Dive Brief:

• While supply chain sustainability efforts around labor, ethics and emissions have progressed, sustainable procurement lags behind and worsened in 2019, according to EcoVadis' Business Sustainability Risk and Performance Index for 2020.
• "It appears that companies continue to focus on societal impacts linked to their own operations, while risks that may be lurking in their supply chains are not prioritized to the same degree," the report stated. Its sustainable procurement metric is based on two factors: suppliers' environmental practices and their social performance on labor rights and other worker issues.
• Ideally, procurement teams should be going beyond surface-level tier 3 and 4 reporting and developing more robust data-sharing and compliance practices to move from analysis to problem-solving, said David McClintock, marketing director at EcoVadis. However, "there's a lot of companies that are just starting to figure out how to report and collect the right information, set the right policies, [and] take the right actions on these topics of environmental risks and management and on labor risk management," he said.

Dive Insight:

The coronavirus pandemic has disrupted companies' progress on improving supplier visibility by stopping some operations and preventing travel and in-person audits — casting doubt on whether results will show improvement in 2020, McClintock said.

Compared to Europe, where supply chain sustainability requirements are more heavily regulated, "I think [sustainability] is still a little bit more like the Wild West in the U.S. People are doing things that they think are good for their brand ... Would it help to have a national regulations? Absolutely," he said, citing the California Transparency Act as a potential example.

However, in the absence of broader legislation, McClintock said private sector firms can work together or with industry associations to collectively improve sustainability standards — pooling their best practices, or data, to improve visibility within their firm and the broader sector simultaneously.

EcoVadis' index covers data from more than 40,000 global companies in the manufacturing; food and beverage; construction; wholesale; transport; information and communication technology; and finance, legal and consulting industries. Firms are scored across 21 sustainability criteria broken across four themes: environment, labor and human rights, ethics, and sustainable procurement. Progress is graded on a scale of zero to 100, with scores below 25 considered "high-risk," scores above 45 considered "good," and scores of 64 and higher considered "advanced" to "outstanding" performance.

When broken down by region across the four main categories, large North American companies scored an average of 43 in 2019, up from 41.8 in 2018. Europe remained the long-term leader at 51.9 in 2019, up from 50.6 the previous year. China continued to be the poorest performer, coming in at 28.5, down from 33.6.

While understanding the environmental risk profile of various countries is important, "Unfortunately, the risk spans not only historically high-risk countries (developing countries) but medium- and low-risk countries as well," Simon Lodge, senior sourcing manager at AXA U.K., said in the report. "Supply chains have been exposed in Europe and the United States in recent years for recruitment practices that ultimately subject workers to exploitation. The key is to take a risk-based approach, targeting where the highest level of risks are focused."

While this effort will still be concentrated in notoriously high-risk countries, he said, it's important not to discount threats closer to home.

When it comes to procurement teams establishing robust supplier management practices, McClintock said EcoVadis wants to see, "Are they regularly asking their suppliers to provide information on their environmental footprint? Do they have a policy? Are they reporting anything? Are they measuring their their energy use? Are they measuring their waste?" And on the social side, "Do [they] have measures in place to manage safety?" The firm also wants to see if procurement teams are engaging regularly with their lower-tier suppliers on these topics and tracking compliance.

Technology is also assisting firms in maintaining efforts during the pandemic. Cloud computing, data analytics, video conferencing and other tools are helping procurement managers gain deeper insight into their supply base without leaving their office, a trend McClintock said could persist into the "new normal" when the coronavirus pandemic resolves.