North America is gaining ground on Europe in corporate sustainability leadership, according to the fifth annual Business Sustainability Risk & Performance Index, published by business sustainability ratings company EcoVadis. While Europe is home to nearly half of the world’s most sustainable publicly listed companies, North American organizations are reducing the performance gap at an increasingly rapid pace, according to the report—establishing an EcoVadis sustainability rating score of 46.5, a new high for the region. Europe scored an average 52.1 rating this year.
The Index is based on the sustainability performance of more than 46,000 companies assessed by EcoVadis between 2016-2020. EcoVadis scores organizations on 21 sustainability criteria across four themes: environment, labor and human rights, ethics, and sustainable procurement. Scores range from zero to 100; below 25 represents high risk, 25-44 represents medium risk, above 45 represents good performance, and above 64 is advanced.
Globally, organizations improved most in the labor and human rights category, which includes areas such as employee health and safety, working conditions, child and forced labor, and diversity and discrimination. The average score for labor and human rights reached a record high of 50.7. Next in line was environment, with an average score of 48.2, followed by ethics, with an average score of 44.3.
Despite those advances, organizations worldwide are failing to make progress on sustainable procurement performance, a factor that suggests many companies are unprepared to meet upcoming supply chain due diligence regulations and may be at increased risk for supply chain challenges, according to the authors. Sustainable procurement continues to be the lowest-scoring area of the index, declining for a fifth straight year across all industries. This year, sustainable procurement performance fell 0.4 points from 2019 to an average 37.6.
“The use of sustainable procurement tools, including supplier [codes of conduct] and supplier assessments, has grown tremendously, to 26% and 33% of companies respectively in 2020, but key measures such as supply chain risk analysis remain underused,” according to the report.
The latter puts organizations at increased risk.
“Sustainability performance is increasing among rated companies across regions and industries as business leaders recognize that sustainable practices yield a tangible competitive advantage,” Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis, said in a statement. “But more work needs to be done to improve sustainable procurement performance, especially since the supply chain generates greater social and environmental costs than a business’ internal operations.”
Regionally, Greater China fell behind others and remained the lowest-scoring area overall, at 36.9.
“China’s lacking sustainability management is concerning in light of upstream sustainability risks in Chinese supply chains,” according to the report. By industry, highly regulated sectors (such as chemicals, electronics, and food manufacturing) display better sustainability performance and year-over-year improvements. Finance, legal, and consulting services lead, with an average score of 51. Wholesale services and professionals, and transportation have the highest improvement potentials, with average scores of 45.8 and 44.8, respectively.
The EcoVadis index examines performance of both small and medium-sized businesses (companies with 26-999 employees) and large businesses (companies with 1,000 or more employees) across five geographic regions and nine industry sectors: light, heavy, and advanced manufacturing; food and beverage; construction; wholesale; services and professionals; transport; information and communications technology (ICT); finance; and legal and consulting.