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Indian firms need to do more to avoid climate change risks

                                                                                                                                         The Hindu, New Delhi, 5th February, 2015


ack of preparation leaves supply chains in Brazil, China, India and the U.S. more vulnerable to climate change risks than those in Europe and Japan, according to a new report by CDP, an international NGO formerly called Carbon Disclosure Project.

Suppliers in India and Canada are not doing enough to manage climate change risks. Indian companies, in particular, demonstrate a low propensity to reporting on emissions, according to the report ‘Supply chain sustainability revealed: a country comparison 2014-15.’

The report, which says it is the most comprehensive overview of the climate risks and opportunities for supply chains globally with focus on 11 countries, finds that Chinese and Indian suppliers deliver the greatest financial returns on investment to reduce their greenhouse gas emissions and demonstrate the strongest appetite for collaboration across the value chain.

While a steadily growing number of Indian suppliers are responding to the CDP supply chain questionnaire, in percentage terms at least, disclosure and performance have been declining over the last two years. Despite the existence of dedicated ministerial departments for energy efficiency and renewable energy, a lack of policy direction from New Delhi is partly to blame, the report points out.

Where there is regulatory certainty around measurement and reporting, such as in Japan or France, high percentages of suppliers also disclose, even when they are not explicitly captured by regulation. Where the signals from government are weak or non-existent, such as in Brazil, China, India and the U.S., reporting levels are disappointing, the report finds.

Multinationals could better engage with their Indian suppliers on emission reduction efforts, and Indian suppliers are increasingly active in proposing emission reduction initiatives to their value chain partners. But the report points out that the percentage of suppliers implementing emission reduction initiatives has fallen to 41 per cent in 2014 from 65 per cent in 2012. However, there has been an encouraging increase in the number of suppliers making investments in low-carbon energy — up to 29 per cent of respondents who implemented emission reduction initiatives from 26 per cent last year.

The new research, which also incorporates information from the United Nations’ World Risk Report, is based on data collected from 3,396 companies on behalf of 66 multinational purchasers that work with CDP. They account for $1.3 trillion in procurement spend and include organisations such as Nissan Motor Co. Ltd., and Unilever.

While suppliers in France, the U.K., Spain and Germany are identified as the most sustainable and they have taken extensive measures despite comparatively low levels of exposure to climate risk, suppliers in China, Italy and the U.S. are found to be vulnerable, the report says.

For many companies and industry sectors, the vast majority of their water use and water-related risks and impacts are located in their supply chain, rather than their direct operations. For example, only 6 per cent of Nike’s water footprint comes from its owned-and operated-facilities, while 73 per cent is used in the production of its raw materials, especially cotton.