The stakeholders pressuring companies to be more sustainable. A surprising result.

A recent survey conducted by BDO Belgium and Mercuri Urval among 150 companies from different sectors revealed that clients are becoming increasingly interested in companies' sustainability strategies and performance. In particular, the study showed that:

• 67% of respondents say that the stakeholders from whom they experience the biggest pressure to become more sustainable are their clients. Followed by employees and future talents (51%) and public authorities (50%). The pressure of banks/insurance companies, suppliers, industry federations and NGOs is indicated as significantly less. 
• 78% of respondents have already received sustainability-related questions from clients, followed by employees and future talents (58%), public authorities/governments (55%) and investors (40%).

This shows that a growing number of clients are considering their values when choosing products and services. This holds true in the B2B context as well, as companies are expected to demonstrate responsibility across their entire value chain. As value chains expand globally, companies must ensure that their suppliers, sub-contractors and providers adhere to high environmental, social and governance standards.

This trend is also driven by the growing legislative obligations focusing on the value chain, both at national level (e.g. in Norway, Germany, and France) and at EU level (such as, for instance, the Corporate Sustainability Reporting Directive, the Conflict Minerals Regulation, the Regulation on Deforestation-free Products as well as the proposed Corporate Sustainability Due Diligence Directive, and the Forced Labour Regulation, if eventually adopted by the European institutions). 

These new laws create a trickle-down effect from big multinational companies (directly impacted by the legislations) and their suppliers. Therefore, not only big companies are affected, but everybody as a result of changed client expectations and requests. 

Why is the value chain important?

A company should focus on the value chain because its most severe environmental and social impacts typically come from upstream or downstream activities. A few examples:

• According to the GHG Protocol, Scope 3 emissions can represent up to 70% of a company’s carbon emissions. These emissions are generated by activities beyond a company's direct control, such as those of suppliers and customers. 
• Severe human rights violations, such as child labour or forced labour, often occurs across the global value chain of European companies, especially in industries such as textile and electronics. Children in third-countries are often employed in hazardous working conditions, working long hours for little pay, and are denied access to education.

By not taking responsibility for their value chain, companies risk being associated with environmental and social issues that could harm their reputation and lead to legal and financial consequences. Therefore, companies should prioritise sustainability in their value chain and work collaboratively with their partners to ensure sustainable practices are implemented throughout the chain.

How can you approach this? What should you consider?

Companies can approach sustainable procurement in three ways: at product level, supplier level and with a collaborative approach.

• Product-level approach: Colruyt is a well-known example. They generated the eco-score which rates how sustainable a product is. Their sustainability performance assessment encompasses many different environmental impacts, which are brought together under one label. Through this transparent approach, Colruyt offers the possibility to their customers to choose more sustainable products.
• Collaborative approach: Companies can work collaboratively with others to maximise their impact on the value chain. One example is the Global Platform for Sustainable Natural Rubber (GPSNR), which gathers stakeholders from across the natural rubber value chain, including producers, processors, traders, tyre makers and NGOs. The GPSNR has developed a set of standards and policies that members must adhere to, including commitments to responsible land use, human rights and environmental protection.
• Supplier-level approach: Companies should have a Supplier Code of Conduct that sets mandatory expectations concerning environmental, social, and governance conditions. A possible example is Henkel, which developed a "100% Responsible Sourcing Strategy" to achieve climate-positive, circular economy, and social progress through their procurement methodology. This strategy involves a six-stage "Responsible Sourcing Process" that identifies risks and defines measures to minimize them. Henkel uses supplier sustainability performance assessments to improve their sustainability performance continuously. The company also collaborates with suppliers to increase their knowledge on process optimization, resource efficiency, and environmental and social standards. 

Ideally, companies should consider implementing all three approaches and focus on helping more vulnerable suppliers through capacity-building activities and financial incentives. By taking a holistic and collaborative approach, companies can take significant strides towards sustainable procurement and contribute to a better future for all.

Make your value chain more sustainable

Contact us today for expert advice in building a responsible and resilient value chain that meets current and future legislative requirements and challenges. Gain a competitive edge by staying ahead of the game and implementing sustainable practices that will benefit your business, society and the planet.

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Note: 

The research was conducted jointly by BDO Belgium and Mercuri Urval in the following countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland. The study surveyed companies to assess their attitudes towards sustainability, the obstacles they face and their main drivers. The research used a questionnaire methodology and the online survey conducted in November-December 2023 reached around 150 companies. The full report will be published by the end of April 2024.