Vigeo Eiris Studies Sustainability of International Supply Chains

28

Vigeo Eiris, an established global environmental, social, and governance (ESG) research agency, has released a study which focuses on how international businesses report on social and environmental standards in their supply chain management. The survey reviews around 1300 companies with headquarters in Europe, North America, Canada, and the Asia Pacific.

The study evaluates companies on the level of engagement demonstrated by their management, the level of engagement demonstrated by their management, and the managerial processes that they choose to implement and on the indicators through which they report on their willingness and capacity to prevent violations or their complicity in violations of conventions and international social and environmental norms in selecting their suppliers and managing their outsourcing.

This study reports several examples of companies that have been subject to controversies on this topic and the corrective measures that they have undertaken. The agency publishes a list of companies whose commitments to prevent social and environmental dumping can be considered as the most advanced internationally, and whose best practices are recognised globally.

This research based on the exclusive rating methodology Equitics developed by Vigeo Eiris in 2002 to assess companies’ social responsibility performances and risks, shows that further progress still needs to be achieved in order for social and environmental dimensions to be better taken into account in world trade.

The report states:

– Despite the media coverage of tragic events such as the Rana Plaza collapse, the average performance on responsible supply chain management remains weak, and this trend is true for all regions and all countries. Only a minority of companies are able to demonstrate responsible management of their supply chain. (Average score of social and environmental factors in the supply chain: respectively 33.8/100 and 31.5/100).

– The integration of social and environmental standards in the supply chain is one of the drivers on which listed companies provide the lowest amount of information, perform the least well yet seem to be less subject to controversies.

– Although figures seem to suggest that social and environmental supply chain issues remain marginal among the social responsibility drivers raised by stakeholders, the cases illustrated in this study demonstrate significant legal implications(deforestation caused by palm oil harvesting, slavery in the textile industry, human trafficking on fishing vessels, degrading treatment of workers in the production of consumer products, child labour, sexual harassment and violence against women workers).

– The study shows that for some sectors such as retail, supermarkets, food, beverage, luxury, cosmetics or energy, controversies on the subject of procurement and management of international supply chains have already reached the alert level. This is the case for specialised retail and supermarket sectors (24% and 13% of social controversies), food, luxury goods and cosmetics, and energy sectors, (31%, 26% and 22% of environmental controversies).

– When companies report on their commitment to a responsible management of their supply chain, they appear to focus more on selecting and controlling suppliers on social and environmental standards, than on developing fair and balanced relations with suppliers.

– Very few companies provide direct evidence of engagement with stakeholders (such as NGOs and trade unions) to promote or control the compliance with social and environmental standards in their supply chain (3% of the companies stated this commitment).

– Around a third of companies report that they have implemented audits. However, there is a lack of assurance on the topics covered by these audits, their methodologies, on the independence of auditors and on the systematic follow-up if incidents are identified. The vast majority of companies do not report that they have implemented corrective measures for any social or environmental incidents identified in their supply chains. This is a concern because a lack of follow-up can completely undermine the utility of audits and any other measures installed.

Fouad Benseddik, Director of Methodology and Institutional Relationships at Vigeo Eiris, said: “Most sectors still have a long way to go to demonstrate responsible supply chain management. Responsible procurement must not simply stay defensive. Buyers and contractors can also have a positive responsibility in making their subcontractors progress and contribute to human development in their operating territories.”