Supply Chain Series: supplier codes of conduct show notable gap in environmental requirements

Comprehensive supplier codes of conduct, which outline the basic commitments a company requires from its suppliers, are fundamental for effective supply chain management. These requirements are vital as companies face growing pressure from regulators and investors to embed sustainability due diligence into their sourcing practices. Rising geopolitical tensions, shifting trade policies and escalating climate risks further heighten this need.

Within our ESG Scores and Raw Data, underpinned by the S&P Global Corporate Sustainability Assessment (CSA), we assess the extent to which companies monitor and report their supply chain management and supplier codes of conduct. 

The CSA is an annual evaluation of sustainability practices covering about 14,000 companies worldwide. In this review, we analyze up to 10,042 public companies on their supply chain management practices; these companies are applicable to respond to supply chain management questions.

In 2024, only 51% of applicable companies publicly disclosed supplier codes of conduct, up from 45% the previous year. As illustrated in figure 1, human rights and labor issues were the most disclosed topics, while environmental topics were the least common. 

Most companies address key human rights and labor issues in their supplier codes of conduct, with high coverage for occupational health and safety (93%), child labor (92%) and forced labor (90%). Working conditions, encompassing working hours, physical and mental demands, wages, and benefits, appeared in 84% of codes, followed by provisions on discrimination and harassment (76%) and freedom of association and collective bargaining (60%). These frequently disclosed topics align with internationally recognized human rights frameworks, including the International Bill of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, and the UN Guiding Principles on Business and Human Rights. 

However, the lower inclusion of freedom of association and collective bargaining signals a need for greater attention from companies, given their critical role in safeguarding workers’ rights and promoting responsible business conduct.

In the area of business ethics, 65% of companies required suppliers to prevent anticompetitive practices, while 56% addressed corruption and conflicts of interest. Despite growing recognition of ethical conduct in supply chains, nearly half of the companies assessed still lacked formal requirements in this domain.

Environmental considerations remain the most significant gap in supplier codes of conduct, although progress has been made since the 2023 CSA results. Resource efficiency was the most commonly addressed environmental topic, yet it appeared in only 56% of codes. Pollution and waste management (48%), greenhouse gas emissions and energy consumption (45%), and biodiversity (29%) were even less frequently disclosed, despite their substantial impact on ecosystems and increasing regulatory focus on them. This gap is particularly concerning given global environmental agreements and mandatory disclosure requirements related to emissions, pollution prevention and waste management.

 While companies participating in the 2024 CSA have made progress in formalizing supply chain sustainability practices, environmental topics are still insufficiently addressed. Strengthening supplier requirements in environmental stewardship, business ethics and underreported labor rights areas is a critical next step for companies aiming to enhance supply chain resilience and align with international sustainability standards.