Australian Companies Lead Asia-Pacific on Sustainability – But Are They Keeping Pace With the Global Leaders?

July 27, 2023 EcoVadis EN

This article taps into the data set underpinning our latest Index Report – which analyzed more than 100,000 EcoVadis sustainability ratings from 2018 to 2022 – to explore six key sustainability trends we observed among Australian companies over the past year. 

In line with steps taken by global peers, the Australian government has recently ramped up its sustainability ambitions, including through its commitment to nearly halve domestic GHG emissions against a 2005 baseline within the decade. The government is also mulling updates to the 2018 Modern Slavery Act that could require in-scope companies to not only report on labor and human rights issues in their value chain but also demonstrate due diligence efforts. These legislative pressures – combined with other drivers like ongoing supply chain instability – will require the bulk of Australian companies to take a much more proactive approach to reducing operational sustainability risks and helping suppliers improve. A steadily growing number of Australian companies are already leveraging our ratings insights and platform tools to work toward these goals.

1) The number of Australian sustainability assessments grew by 75% in 2022 alone.

The representation of Australian companies in the EcoVadis network is growing quickly, with roughly 300 assessments conducted in 2022 – a 75% jump from 2021. This impressive growth was fueled by the more than 200 newcomers to the network and nearly 100 companies assessed for at least the second time. Australia is now fifth in Asia-Pacific by number of ratings, behind South Korea, India, Japan and China. This increasingly robust data set is giving procurement teams around the world the ability to benchmark the performance of their Australian trading partners – across industries and company sizes – and identify high performers that can help them meet their sustainability and compliance goals.

2) Australia leads the way in Asia-Pacific and remains the only non-European company in the global top 20.

With an overall average of 52.3, Australia was the top sustainability performer in our Asia-Pacific assessment region in 2022. It is narrowly ahead of Singapore, nearly 2 points clear of New Zealand and more than 4 points ahead of Malaysia and Japan. This score is firmly within the “Good” threshold of the EcoVadis 0-to-100 scoring scale, which indicates that the typical Australian company has significantly reduced its operational sustainability risks and put in place a management system covering at least key topics. Australia was 20th globally in 2022 and the top-performing country outside of Europe.

Regional scoring and top-performing countries in the EcoVadis network (2018-2022)

3) Medium-sized companies are making the most progress – large companies have significant ground to make up.

Medium-sized companies (100-999 employees), which make up nearly 45% of Australian companies in the network, are leading the way with a 53.8 average in 2022. This puts them just ahead of small companies (25-99 employees) and more than 5 points ahead of their larger counterparts. Overall progress since 2018 has been driven by the 5.3-point gain made by medium-sized companies. Although they are scoring well overall, small companies have underperformed since 2018, gaining just 1.2 points in five years. These averages include both new joiners to the network and those assessed multiple times. In 2022, SMEs assessed for the first time averaged 52.7 while large companies averaged 44.9. This indicates that SMEs are entering the network with a significantly higher level of sustainability maturity. Among those assessed for the second time or more in 2022, SMEs and large companies alike improved by roughly 6 points.

Average scoring by company size (2018-2022)

4) Australian companies are performing relatively well on Labor & Human Rights and Ethics. They remain well outside the global top 20 on the Environment theme but made progress in 2022.

A company’s overall score is determined by its performance on 21 key criteria (and many more subcriteria) across four sustainability themes: Environment, Labor & Human Rights, Ethics and Sustainable Procurement. 

Australian scoring by EcoVadis assessment theme (2018-2022)

Labor & Human Rights: 
Of these themes, Australian companies are most mature on Labor & Human Rights. Their 55.9 average in 2022 put them 15th globally (among countries with at least 100 assessments) and 1st in Asia-Pacific, ahead of New Zealand and Singapore (both at 54.2). SMEs are outperforming large companies by more than 7 points on this theme and are nearing the 60-point threshold. Construction (59.6), ICT (58.8) and heavy manufacturing (56.9) are the top industry performers. 

