Corporations are trimming back the environmental impacts of their far-flung supply chains thanks to a trend toward sharing more transparent information about their carbon footprints, according to a recent study from researchers at Ohio State University.
The move comes as companies have responded to rising investor curiosity about their environmental policies by releasing increasingly detailed reports, and then migrating toward more effective policies to improve those public numbers, the research shows.
That conclusion comes from a paper titled “Supply Chain Carbon Footprinting and Climate Change Disclosures of Global Firms,” written by Christian Blanco, assistant professor of operations and business analytics at The Ohio State University Max M. Fisher College of Business.
The paper examined how information gathered by the Carbon Disclosure Project (CDP) over the past 20 years has influenced firms’ action in the face of climate change. Established in 2000, the nonprofit CDP began as a small index of publicly traded companies for investors who shared an “ambition of transforming capital markets by making environmental reporting and risk management a new business norm.” The group has since grown to include more than 525 investors, 8,400 companies, and $96 trillion in assets.
Blanco’s research analyzed the text from 10,925 CDP reports filed by 2,003 firms during the years 2007-2016, and uncovered an incremental shift in the quality and impact of these disclosures. He concluded that when companies affiliated with the CDP voluntarily submit annual disclosures about their carbon emissions and environmental footprints, their reports become more comprehensive and detailed over time.
That shift illustrates a positive change — albeit slow, incremental, and driven by money — in how companies are quantifying and addressing the impact their entire supply chains are having on climate change, he said.
“As climate change and sustainability initiatives have become a larger focus for the general public, investors began to take notice. This demand for more information has led companies to pay closer attention to the quality and breadth of information they were submitting as part of the CDP,” Blanco said in a release.
“These improved reports, in turn, began forcing companies to confront, understand and view climate change as a real risk to their supply chains — be it physical risks such as weather-related supply chain disruptions or risks as manifested by new or increased climate regulations.”
A second effect of the carbon disclosures has been a realization among CDP-affiliated companies that their supply chains — and the environmental impacts created by them — were larger than they had originally scoped.
"What we’re seeing in these disclosures are companies that are more willing to invest the time and resources to measure the environmental impact of assets like their warehouses, delivery trucks, air cargo planes and data facilities," Blanco said. "It's a much wider — and accurate — view of their total carbon output. It’s also much more difficult."
Research reveals the how, the why and the potential benefits behind many companies' slow crawl to a better understanding of the impact their entire #SupplyChain footprint has on the environment and #ClimateChange. https://t.co/7etooeAVPd— Fisher College of Business (@FisherOSU) January 5, 2022