Most companies unable to gauge whether suppliers meet ESG goals: survey

Dive Brief:

  • Most CFOs and other top executives (65%) said they are unable to accurately assess whether their suppliers meet environmental, social and governance (ESG) standards even as they face growing pressure from regulators to disclose sustainability measurements such as carbon emissions, according to a Sapio Research survey.
  • While most (95%) companies agreed that in order to accurately gauge ESG performance they need to obtain data from their suppliers, 53% of respondents said the information is not readily available, according to a survey of 800 CFOs and other business leaders in six countries sponsored by Coupa Software, which focuses on spending management.
  • Companies that collect data about their suppliers and use the information when making purchasing decisions can influence suppliers’ behavior on environmental and other issues, according to Donna Wilczek, senior vice president for product strategy and innovation at Coupa. “The outcomes are data visibility, compliance and control.”

Dive Insight:

Many companies — especially those in consumer-facing sectors — emit less greenhouse gasses than the combined total among businesses in their supply chains, according to Boston Consulting Group. By encouraging their suppliers to commit to net-zero emissions, the companies can spur emissions reductions in “hard-to-abate” sectors.

The Securities and Exchange Commission (SEC) last month released a proposal that companies follow detailed rules for reporting on climate risk, asserting that businesses and investors will benefit from clear, uniform disclosures on the costs from global warming.

Investors with $130 trillion in assets under management have asked companies to disclose their climate risks, according to SEC Chair Gary Gensler.

Under the proposal, the SEC would require some companies to report on so-called Scope 3 emissions by their suppliers, vendors and other third parties across their supply chains. The reports would be phased in, subject to safe harbor protections and not required of smaller companies.

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