EcoVadis, the world’s most trusted provider of business sustainability ratings, released the fourth annual edition of its Business Sustainability Risk & Performance Index. The report includes insights from global supply chain ratings with analysis on the sustainability scores of more than 40,000 companies as assessed by EcoVadis from 2015 through 2019.
This year’s Index also includes a special deep dive topic on carbon emissions reporting as well as two sub-reports – one examining the health crisis risk and preparedness of supply chains before COVID-19 (based on data from January 2019 to April 2020) and another on the Manufacturers of Chemicals and Chemical Products Industry (based on data from 2015 to 2019).
Select highlights from the analyses include:
- Supply chains were extremely vulnerable leading up to the COVID-19 crisis. Assessments of 35,000 supplier ratings revealed that for every industry, more than a quarter of suppliers have no measures in place to protect employee health and safety and proper working conditions, nor are they monitoring these and other key due diligence indicators of their own suppliers.
- North American companies lead in reporting on CO2 emissions, but Europe leads in implementing action. Eighteen percent of businesses in North America participate in direct carbon reporting compared to 15% of organizations in Europe and AMEA. However, year-over-year Europe continues to outperform other regions on sustainability, scoring particularly well in the Environment theme. From a company size standpoint, small and medium-sized enterprises (SMEs) significantly underperform large ones in emissions reporting, highlighting the need for engagement strategies that develop management system maturity and guide improvements.
- Sustainable Procurement continues to lag. Except for Sustainable Procurement, all theme scores have increased by at least nine percent since 2015. While companies are addressing social and labor impacts within their own operations, they are neglecting the risks that exist among their suppliers – representing a missed opportunity to drive value and create resilience in the next tier of the supply chain.
- Chemical suppliers have greatly improved their sustainability practices. While this trend is especially true among small and medium-sized companies, organizations of all sizes in this industry have shown consistent positive progress. Sector initiatives, such as Together for Sustainability (TfS), present a positive go-forward example for other sectors.
“The recent pandemic put a magnifying glass on supply chain risks and vulnerabilities,” said Pierre-Francois Thaler, co-CEO of EcoVadis. “As organizations look to rebuild operations, they must ensure strong sustainability practices remain front and center, especially when it comes to supplier selection and relationship management. You are only as strong as your most vulnerable supplier – and without a holistic sustainability management system, organizations will continue to struggle to build resilience to supply chain disruptions and fail to meaningfully contribute to global sustainability outcomes.”
EcoVadis scores organizations on 21 sustainability criteria across four themes: Environment, Labor Practices and Human Rights, Ethics and Sustainable Procurement. Scores range on a scale from zero to 100, where below 25 represents high risk, 25-44 represents medium risk, above 45 represents good performance, and above 64 is considered advanced. In this year’s Index, 57% of companies achieved scores of 45 or higher. This reflects a seven percent jump from the previous three years in which this figure hovered around 49% to 51%, indicating that supply chains may have reached a pivot point and are poised to go ‘beyond compliance’ to performance and resilience. Data also showed that, in three out of the four themes, small and medium-sized companies continue to outperform their large counterparts.
“Now is the time to accelerate sustainability programs. Although there remains plenty of room for improvement, this pivot point suggests an accelerating trend of supply chain readiness to escape the ‘compliance’ trap and embrace a performance-management approach to sustainability,” added Thaler.
EcoVadis’ Index examines performance of both small and medium-sized businesses (organizations with 26-999 employees) and large businesses (organizations with 1,000 or more employees) across five geographic regions and nine industry sectors: light, heavy, and advanced manufacturing, food and beverage, construction, wholesale, transport, information and communication technology (ICT), and finance, legal and consulting.
Visit the EcoVadis Index Online or EcoVadis Index Infographic to view highlights on specific sectors, geographic areas and themes or explore the Sustainability Index and Impact resource center to download all studies and insights in the 2020 EcoVadis Business Sustainability Risk & Performance Index series.