Good news on the sustainability fron according to the Business Sustainability Index form EcoVadis. On August 28, the group said that companies of all sizes a are making measurable progress on a broad spectrum of sustainability challenges.
“The sustainable procurement theme is becoming an even more crucial area to watch as supply chain and due diligence laws continue to expand,” said Sylvain Guyoton, chief rating officer at EcoVadis, in a statement. “The principle of ‘substantiated concerns’ in the corporate sustainability due diligence directive, for example, will require many companies to cascade sustainable procurement practices to their Tier 1 suppliers, and who may be anywhere in the world. Companies must work more closely with suppliers than ever before to remain both compliant and competitive.”
The Index explores the trends behind the 125,000+ supplier sustainability ratings (~38,000 in 2023 alone). It looks at how these suppliers, spanning all global regions and major industries, are performing on four core assessment themes: environment, labor & human rights, ethics and sustainable procurement.
The score trends give a view into how large purchasing organizations are leveraging ratings in their supply chains to reduce risk, build resilience, prepare for compliance with ESG reporting and due diligence laws.It also reflects how suppliers are also reducing operational risks, enhancing efficiency, saving costs, collecting better data and enhancing their relationships with business partners.
Key findings within this edition include:
- Improvement across the network: 46.7 is the average score that companies achieve on their first rating, compared to 55.1 for companies with multiple EcoVadis Ratings. Looking beneath global averages, scores of reassessed companies are typically between 8 and 10 points higher per theme, on average, compared to first-time rated companies.
- The “first rating baselines” highlighted throughout the report show that there is still much work to be done across value chains. In 2023, 42% of suppliers rated for the first time fell into the insufficient/partial performance levels, indicating significant sustainability risks and non-existent or ineffective systems in place to manage them. The share of companies in the high to medium risk ranges rises to 80% for the sustainable procurement theme.
- Companies in the network are more mature on the labor & human rights theme than on any other, with a 54.6 average. Small companies in particular have increased their average by 7.3 points since 2019. All regions are consistently improving their performance, with Europe increasing its average the most since 2019. North America is making significant progress, with Canada averaging 55.8 and the US at 53.1. All industries have now crossed the 50-point average score threshold on the labor & human rights theme, with finance, legal & consulting leading the way with a 58.6 score.
- The majority of companies across the network remain in the risk range for the sustainable procurement theme, with a 41.2 average. Europe has crossed the 45-point threshold on the theme, though progress was slow over the past year. North America scored a 37.7 average (an increase of just 0.7 from 2019). Asia-Pacific and Latin America lead the way with 1.5 and 1.4-point gains respectively. All industries remain in the medium-risk range on the sustainable procurement theme, with light manufacturing scoring the highest with a 44.4 average.
- The global Environment average increased by 2.1 points in 2023, significantly more than any other theme. Companies with multiple EcoVadis Ratings scored a 57.2 average for this theme, with nearly one-third performing at an Advanced level. Yet, there was still regress in the food and beverage industry, in which large company performance declined 2 points since 2019.
- Economic uncertainty, rising inflation, geopolitical tensions and other factors have exposed companies to greater ethics challenges than ever. But progress in the ethics theme score has stalled, with SMEs and large companies improving their average by just 0.1 point over the past year.
