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Report: Sustainability in Supply Chains Has Increased Overall, But Procurement Stalls

The COVID-19 pandemic has sharpened into focus the gaping vulnerabilities in the global supply chain, and the data bears this out: Though business sustainability performance has improved over the past five years, according to a new performance index, sustainable procurement continues to lag behind.

Indeed, more than one-quarter of 35,000 suppliers across nine industries and five regions (North America, Latin America and the Caribbean,Europe, Greater China and Asia, the Middle East and Africa) have no health crisis measures—across supplier due diligence, employee health and safety and proper working conditions—in place, according to fourth edition of the Business Sustainability Risk and Performance Index by ratings platform EcoVadis, which drew on data from 2015 to 2019 and parsed them into four assessment themes: environment, labor and human rights, ethics and sustainable procurement.

While most scores improved by at least 9 percent since 2015, those for sustainable procurement “remain at the lowest end,” EcoVadis said, and in fact fell last year compared with 2018. “In appears that companies continue to focus on societal impacts linked to their own operations, while risks that may be lurking in their supply chains are not prioritized to the same degree,” the authors of the report wrote.

Labor and human rights, which ticked up 11 percent from EcoVadis’s previous analysis, showed the biggest gains. “This clearly confirms that topics ranging from employee health and safety, to diversity and discrimination, to child labor and human trafficking are high on companies’ sustainability management agenda,” the authors said.

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Small and medium-size enterprises (SMEs), EcoVadis found, have shown consistent score improvements (a 6 percent increase over five years) while larger companies have presented more fluctuations. SMEs have also consistently outstripped their larger counterparts in the sustainable procurement area since 2015.

Split by geography, Europe remains the “undisputed leader” in sustainability performance with over a 10-point advantage compared to North America, which came in second, the analysis found. Greater China remains the lowest-scoring region, while performance in the AMEA and Latin America and the Caribbean is mixed.

North American companies lead in reporting on carbon emissions, however. Eighteen percent of businesses in the region participate in direct carbon reporting compared with 15 percent of organizations in Europe and AMEA. Europe, on the other hand, leads in implementing action on carbon emissions and sustainability overall—and SMEs, in particular, have been blazing greater trails.

“European SMEs have been leading the benchmark since 2015 and continue to raise the bar for sustainability performance,” the report’s authors wrote. “For the first time in 2019, they passed the symbolic threshold of 50 points.”

And, as it turns out, highly regulated industries, such as chemicals, electronics and food manufacturing, demonstrated better sustainability performance overall, while supporting services along supply chains, such as information services, transport and construction show “no clear improvement trend” in any of the size groups.

All these performance variations affect supply-chain management and resiliency, especially in a world thrown into upheaval by the coronavirus.

“With a view of how risks are shifting by legion and industry, the index provides invaluable information that procurement functions can leverage when formulating sound purchasing strategies,” EcoVadis said of its report. ”In addition to avoiding damage to brand reputation and business disruption, insights into supply chain sustainability management can be effectively leveraged to understand health crisis preparedness and business continuity readiness across the entire value chain.”