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 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 our suppliers’ GHG emissions management progress over time.

Ford’s Supply Chain GHG Emissions Survey

In 2012, Ford again surveyed our suppliers regarding their GHG emissions. We began these types of surveys with a pilot project in 2010, and significantly expanded it in 2011 to include a wider range of suppliers and commodities. In 2012, we again expanded the program to include more suppliers. 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 2012, Ford again surveyed suppliers using two separate questionnaires: the Supply Chain Program questionnaire of the Carbon Disclosure Project (CDP), and the GHG survey of the Automotive Industry Action Group (AIAG). The CDP’s questionnaire gathers qualitative and quantitative information about the suppliers’ management of climate risks and emissions. Based on suppliers’ responses to this questionnaire in both 2011 and 2012, 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. The AIAG survey was developed with input from Ford, other original equipment manufacturers (OEMs) and Tier 1 suppliers and service providers. Ford used both questionnaires to capitalize on the strengths of each 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 2012 we surveyed 135 suppliers, compared to 128 in 2011 and 35 in 2010. The 135 surveyed suppliers account for more than 50 percent of our $75 billion in annual purchases. Also in 2012, we again included logistics and information technology suppliers in addition to vehicle parts suppliers. Suppliers were chosen to participate based on a variety of criteria, including 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

We achieved an overall response rate of 92 percent in 2012, 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 and 39 percent in 2012. We believe that our high response rate is due in part to the active support and training Ford provided to suppliers throughout the process – support that included webinars, guidance documents and one-on-one 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 working to reduce their GHG emissions. However, there was still wide variability in suppliers’ readiness to measure and report on 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 2013, we will again survey a slightly expanded 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.