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Making progress, North America is rapidly gaining ground on Europe to become a region to watch in terms of corporate sustainability leadership. This insight and more are found in the fifth annual edition of the Business Sustainability Risk & Performance Index, by business sustainability ratings provider 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 – establishing an EcoVadis sustainability rating score of 46.5, a new high for the region. 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 on a scale from zero to 100, where below 25 represents high risk, 25-44 represents medium risk, above 45 represents good performance, and above 64 is advanced.
This year’s Index saw strongest performance growth across the Labor and Human Rights theme, which includes criteria such as employee health and safety, working conditions, child and forced labor, diversity and discrimination, and more. Alarmingly, Sustainable Procurement performance – a key catalyst for mitigating sustainability risks across the supply chain – is downward trending across industries, falling by 0.4 points on the 2019 average to 37.6 in 2020. The continued decline in Sustainable Procurement performance is explored more in the Deep Dive section of the Index.
Other Index highlights include:
Not even COVID-19 can slow global sustainability momentum. Despite disruption to global supply chains by COVID-19, companies’ overall sustainability performance continued to improve in 2020. The Labor and Human Rights average score of 50.7 is a record high. Following is the Environment theme with an average score of 48.2, and the Ethics theme with an average score of 44.3. Sustainable Procurement continues to be the lowest-scoring theme, declining for a fifth consecutive year. The downward trending score suggests many companies are unprepared to meet upcoming supply chain due diligence regulations.
Greater China falls behind other regions on sustainability. Europe remains the leading region, with an average performance score of 52.1, with North America rising quickly with a score of 46.5 points. Greater China remains the lowest-scoring region, even though its average score increased to 36.9. China’s lacking sustainability management is concerning in light of upstream sustainability risks in Chinese supply chains.
Sustainability performance varies greatly between industries.Highly regulated sectors (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 51.0. Wholesale services and professionals, and Transportation have the highest improvement potentials, with average scores of 45.8 and 44.8, respectively.
Mid-sized companies outperform small and large sized companies. Across company sizes, performance in the Sustainable Procurement theme was stable, with mid-sized companies (100-999 employees) marginally outperforming their smaller (less than 100 employees) and larger counterparts (over 1,000 employees) at an average score of 38.2.
The 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, finance, legal, and consulting.
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