Sustainable Procurement Suffers, Leads to Increased Risk, Says EcoVadis Report

When it comes to CSR performance over the last couple of years, sustainable procurement lags behind other environmentally responsible practices such as business ethics and human rights initiatives, posing risks for industries across the board, according to a new report from sustainability rating company EcoVadis. These risks include damages to reputation and disruption of business.

The Global CSR Risk and Performance Index ranked organizations across nine industries, from 2015-2017, based on criteria across the “themes” of environment, labor and human rights, business ethics, and sustainable procurement. Companies with scores of 64 or higher are considered advanced to outstanding, those with scores above 45 are considered “engaged,” those with scores of 25 to 44 represent medium risk, and scores below 25 are considered high risk.

Overall, just 13% of large companies (1,000 employees or more) achieved or nearly achieved advanced scores in Sustainable Procurement. Small and medium companies (26 to 999 employees), on the other hand, dominated over larger companies in the score range between 50 and 60.

Some large companies struggle with sustainable procurement because their executives are less likely than those at smaller companies to have a direct oversight of the labor force/suppliers that provide goods and services, according to EcoVadis.

“The year 2017 appears to have been pivotal for small and medium-sized companies to seize the strategic advantages of sustainable procurement,” the report states. “Given the strong positive trend, this may signal a cascading effect, where small and medium-sized businesses drive sustainability monitoring to deeper tiers in the value chain.”

Paris Agreement

Unweighted scores for the Environment category dipped in 2017, after a boost in 2016. “It appears that most businesses still do not see the climate agreement as an opportunity to redesign their activities, and are therefore not improving their environmental impact,” according to the report.

On the other hand, North America was the only region to improve the Environment theme score, despite relaxed regulations and the fact that the US pulled out of the Paris agreement.

Overall Key Findings

• Companies both large and small in manufacturing industries showed better than average overall performance than non-manufacturers.
• Large companies from the Wholesale, Services and Professionals division were the poorest performers.
• In the small- and medium-sized company group, Food & Beverage showed marked improvement over the years, while Finance, Legal and Consulting seem to have found it difficult to keep up with accelerating industry expectations and an intensifying regulatory environment.
• Business ethics is the most improved CSR theme globally, with companies across all categories showing significant improvement.
• European companies consistently outperformed other regions across all four themes, with large companies scoring slightly higher overall than small and medium businesses (49.5 and 48.4, respectively). In North America, on the other hand, small and medium businesses dominated, with an average score of 44.3, compared to an overall score of 40.8 for large businesses.
• Among companies that were reassessed for a second or third time, more than 60% improved their score.
• The average score of small- and medium-sized businesses is increasing at a faster rate than their larger counterparts.

In looking at performance across regions, Europe is still a clear leader across all industry divisions and size groups. Businesses in Latin America were only slightly behind North American counterparts, and could surpass them if they are able to bring up their ethics theme average, which could easily be spurred by new anti-corruption and data protection legislation or enforcement actions, according to the report.