CSR supply chain investments lowering companies' exposure to risk, new figures show
Supply chain CSR investments are paying off, lowering companies’ exposure to a number of global business risks, according to new research.
EcoVadis has published analysis of more than 20,000 companies, which has revealed improvement and opportunity across environmental, labour, ethical and sustainable procurement risk.
The Index was built using EcoVadis' CSR Ratings, which evaluate companies on 21 CSR criteria across four themes: environment, labour practices and human rights, fair business ethics and sustainable procurement.
Each company received a cumulative score, based on a scale of zero to 100, where 25 represents basic CSR coverage, 50 represents standard, 75 comprehensive and 100 exceptional.
Select highlights from EcoVadis' research include:
- Regional performance and risk
Europe had the highest percentage (61%) of low risk companies (scores above 45), compared to the Americas (42%) and AMEA (35%)
Large Europe based companies scored the highest average (49), compared to the Americas (40.5) and AMEA (38.2)
Small and Medium Europe based companies scored the highest average (47.2), compared to the Americas (42.2) and AMEA (39.1)
- Top performing industries
Small and Medium Food & Beverage companies, and Small and Medium Construction companies, tied for the highest percentage (61%) of low risk (scores above 45) companies. The Large segment is led by Manufacturing Light industry (56%), followed by Finance, Legal, Consulting and Advertising industry (51%).
The highest overall CSR score in 2016 went to Small and Medium Construction companies, which earned an average score of 47. In the Large category, the Financial, Legal, Consulting and Advertising market finished with the highest average score (46.2).
- CSR improvements
Large companies in the Manufacturing Light industry improved performance the most (19.2%) from 2015 to 2016. Construction showed the most improvement in the Small and Medium sized business segment (18.7%).
- Environmental performance
The Large Manufacturing Advanced segment led all groups in environmental performance with a score of 51.6. The Food and Beverage industry topped the Small and Medium sized segment with a 50.2 Environment score.
- Labour practices and human rights
Small and Medium sized companies in the Construction industry had the best score (50.3). In the Large segment, the Finance, Legal, Consulting and Advertising industry scored the highest at 47.3.
- Fair business ethics
The Finance, Legal, Consulting and Advertising industry led all groups and sizes in the Fair Business Ethics segment with scores of 47.5 points for Large companies and 46.0 for Small and Medium companies.
- Sustainable procurement
Small and Medium Food and Beverage companies earned the top sustainable procurement score (41.9). Manufacturing Light took the top spot in the Large category (41.4).
“The overall results are promising. We’re observing many companies, across all markets, making crucial year-over-year improvements to CSR performance, and many industries edging toward lower CSR risk,” said Pierre-Francois Thaler, co-founder and co-CEO of EcoVadis.
“While the progress has been terrific, the criticality of supply chain CSR remains extremely high, and there’s a lot of room for all businesses to grow and improve.
“Our grading scale and evaluations represent this reality – we’ve seen strong progress in 2016, but there’s still a major gap between today’s scores and peak CSR performance.”
While the overall average score of both size groups (large and small/medium) was about 44, small and medium sized businesses are improving CSR scores at a faster rate than their larger counterparts.
Given that value chains are made up mostly of small and medium sized companies, the improvement rates represent a promising trend that will have a lasting supply chain impact.
“The research shows that recent initiatives focused on improving crucial CSR and sustainability issues – like modern slavery, conflict minerals, environmental pollution and more – are paying off,” said Thaler. “We can expect greater dividends and less risk globally if our world leaders and businesses continue to invest in these efforts.”
Geographically, EcoVadis’ research found a stark performance contrast between Europe, the Americas and AMEA. In 2016, the average score of Large companies across all segments in Europe was 49, compared to a 40.5 for Americas and 38.3 for AMEA.
AMEA also had the highest percentage of companies that scored under 25 (13% in 2016), compared to the world average of 4%.
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.