Philips takes action to reduce carbon impact of its supply chain

Aiming for at least 50% of its suppliers committing to science-based targets for CO₂ emission reduction by 2025, Philips is stepping up its supplier support and incentivisation programme

Philips is encouraging its suppliers to reduce the impact of their activity on the environment in line with the health sector's net-zero carbon targets. Image, Gerd Altmann from Pixabay

Royal Philips has announced an additional ambitious action to combat climate change across the health sector.

The company is stepping up its acclaimed supplier sustainability programme with the goal of at least 50% of its suppliers (based on spend) committing to science-based targets (SBTs) for CO₂ emissions reduction by 2025.

If successful, this major push to decarbonise the company’s supply chain by supporting its suppliers and incentivising them to adopt and meet SBTs will have an impact seven times greater than the reduction of CO₂ emissions from Philips’ own operations alone.

“Over the last few years, we have made major progress in reducing our own greenhouse gas emissions”, said Frans van Houten, chief executive.

“We have been carbon neutral in our operations since 2020 and source all of our electricity from renewable sources.

“We are now using what we have learned to further build out and scale that success with our partners in the supply chain, where the overall environmental impact can even be even greater.”

We are using what we have learned to further build out and scale our success with our partners in the supply chain, where the overall environmental impact can even be even greater

Philips targets its CO₂ emission reduction efforts in three key areas.

Alongside product and business model innovation and carbon-neutrality in its own operations, reducing the CO₂ footprint of its supply chain is key to fulfilling its commitment to doing business responsibly and sustainably in line with the Paris Agreement preferred goal of limiting global warming to 1.5⁰C.

And, in light of the urgency for agreement at the upcoming United Nations Framework Convention on Climate Change Conference of the Parties (COP26), Philips is determined to provide the industry leadership needed to accelerate climate action and work to create more-resilient and sustainable healthcare together with its customers and partners across the value chain.

“We are at a critical point of urgency where we need to accelerate the global transition to climate neutral, circular, and resource-efficient economies and societies,” said van Houten.

“As a purpose-driven company, we are conscious of our responsibility towards society and have set clear, ambitious environmental, social and corporate governance (ESG) commitments to support this major shift.

“And we encourage as many companies, customers and supply chain partners as possible to commit to climate actions and science-based targets, deliver on those actions, and provide proof of progress and delivery through continuous, transparent and indepth reporting.”

To catalyse this change, our research with Philips will investigate and unpick what is required for the health sector to achieve its net-zero goal and create a blueprint for achieving it based on circular economy business models

Building on the company’s existing extensive supplier sustainability performance programme, in which more than 200 suppliers currently participate, Philips will take an active role in supporting and incentivising its suppliers to bring about the changes needed to meet science-based emission reduction targets within their organisations.

This collaborative approach will focus on structural improvements that maximise the impact of CO₂ reduction activities, as well as offering incentives, such as direct support for capability building and preferential payment terms, to accelerate the adoption of SBTs by its suppliers.

By leveraging the latest insights in machine learning and data science, Philips will iteratively optimise the effectiveness of the programme to extend its reach and impact.

The company will also actively explore the establishment of Virtual Power Purchase Agreements (VPPAs) with suppliers, similar to those it already has with industry consortia, in order to support funding for new renewable energy projects such as wind farms and solar farms and further ‘green the grid’.

The global healthcare industry currently accounts for around 4% of global CO₂ emissions.

It is critical that companies and key supply chain partners work with the NHS and wider health system to cut carbon emissions, reduce costs, and eliminate unnecessary waste from service provision

And, in the lead up to COP26 Philips, as a key partner to the UK’s National Health System, has initiated a research project with the University of Exeter, a globally-leading circular economy research institution, to study the environmental impact of the UK’s health system and evaluate how Philips’ healthcare products and services can contribute to reducing the system’s footprint.

“It is critical that companies and key supply chain partners work with the NHS and wider health system to cut carbon emissions, reduce costs, and eliminate unnecessary waste from service provision and Philips’ ambition needs to be supported and replicated across the sector.” said Professor Peter Hopkinson, professor in circular economy at the University of Exeter and co-director of the £30m UKRI National CE-hub.

“To catalyse this change, our research with Philips will investigate and unpick what is required for the health sector to achieve its net-zero goal and create a blueprint for achieving it based on circular economy business models.”

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