Philips steps up supplier sustainability program to reduce CO2 emissions

Philips has announced an additional action to combat climate change by stepping up its supplier sustainability program 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 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 CO₂emissions from Philips’ own operations. Progress updates will be reported annually in the company’s Annual Report.

Frans van Houten, CEO of Royal Philips, said: “Over the last few years, we have made major progress in reducing our own greenhouse gas emissions. 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.”

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 Philips’ commitment to doing business responsibly and sustainably, in line with the Paris Agreement preferred goal of limiting global warming to 1.5⁰C. 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.

Van Houten added: “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. 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. 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 in-depth reporting.”

Building on the company’s existing extensive supplier sustainability performance program, 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 using the latest insights in machine learning and data science, Philips will optimise the effectiveness of the program to extend its reach and impact. It will also actively explore the establishment of Virtual Power Purchase Agreements (VPPAs) with suppliers, similar to those it already has with industry consortia, 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. In the lead up to COP26 Philips, as a partner to the NHS, has initiated a research project with the University of Exeter 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.

Professor Peter Hopkinson, professor in circular economy at the University of Exeter and co-director of the £30 million UKRI National CE-hub, said: “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. Philips’ ambition needs to be supported and replicated across the sector. 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.”