Sustainability 2011/12

Supply Chain

Supplier Greenhouse Gas Emissions

We are continuing our work to better understand the risks and opportunities of greenhouse gas (GHG) regulation and climate change for our suppliers and, by extension, for our Company.

In 2010, we launched a pilot program with a select group of our suppliers to better understand the collection and reporting of greenhouse gas emissions data in our supply chain. In 2011, we significantly expanded the program to include a wider range of suppliers and commodities. Our goal is to better understand the carbon footprint of our supply chain and to use the data to create a broad-based carbon management approach for our supply chain. We have a comprehensive commitment and strategy to reduce GHG emissions from our products and operations, detailed in the Climate Change section, which enhances our competitiveness. We hope to help promote similar competitiveness throughout the automotive supply chain. The findings of our GHG emission surveys of suppliers, described in more detail in this section, suggest that many of our suppliers are already setting their own emissions-reduction goals or are considering doing so. We will continue to work with and encourage our suppliers to set their own energy-efficiency goals or GHG-reduction targets and to track progress over time.

Scope 3 Greenhouse Gas Accounting and Reporting

Ford was a “road tester” of the Scope 3 Greenhouse Gas Accounting and Reporting Standard developed by the World Resources Institute/World Business Council for Sustainable Development (WRI/WBCSD). Ford had also been an original participant in the review and development of the internationally accepted Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, which addresses Scope 1 (direct) and Scope 2 (indirect) emissions.

The new Scope 3 (Corporate Value Chain) Standard provides a step-by-step methodology for companies to quantify and report their Scope 3-related GHG emissions; it is intended to be used in conjunction with the GHG Protocol Corporate Accounting and Reporting Standard. It provides a standardized method to inventory the emissions associated with corporate value chains, taking into account impacts both upstream and downstream of a company’s operations.

The Scope 3 Standard was developed through a global, collaborative, multi-stakeholder process, with participation from more than 1,000 volunteer representatives from industry, government, academia and nongovernmental organizations. The road-testing process was designed to provide real-world feedback to ensure that the standard could be practically implemented by companies and organizations of different sizes and from a variety of sectors and geographic areas around the world. The WRI/WBCSD collected feedback from 60 stakeholders and issued a draft standard in November 2010. Ford was the only automotive company to participate in the road test. The final Scope 3 Standard was published by the WRI/WBCSD in October 2011.

Carbon Disclosure Project’s Supply Chain Program

In 2011, Ford participated in the Supply Chain Program of the Carbon Disclosure Project (CDP) for the second year. Through this effort, we work with selected suppliers to gather qualitative as well as quantitative information about the suppliers’ management of climate risks and emissions. Ford participated to gain experience with the supplier survey and to better understand our suppliers’ capability to measure, manage and report their emissions. Based on responses in 2011, Ford was found to be a leader in all three major report categories: managing relationships with suppliers, developing and implementing a sustainable supply chain strategy, and managing risks and opportunities.

Ford’s Supply Chain GHG Emissions Survey

As part of Ford’s engagement with suppliers on supply chain GHG emissions, we expanded our survey from 35 suppliers in 2010 to 128 in 2011. The 128 participating suppliers account for nearly 60 percent of our $65 billion in annual purchases1. In 2011, we included logistics and information technology suppliers in addition to vehicle parts suppliers. Suppliers were chosen to participate in the GHG survey based on a variety of criteria, which included the following:

  • The GHG intensity of the commodities supplied
  • The nature of the business relationship with Ford
  • The geographic footprint of the supplier’s global operations

In 2011, Ford surveyed suppliers using both the CDP Supply Chain Program questionnaire and the AIAG GHG survey, which was developed with input from Ford, other OEMs and Tier 1 suppliers and service providers. Ford used both survey questionnaire formats to capitalize on the differing strengths of each form and to get the most complete picture of both qualitative and quantitative aspects of our suppliers’ management of GHG related issues and emissions. It is our intent to pursue a common industry questionnaire, and we are working toward this goal by sharing process learnings from the use of both forms with the CDP and the AIAG.

In 2011, we achieved an overall response rate of 86 percent, exceeding our internal objectives for this round of voluntary surveys. This response rate also significantly exceeds the average supplier response rate of 44 percent for all companies participating in the CDP Supply Chain Program. We believe that this high response rate is due in part to the active support and training Ford provided to suppliers throughout the process such as webinars, guidance documents and one-on-one assistance.

Overall, we continued to find that, for the most part, our suppliers are engaged in the issue of climate change and working to reduce their GHG emissions. However, there was still wide variability in suppliers’ readiness to measure and report on GHG emissions.

Some Key Findings from Our 2011 Supplier GHG Survey

Of the suppliers responding...

  • A large majority of suppliers have developed management and governance structures to address climate change.

    • Over 90% have a person or committee that is directly responsible for managing climate change issues within their company, and more than 85 percent of those were board level or senior managers.
    • 80% have integrated climate change management into their overall business strategy.
  • A large majority of suppliers have active greenhouse gas emissions-reduction programs.

    • Over 60% have set greenhouse gas emissions-reduction targets, and more than 80 percent have active emissions-reduction initiatives. In general, more Ford suppliers responded that they have set intensity-based targets than absolute targets.
  • A majority of suppliers track and report on their greenhouse gas emissions.

    • Over 50% publicly report their greenhouse gas emissions.
  • Suppliers are working to provide their customers (e.g., Ford) with ways to reduce their overall supply chain GHG emissions.

    • Nearly 80% answering this question responded that use of their goods and/or services directly enables GHG emissions to be avoided by a third party.
    • About 50% have a strategy for engaging their own supply chain on GHG emissions issues.

In 2012, we will again survey the same group of suppliers and work with them closely to ensure improvements in data quality that will result in a more robust baseline of emissions data. We will also continue reviewing survey results and prioritizing opportunities to partner with select suppliers on energy-efficiency training and management programs when possible.

  1. $65 billion is Ford’s annual purchase amount as of year-end 2010.