Sustainable procurement practices good for business and society

Company sustainability ratings are proliferating as the environmental, social, and governance (ESG) agenda steadily migrates from the margins to the mainstream of capital, procurement, and consumer markets. This is one of many conclusions drawn by supply chain specialists speaking at the BSR conference in New York last week.

“While the advance of sustainability ratings has spawned innovation, questions of rigor, consistency, transparency, and independence appear with increasing frequency, fueled in part by the financial and environmental crises in the last few years,” said Allen White, vice president and senior fellow, Tellus Institute.

As moderator of the panel, “Sustainability Ratings: Time for a Common Framework,” he noted that these developments lead to one key question.

“How can we use ratings to drive continuously higher levels of sustainability performance among companies worldwide?” he asked.

Marcela Manubens, senior vice president, global human rights a social responsibility program, Phillips-Van Heusen Corporation, observed that “critical mass” is still an objective.

“There’s been a convergence of social agendas,” she said, “but there remains a need for a closer relationship with consumer practice and corporate behavior. Clearly, we are not there yet.”

Steven Lydenberg, chief investment officer, Domini Social Investments, agreed, but the “competitive culture” of corporations was still an obstacle.

“I’m a great believer in KPIs (Key Performance Indicators),” he said. Right now, there are too many secondary indicators on the societal front, with too many scores. That gives us a false sense of completion, and fails to quantify findings.”

As a consequence, he added, corporations are discouraged from innovating.

Michael Marx, executive director, corporate ethics international, said that no matter how slow the process has been so far, corporations must become more transparent.

“Otherwise,” he said, “they run the risk of having procurement negatively impacted. NGOs, for example, can redirect capital if they can’t see beyond the ‘black box’ some corporations still use in their supply chains.”

Indeed, he said, a movement perspective on ratings will educate consumers and differentiate providers.

“That’s when the interests of NGOs and corporations dovetail, and create a win-win,” said Marx.

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