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As more organizations, governments and individuals place a bigger focus on sustainability, companies are beginning to make larger inroads in their own attempts to operate more sustainably. According to EcoVadis’ fifth annual Business Sustainability Risk & Performance Index, sustainability performance for the more than 46,000 global companies tracked between 2016 and 2020 reached an average of 47.7 score points in 2020, up from 46.6 in 2019.
A sustainability ratings company, EcoVadis scored the companies based on 21 sustainability criteria and across four themes—environment, labor and human rights, ethics and sustainable procurement. The company uses a scoring system of zero to 100, with companies scoring under 25 representing “high risk.” Those with scores of 25-44 are labeled as having “medium risk,” while anything over 45 is “good” and more than 64 is “advanced.”
While small- and mid-sized enterprises (SMEs) continue to outperform their larger counterparts, EcoVadis says overall performance scores have increased across company sizes, regions and industries. It also says that a “clear shift from low-performing toward higher-performing sustainability scores over a five-year period” reveals that more organizations are initiating and/or growing their internal sustainability practices for the first time, while leaders continue to professionalize and expand their now-seasoned management systems.
Other Key Findings
As part of its research, EcoVadis also discovered that:
- Labor and human rights management are taking center stage. The labor and human rights theme saw the strongest growth in 2020, and is leading with an average of 50.7 score points. “It is reassuring to see that, amid the COVID-19 pandemic’s immediate impacts on working conditions and human rights across the globe,” the company states, “corporate sustainability management systems continue to mature and adapt to new challenges.”
- Geographic location matters. Europe remains the leading region, with an average performance of 52.1 score points in 2020, but EcoVadis says North America is “catching up quickly” and established a new regional high of 46.5 score points. Greater China, on the other hand, remains the lowest-scoring region, despite the fact that its average score increased to 36.9.
- Sustainable procurement may be lagging. In assessing companies’ sustainable procurement approaches, EcoVadis highlights what it calls a “concerning picture” of supply chain management practices among rated companies. “While some individual regions (namely, the EU) display a stable performance in sustainable procurement,” the company reports, “the global average score is declining.” More specifically, it says most businesses are “unprepared to meet forthcoming supply chain due diligence regulations at a national and European level and are potentially exposed to significant risk in their relationship with suppliers further up the value chain.”
Specific to sustainable procurement, EcoVadis found that:
- While the EU and the Organization for Economic Cooperation and Development (OECD) companies display a stable performance trajectory, global practices in sustainable procurement are lacking and a majority of businesses are unprepared to meet upcoming supply chain due diligence requirements and legal obligations.
- The use of sustainable procurement tools, including supplier code of conduct and supplier assessments, has grown tremendously, to 26% and 33% of companies respectively in 2020, but key actions such as supply chain risk analysis remain underutilized and less than 35% of companies have policies on sustainable procurement in place.
- EcoVadis adjusted its methodology toward more stringent scoring, with a higher weight on key sustainable procurement actions that emphasize best practices in managing supply chain risks upstream.
- Across industries, rated companies’ performance in sustainable procurement is now downward-trending, which raises concerns in light of exacerbated supply chain risks during the COVID-19 pandemic.
There’s More Work to be Done
With sustainable procurement being the only theme in which average scoring decreased in 2020, EcoVadis says it’s time for companies to put more emphasis on this aspect of their sustainability efforts. It also acknowledges that sustainable procurement is the most challenging aspect of sustainability performance, with a gap of 6.7 points to the next-lowest-performing theme (ethics).
“In order to gain transparency into the second tier of the supply chain and learn more about upstream sustainability risks, both social and environmental,” EcoVadis advises, “it’s imperative businesses invest the time and resources required to cultivate a detailed understanding of the procurement practices implemented by partners and suppliers.”
