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Commitment vs. Practice: A Comparison of CSR Performance of the UN Global Compact Signatories and Non-Signatories

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16 Commitment vs. Practice Sustainable Procurement The Sustainable Procurement theme examines how companies manage their own suppliers to ensure compliance on environmental and social issues. Today, approximately 38-45 percent of UN Global Compact participants consider the Ten Principles within their supply chain and subcontracting arrangements. 8 It presents an area of tremendous opportunity for accelerating impact and improving performance for UN Global Compact participants and nonparticipants alike. Supply chains are often the most vulnerable aspect of a company's operations compared with other themes. There are many inherent risks that exist within supply chains that are amplified due to size, industry and other variables. Several of the most prominent risks include the supply of natural resources, human rights violations, reputational risk, sanctions, cost, along with various others. In fact, for most companies, supply chain accounts for over 80 percent of the greenhouse gas emissions and 90 percent of the impact on air, land, water, biodiversity, and geological resources. 9 Labor and human rights violations in the supply chain can not only subject companies to regulatory fines, but can negatively impact their brand image and revenue. Lastly, corruption and bribery within the supply chain can also lead to increased regulatory fines, prosecution, and brand devaluation. Some of the major challenges that business faces when trying to address risk within their supply chain are internal capacity, cost, resistance from suppliers, and the complexity of tracking supplier performance 10 . It is thus important for management systems to invest in sustainable procurement so that they can drive CSR performance within their own operations and across their value chain. Sustainable procurement is not explicitly included as part of the UN Global Compact Ten Principles even though dissemination of the Ten Principles across the value chain is considered as part of the UN Global Compact endorsement. This can help explain the relatively low performance of UN Global Compact participants under the Sustainable Procurement theme when compared to their own performance under Environmental, Labor and Human Rights and Ethics themes. This reinforces the findings from the latest UN Global Compact progress report, according to which "applying sustainability throughout the value chain remains one of the major challenges" facing UN Global Compact participants. 11 Despite the difficulty engaging suppliers on sustainability faced by the UN Global Compact participants and nonparticipants alike, there is still an evident difference in performance. Specifically, UN Global Compact participants earned an Average Score of 50, when compared to their nonparticipant counterpart averaging 37. This may suggest that UN Global Compact endorsement pushes companies into developing a more advanced management system overall, which expands to include supply chain sustainability. On the other hand, this improvement is not generalized since 13 percent of all UN Global Compact participants perform below average. 8 p. 18 9 https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/ starting-at-the-source-sustainability-in-supply-chains 10 EcoVadis "Scaling Up Sustainable Procurement" 2017 p. 16 11 p. 18

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