Sustainability and environment

Safety and the Supply Chain: CSR Investments Lower Global Risk Exposure

An analysis of more than 20,000 companies reveals improvement and opportunity across environmental, labor, ethical and sustainable procurement risk, while safety professionals are being asked to weigh in on the GRI 403 standard, which details reporting practices related to occupational health and safety (OHS) that can be used by any organization wanting to fully report its sustainability impacts.

A new report that evaluates the corporate social responsibility (CSR) performance of more than 20,400 companies indicates that many companies are making year-over-year improvements; however, it is critical in terms of the supply chain for companies to continue to improve.

EcoVadis, a leading platform for environmental, social and ethical performance ratings for global supply chains, published the Global CSR Risk and Performance Index, which utilizes scorecard ratings that analyzed nearly 800,000 data points across the calendar years 2015 and 2016.

The Index evaluates companies on 21 CSR criteria across four themes: environment, labor 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. Each industry of companies was broken down into two categories – small and medium-sized businesses (companies with 999 or fewer employees) and large organizations (1,000 or more employees).

“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.”

Regional Performance and Risk

Europe had the highest percentage (61 percent) of low-risk companies (scores above 45), compared to the Americas (42 percent) and Asia Middle East Africa AMEA (35 percent). Large Europe-based companies scored the highest average (49), compared to the Americas (40.5) and (AMEA) (38.2). Small- and medium-sized Europe-based companies scored the highest average (47.2), compared to the Americas (42.2) and AMEA (39.1).

“Europe is nearly 20 percentage points ahead of the Americas for several reasons, one of which is heavier governmental regulations,” said Dave McClintock, marketing director at EcoVadis. “In fact, in 2014, members of the European Union agreed to make corporate social responsibility a mandate instead of a voluntary program. At the onset of this program, nearly 6,000 large companies were, and still are, required to report on their policies on diversity, social issues and on corruption, as well as the risks they pose to human rights and to the environment.”

Increased consumer and buyer expectations also are driving higher scores for CSR efforts in Europe. Even business-to-business and large purchasing organizations must report on sustainability, thanks to EU directives and nation-level laws on supply chain due diligence: McClintock cited France’s Duty of Care of Devoir de Vigilance law, or the UK Modern Slavery law as examples. Both were established to increase further scrutiny on suppliers to ensure they are complying with CSR ideals.   

“This is a far cry from U.S. standards, especially as the current administration continues its plans to withdraw from the Paris Agreement, which may enable industries like fossil fuel and coal to ignore the effects of climate change and pollution for the foreseeable future,” said McClintock.

The top-performing industries included small and medium-sized food and beverage companies and small and medium-sized construction companies, which tied at 61 percent for the highest percentage of low-risk companies. Among large companies, light manufacturing segment led the way with 56 percent, followed by the finance, legal, consulting and advertising category at 51 percent.

The highest overall CSR score in 2016 went to small and medium-sized construction companies, which earned an average score of 47. In the large category, the financial, legal, consulting and advertising category finished with the highest average score (46.2).

Large companies in the light manufacturing segment improved performance the most (19.2 percent) from 2015 to 2016. Construction showed the most improvement in the small and medium-sized business segment (18.7 percent). When broken down by performance in environment, labor practices and human rights, fair business ethics and sustainable procurement, the index shows:

Environmental performance – Large companies in the advanced manufacturing 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.

Labor 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-sized companies.

Sustainable procurement – Small and medium-sized food and beverage companies earned the top sustainable procurement score (41.9), while light manufacturing took the top spot in the large category (41.4).

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 Pierre-Francois Thaler. “We can expect greater dividends and less risk globally if our world leaders and businesses continue to invest in these efforts.”

GRI 403: Where Safety and Sustainability Meet

The Global Reporting Initiative (GRI) 403 standard – part of the first global standards for sustainability reporting – details reporting practices related to occupational health and safety (OHS) that can be used by any organization wanting to fully report its sustainability impacts. According to GRI, the standard is being revised to reflect internationally supported best practices as well as to align it with recent developments in OHS management, including the upcoming ISO 45001 standard. Improvements include greater emphasis on hazards and the application of the hierarchy of controls. Also proposed are better methodologies for calculating injury and illness data, and new leading indicators based on how workers are covered by management systems and have access to occupational health services.

Dave McClintock noted that GRI might be the most popular framework for CSR reporting in organizations across the globe, but several countries use different methodologies to define their OHS standards, making comparing organizations on a global scale much more difficult.

“For example,” he said, “a services company may not use accident rates and severity as an indicator of OHS, whereas a manufacturing company most likely would. Therefore, these companies would have different indicators of OHS, making them difficult to compare.”

McClintock said countries also may have different approaches to collective agreements on OHS (similar to other topics such as global warming potentials and carbon intensities). “In the absence of a universally agreed upon standard, we’re forced to make sense of the individual data that companies report – regardless of the fact that this data might not be comparable.”

The introduction of ISO45001 potentially could harmonize these differences in calculation approaches, and better facilitate more accurate comparison between companies.

“This would mark huge progress for assessing CSR initiatives across a variety of factors,” McClintock admitted. “When we created the index, we reviewed the OHS indicators across organizations and industries and assigned a score based on the relevance and existence of company’s existing reported data. So, while OHS standards are certainly accounted for in CSR reporting, they certainly vary across industries and countries.”

The Center for Safety and Health Sustainability (CSHS) is encouraging safety and health professionals around the world to comment on a key international standard connected to corporate sustainability. The Global Reporting Initiative (GRI) is seeking feedback on proposed updates to GRI 403: Occupational Health and Safety. The comment period is open through Oct. 9.

Safety and health professionals should consider the following questions when reviewing the revised standard, which can be found at https://www.iso.org/iso-45001-occupational-health-and-safety.html:

• Do the performance indicators demonstrate an organization’s true OHS performance?

• Are the performance indicators feasible and practical to implement across all organizations?

• Will the data produced be useful to you and a wide range of stakeholders?

• Do you suggest changes to the proposed disclosures and reporting requirements?

“The GRI 403 standard provides a lever for change in corporate reporting practices on OHS globally,” said Kathy A. Seabrook, chair of the CSHS Board of Directors. “Safety and health professionals need to step up, participate and influence the final standard through this public consultation period. It’s a significant development in our profession.”

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