Supplier Greenhouse Gas Emissions

We continue to work to better understand the carbon footprint of our supply chain, as well as the risks and opportunities of greenhouse gas (GHG) regulation and climate change for our suppliers and, by extension, for our company. For our own products and operations, we have a comprehensive commitment and strategy to reduce GHG emissions, as detailed in the Climate Change section of this report, 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 below, suggest that many of our suppliers are already setting their own emissions-reduction goals or are considering it. We will continue to work with and encourage our suppliers to set their own energy-efficiency goals or GHG-reduction targets and to track our suppliers’ GHG emissions management progress over time.

Ford’s Supply Chain GHG Emissions Survey

In 2010, Ford launched a pilot project to better understand our suppliers’ GHG emissions using the Carbon Disclosure Project (CDP) Supply Chain Program questionnaire. The CDP’s questionnaire gathers qualitative and quantitative information about the suppliers’ management of climate risks and emissions. From the success of this pilot, we have been using and expanding the CDP survey ever since. 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.

In 2013, we surveyed 145 suppliers to understand their greenhouse gas emissions, compared to 135 in 2012, 128 in 2011 and 35 in 2010. The 145 suppliers surveyed accounted for more than 50 percent of our 2012 annual purchases of $90 billion. We also included select non-production suppliers, such as logistics and information technology suppliers in this survey. In 2014, we plan to expand this survey to include an even larger number of key production and non-production suppliers, and we will survey suppliers about both GHG emissions and water.

When determining which suppliers to survey in our greenhouse gas survey we used a variety of criteria, including:

• The GHG intensity of the suppliers’ activities or commodities supplied,
• The strategic nature of the business relationship with Ford, and
• The geographic footprint of the supplier’s global operations.

From the supplier data we have collected since 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.

We achieved an overall response rate of 89 percent in 2013, again exceeding our internal objectives for this round of voluntary surveys. This response rate also significantly exceeds the average supplier response rate for all companies participating in the CDP’s Supply Chain Program, which was 44 percent in 2011, 39 percent in 2012, and 51 percent in 2013. We believe that our high response rate was achieved through the active support and training Ford provided to suppliers throughout the process – support that included webinars, guidance documents and one-on-one technical assistance.

The findings from this year’s survey are summarized in the box below. Overall, we continued to find that, for the most part, our suppliers are engaged in the issue of climate change and are working to reduce their GHG emissions. However, there was still wide variability in suppliers’ readiness to measure, report on and actively manage GHG emissions.

Scope 3 Greenhouse Gas Accounting and Reporting

Scope 3 greenhouse gas emissions include all of the upstream and downstream emissions generated by a company’s supply chain, from raw material extraction to end-of-life disposal or recycling. Assessing these emissions is extremely challenging, as it includes emissions generated by processes and entities far from Ford’s own operations and direct suppliers. The World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD) finalized a new Scope 3 (Corporate Value Chain) GHG Emissions Standard in 2011 to help companies with this difficult task. The standard provides a step-by-step methodology for companies to quantify and report their Scope 3 GHG emissions in 15 different categories of emission-generating activities across their entire value chain, upstream and downstream of their own operations. It is intended to be used in conjunction with the GHG Protocol Corporate Accounting and Reporting Standard, which provides companies with a methodology for reporting emissions from their own operations.

Ford road-tested the new Scope 3 protocol in 2010 as part of the WRI/WBCSD’s development process. The direct supplier emissions we assess in our current supplier GHG surveys are only one element of the WRI/WBCSD Scope 3 standard. However, we are using elements of the WRI/WBCSD Scope 3 standard to assess our full supply chain emissions, to help us develop a comprehensive approach to supply chain emissions management, and to help our suppliers develop GHG management plans. We are currently working to integrate our supplier GHG survey results into a broader analysis of complete Scope 3 GHG emissions.

In 2014, we will further expand our supplier environmental assessments. We will increase the number of suppliers we ask to respond to the CDP Supply Chain greenhouse gas survey. We will also ask these supplies to complete the CDP Supply Chain water questionnaire as part of our efforts to better understand water risks and implications to our supply chain. We are selecting the expanded group of suppliers to complete these surveys based on a range of criteria including higher greenhouse gas and/or water impacts of the products and materials they supply, their strategic importance to Ford, and the geographic footprint of their operations. We will work closely with these suppliers 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.