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CSR Could Vastly Improve Supply Chain Sustainability if Companies Could Get it Right

While corporate social responsibility (CSR) clauses have become widely used and have strong potential for improving supply chain sustainability performance, companies’ current practices need improvement to truly impact change, according to a new study.

The study conducted by EcoVadis, a provider of business sustainability ratings in partnership with Affectio Mutandi, which specializes in strategy development on environmental, social and governance, sought to determine the effectiveness and impact of CSR contracts on sustainability practices.

While 70 percent of buyers include a CSR clause in their contracts, more than 50 percent of suppliers said they have come across CSR requirements they couldn’t achieve given the price and quantity of the product required, as well as the timing required the contract. In addition, the study found most CSR clauses don’t have sufficient detail, with 75 percent referencing generic regulations.

Forty-one percent of suppliers do say contractual CSR commitments have raised their awareness of environmental, social and ethical issues, but what brands need to consider as transparency becomes increasingly paramount, is that just 38 percent of CSR clauses extend to tier two suppliers and beyond, which means that raised awareness isn’t reaching throughout the supply chain.

The study also identified several types of clauses in CSR requirements and found large discrepancies in how they are applied, indicating that many companies are still open to risks they could avoid. And companies also aren’t considering their suppliers, as only 25 percent of buyers are adapting CSR clauses depending on the sector and size of the supplier. To improve the corporate responsibility scenario, EcoVadis said companies should develop four key criteria for creating more-effective CSR clauses: precision, verifiability, enforceability and coverage depth.

“As regulatory pressure and demands for transparency continue increasing and businesses are being held accountable for the practices of their suppliers, this study shows the pressing need to rethink how we use contract clauses to support CSR and sustainability practices,” Pierre-Francois Thaler, co-CEO of EcoVadis. “Our goal at EcoVadis is to make sustainability performance measurable and benchmarkable, which is the foundation of integrating specific and enforceable CSR criteria in contracts and serves as a motivator for suppliers to engage in improvements.”