While many companies have set bold sustainability goals, the global assurance partners has found businesses' readiness to hit these targets is insufficient.
Underscoring this, research from the World Benchmarking Alliance (WBA) found that 90% of ‘the world’s 2,000 most influential companies’ are failing to ensure human rights, decent work and ethical conduct.
This lack of preparedness is often due to poor visibility of supply chains or insufficient expertise in managing these issues effectively, LRQA’s ’2025 Top Trends in Supply Chain Sustainability' report suggests.
Lack of vision and financial challenges
When questioned on static progress, the report found that around 75% of large retailers say a lack of clear strategy or goals in place are a key challenge in meeting sustainability targets.
Meanwhile, 50% of small companies report that they ‘don’t feel pressure from consumers/customers to make any change', with nearly half citing the task as ‘too big’ and ‘transformational change’ too costly.
The report also shows that businesses are frequently caught in a quandary, where short term financial gains are prioritised over long-term sustainability goals. This is intensified by market pressures that reward immediate results, making it harder for companies to invest in sustainable practices which may not provide instant financial gratification.
Data dilemma
Data is key when it comes to meeting ESG requirements, particularly as we see new regulations come into force, such as the EUDR and CSDDD. However, although companies report having more data and visibility into their supply chains, LRQA’s report finds that they are often struggling to create meaningful action from it.
While data is important, without proper management it’s meaningless.
A lack of high-quality data in areas such as biodiversity and deforestation is making matters worse, as new ‘green’ regulations come in hard and fast requiring insight which businesses simply don’t have.
The implications of this are far-reaching, restricting one’s ability to proactively monitor trends and understand supply chain ESG risk patterns.
Labour violations in unassuming markets
Another major challenge halting sustainability progress is the lack of understanding into how business, the environment and human rights are intertwined.
EiQ’s 2024 overall supply chain risk index revealed that violations are occurring all over; and with insufficient data on these unassuming markets, issues have been sneaking under the radar.
The perception that certain regions and industries are safe havens is an outdated and dangerous outlook. The aforementioned index found that more than 50% of the regions are at high or extreme risk for overall supply chain violations, with countries such child labour an ongoing concern in the US, forced labour problems persisting in Italy, and the risk for violations against foreign migrant rising in Australia.
Regulatory soup
While a lack of strategic vision, finance and high-quality data or indeed, insufficient use of it, are halting progress, the complex tsunami of regulation is adding further fuel to the fire.
We can also expect new regulations to have a much quicker impact on SMEs than one might have originally expected. Although the first wave of CSDDD will not directly impact SMEs, LRQA warns they will be hit by the knock-on effects it has on larger businesses as they impose similar expectations on their suppliers (which often encompass SMEs).
Investors interested in ESG
Despite a lack of long-term sustainability goals, data shows that businesses prioritising sustainability targets are more attractive to investors.
Deloitte research reveals that 83% of investors incorporate sustainability information into their fundamental analyses. Similar findings were unearthed by KPMG, which found that 70% of dealmakers globally report that ESG has become more integral to investment deals in the last 12-18 months.
LRQA believes this ‘investor interest’ in ESG strategies is set to be a key trend for 2025 and will significantly impact how businesses prioritise and manage their supply chain ESG due diligence in the future.
