Philips announces ambitious climate action to drive significant reduction of greenhouse gas emissions in its supply chain

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Global Supplier engagement

October 28, 2021

Aiming for at least 50% of its suppliers (based on spend) committing to science-based targets for CO emission reduction by 2025, Philips is stepping up its supplier support and incentivization program

Amsterdam, the Netherlands –
Royal Philips (NYSE: PHG, AEX: PHIA), a global leader in health technology, today announced an additional ambitious action to combat climate change. The company is stepping up its acclaimed supplier sustainability program with the goal of at least 50% of its suppliers (based on spend) committing to science-based targets (SBTs) [1] for CO₂ emissions reduction by 2025. If successful, this major push to decarbonize the company’s supply chain – by supporting its suppliers and incentivizing them to adopt and meet SBTs – will have an impact seven times greater than the reduction of CO₂ emissions from Philips’ own operations. Progress updates will be reported annually in the company’s Annual Report.

“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,” said Frans van Houten, CEO of Royal Philips. “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.”

COP26
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.

“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 Frans 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. 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 incentivizing its suppliers to bring about the changes needed to meet science-based emission reduction targets within their organizations. This collaborative approach will focus on structural improvements that maximize 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 optimize the effectiveness of the program to extend its reach and impact. Philips 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’.

New study on environmental impact of the UK’s health system
The global healthcare industry currently accounts for around 4% of global CO₂ emissions [2]. 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.

Global recognition
Philips was the first health technology company to have its CO₂ emission targets for the 2020 - 2040 period assessed and approved by the Science-Based Targets initiative (STBi). Philips received further recognition for its ESG performance, achieving top positions in the Dow Jones Sustainability Index and the Sustainalytics rankings, and eight consecutive years on the CDP Climate Change A-list. In March 2021, the company was awarded an ESG score of 90 out of 100 by S&P Global Ratings, the highest score the organization has awarded to date. Philips also achieved second place in 2020 on Wall Street Journal’s 100 Most Sustainably Managed Companies in the World.

[1] Science-based targets are a set of goals developed by a company to provide it with a clear path to reduce greenhouse gas emissions. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. More information: sciencebasedtargets.org
[2] European Commission, EDGAR - Emissions Database for Global Atmospheric Research, https://edgar.jrc.ec.europa.eu/

For further information, please contact:

Joost Maltha
Philips Global Press Office
Tel: +31 610 558 116
Email: joost.maltha@philips.com

Ben Zwirs
Philips Global Press Office
Tel: +31 6 1521 3446
Email: ben.zwirs@philips.com

About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people's health and well-being, and enabling better outcomes across the health continuum – from healthy living and prevention, to diagnosis, treatment and home care. Philips leverages advanced technology and deep clinical and consumer insights to deliver integrated solutions. Headquartered in the Netherlands, the company is a leader in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, as well as in consumer health and home care. Philips generated 2020 sales of EUR 17.3 billion and employs approximately 78,000 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter.

Forward-looking statements
This release contains certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about the strategy, estimates of sales growth, future EBITA, future developments in Philips’ organic business and the completion of acquisitions and divestments. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.

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