source forest commodities in high-risk regions – are unable to report any data on their water withdrawals or volumes of production and consumption of forest commodities. As emphasized at COP26, stand-alone actions are not sufficient. Environmental issues are interconnected; companies cannot meet their climate net-zero targets whilst generating mass deforestation in their supply chain.

High-performing companies in this area ask suppliers to report data and set targets to reduce their upstream Scope 3 emissions. A growing number of organizations, such as the 207 CDP Supply Chain members and companies on the SER Leaderboard, are trailblazing a path to truly meaningful reductions in harm to the environment. However, they are currently in the minority.

Ambitious environmental action is not yet cascading down the supply chain. Alongside insufficient tracking, CDP data also illustrates a lack of engagement with suppliers. For example, on climate change, only 20% reported data for Scope 3 category 1 ‘Purchased Goods and Services’ emissions, and 62% aren’t engaging suppliers on the topic.