Sustainable Procurement Lags Behind Climate Goals: EcoVadis Report

Despite significant strides by some of the world's largest companies towards sustainable procurement practices in 2023, progress remains far from adequate to meet global climate and nature targets, according to a new study by corporate sustainability ratings agency EcoVadis.

The study, based on sustainability ratings for 125,000 suppliers across four key areas – environment, labour and human rights, ethics, and sustainable procurement – reveals some positive trends. These include increased adoption of data-driven targets, improved practices and reporting, and broader engagement with value chain members. However, a concerning four-fifths of companies still have procurement practices deemed "high" or "medium" risk.

While the average score for sustainable procurement practices across the EcoVadis network stands at 41.2 out of 100, significant regional differences exist. European companies have made the most progress, exceeding the 45-point threshold for the first time last year. In contrast, North American companies scored an average of 37.7, a mere 0.7-point increase since 2019. Asia-Pacific and Latin America also saw modest improvements of just 1.5 and 1.4 points, respectively, over the same period.

The index further highlights that all industries remain within EcoVadis' medium risk range regarding sustainable procurement. This sluggish progress is particularly concerning for European companies, given the impending Corporate Sustainability Due Diligence Directive (CSDDD) regulations. These regulations, set to be phased in from 2027, could impose substantial fines on companies failing to mitigate the environmental and social impacts of their supply chains.

"Sustainable procurement is becoming an increasingly crucial area of focus as supply chain and due diligence laws continue to expand," said Sylvain Guyoton, Chief Rating Officer at EcoVadis. "The 'substantiated concerns' principle in the CSDDD, for instance, will require many companies to cascade sustainable procurement practices to their Tier 1 suppliers, potentially located anywhere in the world."

He emphasised the need for companies to collaborate more closely with suppliers to ensure both compliance and competitiveness.

Despite these challenges, the report highlights some encouraging areas of progress. The global average score for environmental performance, for example, increased by 2.1 points in 2023, a larger improvement than any other theme.

Additionally, the EcoVadis network demonstrates greater maturity in addressing labour and human rights, with an average score of 54.6. Notably, small companies have seen their average score increase by 7.3 points since 2019.

However, the index points out that economic uncertainty, rising inflation, geopolitical tensions, and other factors have hampered progress on ethics. SMEs and large companies have experienced only a 0.1-point average improvement in this area over the past year.

EcoVadis found that companies participating in multiple ratings through its platform since 2019 have, on average, outperformed regional and industry sustainability benchmarks. These companies are also more likely to be developing robust environmental, social, and ethical policies. Reassessed companies typically achieve scores that are eight to ten points higher per theme, on average, compared to those rated for the first time.

The study serves as a stark reminder that while progress towards sustainable procurement is evident, the pace remains inadequate to achieve global sustainability goals. Companies must actively implement stronger sustainable procurement practices, particularly in light of upcoming regulations like the CSDDD. Continued collaboration between businesses and suppliers, coupled with enhanced transparency and data-driven approaches, will be crucial to drive meaningful change and ensure a sustainable future.