EcoVadis: Companies Mastering Sustainability Fundamentals

Organisations of all sizes across the EcoVadis Network, particularly those with multiple ratings, are making measurable progress on a broad spectrum of sustainability challenges.

This was discovered in the eighth edition of the Business Sustainability Index, published by business sustainability ratings provider EcoVadis.

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 monitor and improve their sustainability performance and that of their business and trading partners.

Its actionable scorecards, benchmarks, carbon action tools and insights guide an improvement journey for environmental, social and ethical practices across 200 industry categories and 175 countries. Industry leaders such as Johnson & Johnson, L'Oréal, Unilever, Bridgestone, BASF and JPMorgan are among the 100,000 businesses collaborating with EcoVadis to drive resilience, sustainable growth and positive impact worldwide.

The index explores the trends of 125,000 plus supplier sustainability ratings. EcoVadis has been helping1,200 leading procurement teams from 2019 through 2023.

This examines how these suppliers, spanning the entire globe and the major industries, preform on four core assessment themes.

Making measurable progress

Its data-driven analysis, it highlights the state of where global value chains stand on sustainability nearly halfway into a pivotal decade for climate and social action.

The score trends indicate how large purchasing organisations are leveraging ratings in their supply chains to reduce risks, build resilience, prepare for compliance with ESG reporting and due diligence laws and unlock the value needed to thrive today and into the future.

It reflects how suppliers are reducing operational risks, enhancing efficiency, saving costs, collecting better data and enhancing their relationships with business partners.

For example, companies with multiple ratings are rising far above regional and industry performance baselines on average.

These companies are developing robust policies, setting data-driven targets, adopting better practices, reporting their progress to a wider audience and beginning to cascade their sustainability efforts into the next tier of the value chain.

Key findings within this edition include:

• Improvement across the network: 46.7 is the average score that companies achieve on their first rating, compared to 55.1 for companies with multiple EcoVadis Ratings. Looking beneath global averages, scores of reassessed companies are typically between 8 and 10 points higher per theme, on average, compared to first-time rated companies.
• The “first rating baselines” highlighted throughout the report show that there is still a lot work that needs to be done across value chains. In 2023, 42% of suppliers rated for the first time fell into the Insufficient/Partial performance levels, indicating significant sustainability risks and non-existent or ineffective systems in place to manage them. The share of companies in the high to medium risk ranges rises to 80% for the Sustainable Procurement theme.
• Companies in the network are more mature on the Labour & Human Rights theme than on any other, with a 54.6 average. Small companies, in particular have increased their average by 7.3 points since 2019. All regions consistently improve their performance, with Europe increasing its average the most since 2019. North America is making significant progress, with Canada averaging 55.8 and the US at 53.1. All industries have now crossed the 50-point average score threshold on the Labour & Human Rights theme, with Finance, Legal & Consulting leading the way with a 58.6 score.
• The majority of companies across the network remain in the risk range for the Sustainable Procurement theme, with a 41.2 average. Europe has crossed the 45-point threshold on the theme, though progress was slow over the past year. North America scored a 37.7 average (an increase of just 0.7 from 2019). Asia-Pacific and Latin America lead the way with 1.5 and 1.4-point gains respectively. All industries remain in the medium-risk range on the Sustainable Procurement theme, with Light Manufacturing scoring the highest with a 44.4 average.
• The Global Environment average increased by 2.1 points in 2023, significantly more than any other theme. Companies with multiple EcoVadis Ratings scored a 57.2 average for this theme, with nearly one-third performing at an Advanced level. Yet, there was still regress in the food and beverage industry, in which large company performance declined by two points since 2019.
• Economic uncertainty, rising inflation, geopolitical tensions and other factors have exposed companies to greater ethical challenges than ever. But progress in the Ethics theme score has stalled, with SMEs and large companies improving their average by just 0.1 point over the past year.

"The Sustainable Procurement theme is becoming an even more crucial area to watch as supply chain and due diligence laws continue to expand," says Sylvain Guyoton, Chief Rating Officer at EcoVadis.

"The principle of 'substantiated concerns' in the Corporate Sustainability Due Diligence Directive, for example, will require many companies to cascade sustainable procurement practices to their Tier 1 suppliers who may be anywhere in the world. Companies must work more closely with suppliers than ever before to remain both compliant and competitive."

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