Are UK Companies Reducing Risk and Keeping Pace With Europe’s Sustainability Leaders? Here’s What Our Ratings Data Reveals

July 27, 2023 EcoVadis ‏‏‎

This article taps into the expansive data set used for our latest Index report – which analyzed more than 100,000 EcoVadis sustainability ratings from 2018 to 2022 – to highlight six key sustainability trends we’re seeing among UK suppliers.

As social and environmental risks continue to proliferate across global supply chains, sustainability leadership has never been more important. However, although the UK has set some of the world’s most ambitious targets – like its goal to slash 78% of domestic emissions by 2035 – its position as a leader appears to be waning. In a recent report, the UK Government’s Climate Change Committee found that the nation is falling behind on its climate targets and the steps being taken by other progressive countries. According to Global Compact Network UK, progress on the Sustainable Development Goals has largely stalled and regression is even occurring in some areas. To close this ambition-action gap, the UK private sector must accelerate its efforts to deliver the positive change that consumers, investors and regulators in Europe and beyond are increasingly expecting. Our ratings data shows that many UK companies in the EcoVadis network are already making headway on this goal. Those that engage consistently with the ratings process are reducing risk, measurably improving on a range of key topics and, importantly, demonstrating their compliance readiness and sustainability leadership to new and existing trading partners. 

1) The number of UK sustainability assessments is growing rapidly – by 41% in 2022 alone.

UK companies are well represented in the EcoVadis network, trailing just Italy, Germany and France for the most assessments in Europe over the past year. More than 1,900 assessments of UK companies were conducted in 2022 – a 41% jump from 2021. This growth was fueled by the more than 900 newcomers to the network and 1,000+ reassessed companies. Nearly a quarter of all UK companies that engaged in the assessment process in 2022 were doing so for at least their third time. This increasingly robust dataset is giving procurement teams across Europe and beyond the ability to benchmark the performance of their UK trading partners – across industries and company sizes – and identify high-performers that can help them meet their sustainability and compliance goals.

2) Sustainability progress since 2018 is being driven by SMEs, though large companies made gains over the past year.

Ranking 7th globally in 2022 with an overall average of 55.8, the UK finished just behind Italy and within 4 points of Finland and world-leading Norway. This score is firmly within the “Good” threshold of the EcoVadis scoring scale, which indicates that the typical company has significantly reduced its operational sustainability risks and put in place a management system covering high-level sustainability challenges. SMEs, which account for 80% of UK ratings, are driving the bulk of the scoring progress made since 2018. Over the five-year period we explored, small companies (25-99 employees) gained 6.9 points and medium-sized companies (100-999) added 5.2 points to reach nearly identical averages in 2022. Large companies (1,000+ employees) in the UK gained a mere 1.2 points over the same timeframe due to multiple years of stagnation, though their scoring has rebounded significantly over the past year. This performance disparity between SMEs and their larger counterparts is in line with broad global trends; however, large UK companies are falling well behind their top-performing European peers. Large Norwegian companies, for example, have gained an impressive 10 points since 2018 and are keeping pace with SMEs. 

UK scoring by company size (2018-2022)

3) Performance on Labor & Human Rights has been solid, but there was regression in 2022.

A company’s overall average 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. 

UK average scoring by EcoVadis assessment theme (2018-2022)

In terms of average scoring and progress made since 2018, UK companies in the EcoVadis network are performing better on the Labor & Human Rights theme than on any other. Their 58.3 puts them 7th among countries with more than 100 assessments. After years of consistent gains, momentum on this theme slowed significantly in 2022. This slowdown is being caused, in part, by an influx of large companies with less maturity on this theme. Large UK companies assessed for the first time in 2022 are scoring just over 45, an indication that they have moved out of the high-risk range but still have a lot of work left to integrate social best practices throughout their operations. This is 10 points lower than the first-time average for SMEs, though this performance gap narrows to 7 points among companies rated twice or more. A number of industries that were performing at a high level have lost ground over the past year, including food & beverage (-1.8 points), advanced manufacturing (-2.7) and transport (-2.4). The minimal progress made over the past year was driven by companies in the heavy manufacturing (+2.3 points), ICT (+2.2) and light manufacturing (+1.6) industries. 

4) UK companies are second globally on the Ethics theme – though companies across all size categories lost ground in 2022.

Through the Ethics theme, EcoVadis assesses how effectively a company is addressing issues like corruption, anti-competitive practices and data management. In 2022, UK companies in the network were tackling these issues better than those in every other country except Norway, which has now crossed the 60-point threshold. Thanks in part to a robust and supportive legislative framework, UK companies have been among the leaders on this theme since we began tracking performance in the country. However, there are signs that this position may be in jeopardy. Despite decent progress since 2018, companies across all three size categories lost ground over the past year. Small companies have dropped roughly 2 points since 2021 and medium-sized/large companies have both seen their averages drop marginally. While a similar regression was also observed in Finland, all other countries in the top five on Ethics improved over the past year – Norway in particular made significant gains across all company sizes. To reverse this concerning trend, UK companies in the advanced manufacturing (-3.5 points since 2021), transport (-3.4), food & beverage (-3.3) and light manufacturing (-1.9) industries, in particular, must redouble their efforts on ethics challenges.

5) UK companies trail the European leaders on the Environment and Sustainable Procurement themes. 

UK companies continue to trail their high-performing European peers on the Environment theme by a significant margin. With an average of 55.6 in 2022, they rank 14th globally and are now nearly 7 points behind world-leading Finland. However, all size categories have made impressive gains on this theme since 2021. Large companies overcame years of stagnation to improve their average by 3.7 points. Medium-sized companies tacked on 2.5 points and their smaller counterparts gained 2.2. Across Europe in 2022, 34% of companies purchased or generated renewable energy, 29% trained their employees on energy and climate topics and 26% conducted energy/carbon audits of their operations. More UK companies will need to adopt best practices like these to continue to close the performance gap. 

UK scoring on the Environment theme (2018-2022)

After years of decline, global scoring on the Sustainable Procurement theme rebounded in 2021 and continued to rise over the past year. UK companies also experienced the rebound and now rank 9th globally with an average of 44.6. The recent gains made by both SMEs and large companies demonstrate that a growing number of UK companies are readying themselves for the new wave of European supply chain due diligence legislation. With national laws and the upcoming EU Corporate Sustainability Due Diligence Directive set to require a significant number of UK companies to look deeper into their supply chains than ever before, a strong approach to sustainable procurement is non-negotiable. A recently proposed amendment to the Modern Slavery Act, which could introduce corporate liability for breaches, is yet another reason for domestic companies to take bold action. 

6) By consistently engaging in the ratings cycle, UK companies are more likely to become sustainability leaders – those that do are reaping the benefits.

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, particularly among companies in Europe and North America.

Progression of UK companies rated in 2018 and again in 2022 

This chart shows a group of UK 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, 17% 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 tripled from 2018 to 2022 (13% to 40%). As our Index data shows, a rapidly growing number of UK 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 with the Sustainability Intelligence Suite? Contact us for a demo or quote


 

About the Author

EcoVadis ‏‏‎

EcoVadis is the world’s most trusted provider of business sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains. Backed by a powerful technology platform and a global team of domain experts, EcoVadis’ easy-to-use and actionable sustainability scorecards provide detailed insight into environmental, social and ethical risks across 200+ purchasing categories and 175+ countries.

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