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Sustainability Risks in Supply Chains

A recent study conducted by EcoVadis, a leading platform in sustainability intelligence, highlights a critical issue in Tier 1 supply chains regarding sustainability risk management. Despite making progress in climate action and human rights within their operations, an alarming 80% of companies at the Tier 1 level do not have a structured process in place to identify or manage sustainability risks throughout their supply chains. This lack of oversight significantly hampers the ability to promote sustainable practices further down the supplier network.

Key Findings from the EcoVadis Sustainability Ratings Index

The insights in this report are drawn from the 10th edition of the EcoVadis Sustainability Ratings Index, encompassing nearly 200,000 scorecards from more than 100,000 companies globally, evaluated between the years 2021 and 2025. The data reveals that while these top-tier suppliers are enhancing sustainability efforts internally, the positive impact does not extend effectively to their suppliers. For instance, 73% of these companies do not report on Scope 3 upstream emissions, while 77% lack downstream emissions tracking. Additionally, a meager 2% of the surveyed companies have implemented an external mechanism for workers within the supply chain to report human rights violations.

Transparency is another pressing concern, as fewer than 1% of the companies provide detailed, decision-grade sustainability data to their buyers. This signals a significant bottleneck in the flow of crucial information needed to make informed sustainability decisions.

Internal Progress vs. Supply Chain Gaps

EcoVadis's findings indicate that while companies are making notable strides within their own operations—46% of rated suppliers either purchase or generate renewable energy, and 38% provide climate-related training to employees—78% still have not set science-based carbon reduction targets. This inconsistency, where internal efforts do not translate into comprehensive supply chain strategies, poses a significant challenge for sustainable procurement.

On the environmental front, there has been a noticeable improvement, with average environmental scores increasing by 9.6 points over four years. The percentage of companies achieving an Advanced+ rating (scores of 65 or above) has more than doubled, from 17% in 2021 to 38% in 2025. Notably, the Labor & Human Rights aspect showed an average score of 59.5, with 80% of companies adopting formal Diversity, Equity, and Inclusion (DEI) policies.

However, when examining procurement practices, the picture looks different. Many companies still depend heavily on unverified supplier questionnaires (42%) and only 46% require suppliers to agree to a sustainability code of conduct. Furthermore, just 20% conduct on-site audits, indicating a minimal shift in oversight practices over the past four years.

The Role of AI and Data Challenges

The struggle isn't just in documentation, as companies are increasingly integrating Artificial Intelligence (AI) into their procurement strategies. A related EcoVadis report indicates that 68% of corporate buyers have begun utilizing AI tools for sustainable procurement, with 62% recognizing carbon data validation as a top priority. Nonetheless, a considerable portion of suppliers are not adequately prepared to provide this essential data—30% reportedly do not offer any carbon data, and 26% supply only aggregated estimates.

According to Sylvain Guyoton, Chief Rating Officer at EcoVadis, while sophisticated tools for analyzing supplier sustainability data are in place, the core issue lies with suppliers lacking the capability to report necessary data. "Better software does not close that gap. The measurement problem lives in the supply base itself," he stated. To bridge this gap, ongoing engagement and structured assessments are paramount.

Path Forward for Sustainable Supply Chains

Despite the challenges outlined, the potential for improvement is substantial. Targeted engagement and strategic planning can significantly enhance supplier capabilities. Companies with multiple EcoVadis ratings tend to outperform newcomers by an average of 12 points, underscoring the benefits of continuous improvement in sustainability practices.

Organizations willing to engage suppliers as part of an ongoing process rather than a one-time compliance task can effectively narrow the gap between their sustainability intentions and actual verification processes.

Conclusion

The EcoVadis Sustainability Ratings Index serves as a wake-up call for enterprises to assess their suppliers' sustainability practices seriously. For a more sustainable future, both buyers and suppliers must collaborate efficiently to foster transparency, accountability, and continuous improvement throughout their supply chains. To explore more about these findings, you can access the full report at EcoVadis Insights.