(Credit: Pixabay)Companies of all sizes improved their sustainability performance over the past five years, the most businesses on record are participating in sustainability ratings, and after years of fluctuations, some improvement is being made in supply chain environmental impacts, according to a report from EcoVadis.
EcoVadis released its sixth Business Sustainability Risk and Performance Index. The business sustainability ratings provider found that 65% of companies are achieving a performance level of good or better, up from 50% in 2017. Additionally, the number of companies with partial sustainability performance fell from 45% in 2017 to 32% in 2021.
Sustainability performance overall was 1.7 points higher than it was in 2020, doubling the improvement from the year before despite ongoing supply chain disruptions that could impact efforts in the area. Finance, legal, and consulting firms scored the best in the ratings, followed by food and beverage and manufacturing.
Every industry analyzed by EcoVadis saw its sustainability ratings increase since 2017. More companies in general are making sustainability goals part of their business plans, which include seeing investment potential from those efforts.
The EcoVadis index is based on sustainability performance data derived from more than 83,000 ratings of nearly 53,000 companies that were assessed by EcoVadis from 2017 to 2021. Businesses were scored on 21 sustainability criteria across four themes – environment, sustainable procurement, ethics, and labor and human rights.
The environment category measures the results from areas such as greenhouse gas emissions reductions, biodiversity, and water use. Food and beverage, light manufacturing, and heavy manufacturing were leaders in this area, but all industries saw significant gains.
Sustainable procurement scores were also up 1.2 points from 2020, after historically declining, the report finds. Sustainable procurement in the rating system is based on environmental and social results from suppliers.
EcoVadis says 90% of a company’s environmental impact comes from the supply chain, making this category critical. Because many companies are in the early stages of implementing measures to make improvements in their supply chains, the scores are generally lower than in other categories.
Food and beverage was the leading industry in this supply chain study, but all industries improved their scores from 2020. EcoVadis says that is promising considering the fluctuations that have taken place for industries in sustainable procurement since 2017. European companies far outpaced other regions in this area.
A separate report from EcoVadis earlier this year found most companies are setting supply chain emissions reduction targets, including with Scope 1 and 2 emissions. That report did find Scope 3 progress was slower. Efforts to make sustainability improvements in supply chains include improving and increasing technology and management systems, such as using artificial intelligence.
Small- and medium-sized companies are also improving their sustainability performances at a more rapid rate than larger companies. Small- and medium-sized companies, which account for more than 70% of the world’s supply chains outperformed large companies over the five-year period that has been analyzed by EcoVadis. Overall, all companies improved their ratings over that period, and the progress of large companies was within two points of smaller businesses.
European companies, which make up the majority of the data set, scored the highest in the complete EcoVadis sustainability ratings. A quarter of European companies registered advanced performance levels. However, North American companies saw a 42% growth in assessments from 2020 to 2021, and Asia-Pacific had the second highest growth in sustainability ratings overall.
“Companies who consistently use a ratings-based engagement strategy are reaching greater levels of sustainability management performance across their value chains – a foundational element to supply chain risk mitigation and resilience,” says Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis. “And as those programs mature to more advanced stages, they can see much more dramatic improvement in the years to come.”
