More companies than ever are engaging in sustainability ratings. From 2017 to 2021, we assessed nearly 53,000 companies, spanning 160 countries. That’s more than 83,000 ratings, representing a 61% growth over the five years. There’s a perk in having such volume – as our data set grows and the network matures, our benchmarking capabilities grow organically.
Leveraging this rapidly expanding data set, we recently released our latest edition of the Business Risk and Sustainability Performance Index, accompanied by an updated Index Online. It shares valuable insights on the sustainability performance of the companies within our network – across regions, industries and company sizes. Here are some key trends from this year’s report.
Improvement is an Ongoing and Iterative Process
Companies across the network have improved their sustainability practices over the past five years. Nonetheless, a significant performance gap persists between companies rated for the first time and those that have undergone multiple assessments, with the difference being even more pronounced at the theme level. On average, in 2021, first-time assessees scored almost 8 points less compared to their more experienced-in-the-process counterparts. Companies with multiple assessments score more than 10 points higher on the Environment theme than those assessed for the first time. A similar, almost 9-point difference manifests itself when comparing the Sustainable Procurement scores on reassessment.
Genuine improvement is possible when companies are consistent in their sustainability efforts and apply learnings from the rating process, as illustrated by the progression curve based on the number of assessments. It’s clear that companies are recognizing the value of reassessment – in 2021, there was an even split between first-timers and veterans of the rating process.
SMEs Are Raising the Bar
Companies around the world have made significant progress on sustainability in recent years, with the average global score reaching 49.2 in 2021 – a 5.1 increase since 2017. This progress is largely due to small and medium-sized companies (SMEs), who not only outperformed their larger counterparts but also improved faster over the five years and increased their score by more than 5 points (compared to 3.4 gained by large companies). The strides made by SMEs, which account for over 70% of global supply chains, are a positive sign for the future of sustainable procurement. The capacity SMEs are building is starting to play a pivotal role in reshaping the supply chain landscape.
Solid Progress Is Being Made Across All EcoVadis Assessment Themes
While there’s room for improvement, the pace of sustainability progress is steadily accelerating, with companies showcasing a higher level of maturity on social and environmental topics in 2021 than ever before. Companies have made exceptional year-on-year progress on the Ethics theme, increasing their average by 2.5 points in 2021 (the largest gain across any theme). However, with a theme average of 46.8, 2021’s scoring on Ethics is lower than on the Environment and Labor & Human Rights themes. This year’s performance on Labor & Human Rights was the highest across all themes, with companies averaging 52.5. All regions scored above the 45-point mark (Good performance) – a first for any EcoVadis assessment theme.
Despite the pandemic causing a need to scale back spending on environmental and climate initiatives, companies still managed to modestly improve on the Environment theme. The average rose to 49.6 in 2021, an increase of 1.3 points from the previous year. Large companies continue to lead the way on this theme; however, SMEs are gaining ground. Over the last year, small and medium-sized businesses improved their score by 1.5 and 1.6 points, respectively, significantly outpacing the 0.4-point growth achieved by large companies over the same period.
Europe in a League of Its Own
Zooming in on regional sustainability progress, significant performance gaps persist. As of 2021, Europe continues to lead with an overall average of 53.8, followed at some distance by Northern America (46.9), Latin America & the Caribbean (44.9), and Africa & the Middle East (41.9). Asia-Pacific is at the tail end of the regional distribution, with a score of 41.5. Although it still lags behind, Asia-Pacific was the most improved region in 2021, gaining 1.8 points since 2020.
Europe’s leadership on sustainability is even more pronounced at the theme level. When it comes to performance on Ethics, Europe bests Asia-Pacific by more than 15 points – the largest regional gap observed across any of the themes. Another notable gap persists when comparing regional performance on Sustainable Procurement – in 2021, Europe outperformed Northern America by 6.7 points.
Europe also remains the definitive leader in environmental performance, with a quarter of its companies scoring above 65 points (Advanced or better) on the theme in 2021. The almost 10-point scoring gap between companies in Europe and the next best region, Latin America & the Caribbean, was the most significant regional disparity between first and second place found across any of the themes in 2021. Such a pronounced difference can, in part, be attributed to the performance of standout countries in the Nordics.
Sustainable Procurement Scoring Increases But Companies Must Accelerate Their Due Diligence Efforts
The Sustainable Procurement theme continues to be the lowest-performing theme overall. While companies of all sizes improved on this theme in 2021 after multiple years of scoring regression, the 38.8 overall average remains well below that achieved on all other themes. Large companies gained 0.4 but are still performing below their 2017 benchmark. This is the only scoring decrease observed over the five years. Progress is being hindered by the difficulty of implementing sustainable procurement practices in an increasingly complex and unpredictable supply chain landscape. Companies have a lot of work left to do to build resilient procurement programs capable of tackling sustainability challenges throughout their value chains.
Emerging regulations like the EU’s recent Directive on Corporate Sustainability Due Diligence are compelling companies to rethink their approach to environmental and social issues throughout their value chains. The data shows there is a significant difference in how companies approach these issues internally versus in their supply chains. Although more companies are developing comprehensive procurement policies, less than half of all those examined in the Index are taking steps to cascade due diligence practices to their suppliers. Companies tend to have stronger management systems in place to address risks in their operations than in their supply base. However, to enhance resiliency and ensure compliance with rapidly expanding due diligence requirements, companies need to manage both internal and external domains.
These are only a few of the key trends from this year’s Index. Looking at the five years’ worth of data provides a myriad of insights, all, however, prompt one message: a measurable improvement in the environmental, social and ethical practices of companies around the world is possible. If you want to explore the data on your own, visit Index Online – an interactive, web-based tool that enables you to explore our assessment data in more detail and filter the results by theme, region, country and industry.
About the Author
Follow on Twitter Follow on Linkedin Visit Website More Content by EcoVadis EN
