A study by Mannheim Business School has found that despite the enactment of Germany’s supply chain due diligence law last year, most firms continue to rely on financial metrics over sustainability when selecting suppliers.
According to Environmental Finance, this finding comes amid increasing regulatory pressures across Europe to integrate environmental, social, and governance (ESG) criteria into corporate supply chains.
The survey, which evaluated around 2,600 companies for their ESG incorporation in supply chains, revealed a concerning trend: non-financial indicators are significantly less prioritised. This suggests that the existing German law may not yet be effective in shifting corporate focus towards more sustainable business practices.
According to Professor Jannis Bischof of Mannheim Business School, the legislation has often been treated as a mere compliance requirement. “In too many cases, the implementation of the [German] law is purely a compliance exercise with no real impact on sustainability goals,” he stated.
Furthermore, the impending Corporate Sustainability Due Diligence Directive (CSDDD), set to be mandatory for the largest companies by July 2027, has garnered attention and support from institutional investors. These investors advocate for more stringent enforcement of sustainability reporting to ensure that companies do not merely view the CSDDD as another regulatory hurdle but as a pivotal driver for genuine sustainability integration within their operations.
This insight into corporate ESG strategies underscores a significant gap between regulatory intentions and corporate actions, with far-reaching implications for sustainability efforts globally. As the EU gears up to expand these regulations, the effectiveness of such policies in instigating real change remains to be seen.
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