GBP Monitor: Despite the Supply Chain Act, Financial Factors Dominate the Selection of Business Relationships – Sustainability Takes a Backseat
In May 2024, following fierce controversy, the European Union has adopted a new supply chain directive that obliges large companies to make a greater commitment to environmental protection and social standards (environmental, social, governance, ESG). The documentation requirements were introduced to exert pressure on all companies involved in supply chains to contribute to ensuring compliance with sustainability goals. This directive is to be gradually implemented by 2029.
In Germany, the Supply Chain Act (Lieferkettensorgfaltspflichtengesetz) with similar objectives has been in force since last year. The current GBP data now show that the expectations associated with the new act are only being fulfilled to a limited extent: Companies still select their customers or suppliers mostly because of hard financial indicators such as price, product features, terms of payment and delivery. According to the GBP survey, these criteria are considered to be the most relevant. Non-financial indicators such as environmental protection and sustainability rank at the bottom of the list. The results apply both to large companies, which are required to disclose their ESG performance, and to smaller companies with fewer than 1,000 employees, which are not obliged to do so.