European companies outperform the global average in terms of their sustainability performance, SAM’s Europe Status Report 2019 reveals – a finding that seems to endorse Europe’s international reputation as a forerunner of sustainability thinking. But while the report shows that European companies have an overall solid understanding of how to address corporate sustainability, it also points to significant room for improvement overall as well as in specific areas.
SAM’s first Status Report for Europe provides a snapshot of highlights from the 2019 SAM Corporate Sustainability Assessment (CSA), which assessed 677 companies from 23 European countries, providing insights into companies’ key strengths and weaknesses in relation to financially material sustainability factors that could impact the companies’ value drivers, competitive position, and thus long-term value creation. With participation varying widely across Europe, the report considers only the 10 countries with sufficiently large sample sizes (of at least 10 companies) to draw meaningful conclusions: Finland, France, Germany, Italy, the Netherlands, Russia, Spain, Sweden, Switzerland, and the United Kingdom.
European companies’ higher average scores in the 2019 CSA compared to their peers in Asia, Latin America, and North America seem to confirm Europe’s reputation as a global leader in sustainability thinking, corporate strategy, and business practices. However, the companies’ average scores of 60, 67 and 58 (out of 100) for the Economic, Environmental and Social Dimensions, respectively, point to considerable further room for improvement across most companies.
Among the 10 countries featured in the report, Spain stands out with particularly strong absolute corporate performance in all three Dimensions, while Russia is the clear laggard which may be attributed to the fact that the number of first-time participants in the CSA that was significant in 2019. All other country Average Scores are in a relatively tight, roughly 10-point range. This seems to indicate a similar level of commitment to sustainability management and transparency across these countries. In addition, the CSA results point to a European-wide prioritization of environmental issues over other sustainability issues as companies in all countries except Russia achieved higher Average Scores in the Environmental Dimension than in the Economic and Social Dimensions.
In the CSA’s Economic Dimension, Europe lags behind the global average on several Corporate Governance topics. In particular, board structure and the transparent definition of management ownership requirements as well as their actual implementation remain areas of weakness for many European firms, especially compared to their North American peers. Conversely, Europe stands out on diversity policy, gender diversity, and executive compensation.
In the Environmental Dimension, Europe scores above the global average in the Climate Strategy, Environmental Reporting, and Operational Eco-Efficiency criteria. However, SAM’s analysis points to significant room for improvement in relation to the adoption of management incentives for the management of climate change issues.
In the Social Dimension, European companies perform particularly well on the Corporate Citizenship & Philanthropy as well as Social Reporting criteria, but still have significant room for improvement in other key areas, particularly Human Rights but also Talent Attraction & Retention, Human Capital Development and Labor Practice Indicators.
The European countries best represented in the DJSI World are France, with 25 out of 78 eligible companies included in the global sustainability benchmark, followed by the UK (23 out of 138) and Spain (16 out of 25). Finland stands out with all six of its eligible companies securing a place on the DJSI World components list.
In line with the CSA results for all other global regions, European companies that actively participated in the CSA achieved better Scores for their management of sustainability issues than companies assessed only based on publicly available information. This probably reflects a greater commitment to sustainability and to improving through benchmarking on the part of active participating companies.
In this context, the fact that CSA participation increased in all but one of the 10 countries covered in the report indicates that more companies are taking a progressive, holistic approach to sustainability management and use the CSA process to assist them in this effort. As a credible external assessment of where a company stands in terms of its sustainability efforts and performance, the CSA not only helps companies to identify gaps and close them, but also raises the bar each year. As such, it should contribute to continuous improvements in the European corporate sustainability landscape over time.