Ethics:
The Ethics theme, which assesses performance on issues like corruption, anti-competitive practices and data management, has long been a bright spot for Australian companies – though there are recent signs of regression. In 2022, they finished first in Asia-Pacific and 12th globally with an average of 51.3. Although this is their best relative theme performance on the global level, they still trail leaders like the United Kingdom (56.8) and Norway (60.1) by some margin. Medium-sized companies in Australia are responsible for virtually all of the progress made on this theme over the past five years. The average for small companies has dropped by more than 4 points since 2018 and large companies have gained just 0.3 points. However, Australian companies rated at least twice are averaging 6 points more on this theme than those assessed for the first time.

Environment:
Australian companies performed well on the Environment theme in 2022, finishing second in Asia-Pacific behind Japan and just outside of the top 20 globally. After years of stagnation, SMEs have made solid progress on the theme over the past year, with medium-sized companies adding more than 5 points to their average. Despite their lower average, large companies have made consistent progress since 2018. The finance, legal & consulting (57.7), heavy manufacturing (56.4) and food & beverage (56) industries are leading the way, while advanced manufacturing (46.7) and transport (47.3) have a lot of ground to make up. 

5) Australian companies have fallen well behind on Sustainable Procurement – but there were positive signs in 2022. 

After years of decline, global scoring on the Sustainable Procurement theme rebounded in 2021 and continued to rise over the past year. Australian companies also experienced this rebound, increasing their average by nearly 3 points in 2022 alone. However, with a theme average of 41.5, they are still third in Asia-Pacific (behind Singapore and New Zealand), well outside the global top 20 and more than 3 points back of the European average. This score indicates that the typical Australian company in the EcoVadis network is beginning to implement sustainable procurement actions – like introducing a supplier code of conduct – but is still exposed to significant supply chain risk. However, the data shows that Australian companies with multiple assessments are mitigating this risk more effectively. Those that have been rated multiple times are outperforming newcomers to the network by more than 7 points – the widest disparity across any theme. These companies are improving their ability to respond to potential updates to Australia’s Modern Slavery Act and the new wave of European supply chain due diligence legislation. The upcoming EU Corporate Sustainability Due Diligence Directive in particular will require in-scope Australian companies to look deeper into their supply chains than ever before to identify, mitigate and prevent a range of complex sustainability risks. 

6) By consistently engaging in the ratings cycle, Australian companies are more likely to become sustainability leaders – and reap the benefits of doing so.

As our recent joint study with Bain & Company found, compliance is just one benefit of a proactive approach to sustainability. The study found clear links between ESG leadership and financial performance. For example, network leaders (top 10%) on renewable energy usage and carbon maturity decarbonizing faster and seeing profitability margins roughly 4 percentage points higher than those of their mid-field peers (middle 70% of companies). Maturity on the Sustainable Procurement theme was also found to be closely linked with financial outperformance. 

Progression of Australian companies rated in 2018 and again in 2022 

This chart shows a group of Australian companies rated in 2018 and again in 2022 (many underwent additional assessments between these years). It illustrates just how impactful multiple cycles of benchmarking and improvement can be. In 2018, a third of these companies were at the “Partial” level indicating an underdeveloped sustainability management system and a moderate to high operational risk profile. By 2022, the vast majority of these companies had progressed into the “Good” performance range. The number of companies in this committed group performing at an “Advanced” level and distinguishing themselves as leaders nearly tripled from 2018 to 2022 (10% to 28%). As our Index data shows, a rapidly growing number of Australian companies are using EcoVadis insights and tools to become leaders in their industries and are reaping the competitive advantages of doing so. 

Ready to benchmark and improve your sustainability performance? Start your rating journey here . Want to learn more about accelerating your sustainable procurement journey from risk to impact with the Sustainability Intelligence Suite? Contact us for a demo or quote


 

About the Author

EcoVadis EN

EcoVadis is a purpose-driven company whose mission is to provide the world's most trusted business sustainability ratings. Businesses of all sizes rely on EcoVadis’ expert intelligence and evidence-based ratings to manage risk and compliance, drive decarbonization, and improve the sustainability performance of their business and value chain. Its AI-powered risk mapping, actionable scorecards, benchmarks, carbon action tools, and insights guide a resilience and improvement journey for environmental, social and ethical practices across 200 industry categories and 175 countries.

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