Measuring What Matters: The Rise of Sustainability Ratings in Global Commerce

A sustainability rating is an assessment of a company's economic, environmental, and social values. How well a company manages these three dimensions can indicate its ability to benefit from opportunities and manage risks in the mid- to long-term, and is therefore of interest to investors, customers and consumers.

Sustainability as a major concern for businesses, government, and consumers took center-stage in the mid-1990s not on environmental issues, but on unconscionable working conditions: Several major retailers were brought to the center of sweatshop allegations—accused of providing poor and unjust working conditions for local workers. Initially, the retailers denied the charges, stating they had little control over their supply chain providers, but the statement was drowned out by angry opposition from consumers and investors alike. The retailers responded with the enactment of codes of condust for all contractors that protect workers and prohibit illegal working conditions.

There was no holding back the burgeoning demand for information, not just about companies but about their internal practices. 

 

What is a Sustainability Rating? 

Sustainability ratings, sometimes referred to as ESG ratings, cover multiple business subjects such as carbon emissions, labor practices including DEI, details regarding supply chains, how the community engages with the businesses, and the company’s own corporate governance.   These ratings are vital tools for helping companies and the countries in which they operate to develop a sustainable economy in the longer term. 

For logistics companies such as CEVA and its parent company the CMA CGM Group, sustainability ratings help to create visibility into the operations of the global supply chains they serve, identifying areas for improvements. The company, in line with the CMA CGM Group, has three chief commitments that guide its activities: Acting for People, Acting for Planet and Acting for Fair Trade. 

Regarding sustainability, a widely debated topic in the field of logistics, CEVA’s own decarbonization efforts are driven by its ability to innovate and collaborate. In the short-term, these efforts have three main levers: its warehouses, its fleet and low carbon solutions, with such activities as reducing energy consumption through solar panels and LED lighting, updating the transportation fleet to electric and biofuel-vehicles, and offering low-carbon modal switch transportation alternatives.  

Today, sustainability ratings have become an industry: According to case studies conducted by the INSEAD business school, the total addressable market for supply-chain sustainability ratings was estimated at $850 million by 2024, with the served market estimated at $400-450 million for the same time period. As of 2020, there were more than 150 sustainability data and ratings providers worldwide, including S&P Global ESG, JUST Capital, Sustainalytics, FTSE4Good, and more. These ESG rating companies have a variety of target customers ranging from stakeholders, investors, the public and supply chain partners. And while there are many in today’s market, EcoVadis is the world leader.

 

Just what is EcoVadis?

EcoVadis is a digital platform that helps companies manage ESG risk and compliance, meet corporate sustainability goals, and drive impact at scale by providing detailed insights for compliance, improvement and acceleration on sustainability. EcoVadis provides companies with insights and tools to benchmark, monitor, and improve the environmental, social and ethical practices. Their customer base of more than 130,000 companies (encompassing both corporations and supplier companies) includes some of the world’s largest corporations, including BASF, Coca-Cola, Johnson & Johnson, L'Oréal, LVMH, Nestlé and Unilever.

The company creates its sustainability ratings using a methodology consisting of seven management indicators and 21 criteria grouped under Environment, Labor and Human Rights, Business Ethics, and Sustainable Procurement. The weight of each theme or criterion is adjusted according to the company’s size, geography and industry. The methodology incorporates third-party information through external certification and external stakeholder input and is designed to enable analysts to cross-check certain information provided through different sources.  

Rankings are the result of a thorough assessment:

• Questionnaire: tailored to the company’s industry and size 
• Supporting documentation: companies must submit formal, recent and credible documentation like CSR reports, certificates, training materials, etc. 
• Performing a 360° screening on many news outlets to identify negative CSR-related news articles

EcoVadis analysts then review these documents for elements of sustainability and, finally, collect global, external source statements on suppliers from the web with the help of digital tools. Companies who request an EcoVadis analysis receive a rating (from 0 – 100), while suppliers receive feedback on their practices and recommendations on areas to improve. 

 

CEVA Logistics on EcoVadis

CEVA Logistics was awarded a Gold  Medal and received an overall score of 76 out of 100 in the 2024 EcoVadis sustainability performance assessment, a significant 12-point improvement from the previous year, placing CEVA in the top 1% overall for the logistics industry and top 5% of companies overall. CEVA scored particularly high in the Environment category, earning a score of 90 out of 100, highlighting the company’s continued CSR progress.

 

Are the rankings worth the effort?

While ESG ratings have gained momemtum and popularity, they’re not without flaws. ESG ratings can be unreliable, carry biases and have a general lack of transparency. With so many providers and methodologies on the market, there is often inconsistency in ratings for the same company which reduces trust among investors, the public, and others. There is a growing need for increased transparency around ESG data collection, reporting and authentication of evidence that the companies being assessed provide. The future of the ratings system is sure to change in the next coming years.

To be sure, compiling the necessary information for a sustainability ranking, then reviewing the results and implementing change takes time, money and effort. It’s a long-term investment with incremental results on the environmental front and more significant results on the business plan.

Internally, sustainability information can foster a company’s awareness of the environmental and social needs in the areas where it conducts business which, in turn, can foster innovation by identifying opportunities for new products, while reducing the potential impact of tougher legislation and quality standards. 
A high sustainability rating can bolster the reputations of both company and supplier and make them more attractive to jobseekers, thus facilitating both hiring and employee retention. 

A negative sustainability rating, on the other hand, can result in losses to business, investment, customers, and customer confidence or loyalty.  
Sustainability ratings are especially valuable for long-term investors, in particular for genuine sustainability funds, which look for the most sustainable companies within each industry to include in their investment portfolios. 

Ratings are especially important to the logistics industry as it undergoes significant transformation in its concerted effort to tackle climate change. In today’s era of increasing environmental awareness and corporate responsibility, the logistics industry is actively embracing innovative sustainability practices and ethical standards to stay on track in its drive toward creating positive global change.

 

Aligning sustainability goals

CEVA Logistics is committed to achieving  higher levels of sustainability in logistics and uses its global scale to introduce its customers and suppiers to low carbon solutions, helping encourage the shift toward more sustainable supply chains. The company’s high level of transparency fosters mutual accountability to continue improving the global supply chain.

The effects are already apparent. In 2023, CEVA’s carbon footprint decreased to 6.0 million tons, a reduction of 200,000 tons from 2022. CEVA and the CMA CGM Group are committed to the decarbonization of their operations and aim to reach net zero emissions by 2050. 
 

Source: INSEAD case studies