The newly released 8th edition of the Business Sustainability Index, provided by EcoVadis, shows outstanding improvements in companies that have gone through multiple ratings for sustainability. This report, based on the analysis of more than 125,000 ratings of supplier sustainability, offers a complete overview of global trends in four key sustainability themes: Environment, Labor & Human Rights, Ethics, and Sustainable Procurement. The report covers a period from 2019 to 2023 and gives insight into improvement and lingering challenges for suppliers around the world.
Overall Progress of Re-Rated Companies
One of the key findings in the EcoVadis report is the marked improvement within companies that have been rated more than once. These companies now average 55.1, compared with 46.7 for those rated for the first time. On average, re-rated companies move up 8 to 10 points across the four themes in which they are rated. This would indicate that companies already practicing sustainability are better positioned to handle risks and meet the demands of new ESG legislation and regulations, thus enabling them to achieve ongoing success.
However, the report also shows that despite overall progress, first-time-rated suppliers are still struggling. In 2023, 42% of all first-time-rated suppliers were rated in the lower performance categories, which, according to MSCI, implies significant sustainability risks. Besides, 80% of the companies that have been identified in the high to medium risk fall under the Sustainable Procurement theme, which calls for continuous attention toward this theme.
Regional Performance: Europe Leading, Yet Challenges Remain
The report also reveals how different regions have performed across these themes, with Europe emerging as an outright leader on the theme of Labor & Human Rights. This is reflected in the highest improvement for this theme among European companies, with all sectors scoring above 50. Some improvements could be noticed in North America, led by Canada and the United States, whose scores climbed upwards to reveal a more apparent focus on human rights in business practices.
Nevertheless, Sustainable Procurement remains a challenge throughout regions: Europe has slightly improved but still tends to have many companies in the risk categories, standing at an average of 41.2; North America and the rest of the world recorded modest gains in this theme, which evidences the need for more focused efforts to enhance sustainable procurement practices globally.
Environmental Gains and Setbacks
For 2023, the Environment theme realized the largest jump in its global average score at 2.1 points. Companies with multiple ratings now average 57.2 in this category, which is indicative of increased awareness and action taken on environmental issues. Not all industries have improved: for example, environmental performance in the Food and Beverage sector went backward-a testament that industry-specific strategies are required to overcome particular sustainability challenges.
Ethics: A Relentless Challenge: Ethics have remained at the top of the challenges, with a development in the global average score of 0.1 point from the previous year. Such findings depict that many companies struggle to put in place and implement standards regarding ethics in their operations and supply chains. The little progress witnessed in this area implies that a lot of work has to be done by companies in making ethics part of their nature concerning sustainability.
Sustainable Procurement: A Growing Priority
The focus has now sharpened on Sustainable Procurement, especially with extended supply chain legislation and due diligence reaching across the globe. The report focuses on how close collaboration with suppliers is crucial to remaining compliant with the changing landscape of legislation while continuing to stay competitive within the market. Yet, challenges in this respect remain, and too many companies continue to fall below par.
Conclusion: A Mixed Picture of Progress and Ongoing Challenges
In the 8th Edition of the EcoVadis Business Sustainability Index, results show a mixed picture of progress and entrenched challenges in sustainability performance on a global scale: whereas companies with multiple ratings evidenced strong improvement, first-time-rated suppliers and specific regions and industries continue to represent significant risks. This report therefore evidences that ongoing commitment to sustainability is needed in all themes, with particular attention to the themes of Sustainable Procurement and Ethics.
As supply chains continue to become increasingly interdependent on a global scale, management of sustainability risks will be one of the clear drivers of future success and resilience. These results from EcoVadis are a good reminder that despite some progress, much is still left to be done in order to have truly sustainable global value chains.
Source: EcoVadis