Over a third of European companies ready to cut ties with non-ESG compliant suppliers

A growing number of European companies are prepared to sever relationships with suppliers that fail to meet sustainability criteria, according to a new survey by consultancy Bain & Company. The report reveals that more than one-third of corporate customers are ready to drop non-compliant suppliers, with two-thirds stating they will take such action within the next three years.

The study also highlights that 85% of B2B suppliers are incorporating environmental, social, and governance (ESG) factors into their offerings, but only 53% of customers believe their expectations are being fully met.

In addition to cutting ties with unsustainable suppliers, companies are willing to pay more for eco-friendly products and services. Around 45% of corporate clients globally are prepared to pay up to 5% more for sustainable offerings, and another 35% are open to paying 5-10% extra if the product meets ESG standards.

However, Bain & Company notes that sustainability is losing its top priority status for many businesses due to economic challenges such as inflation, geopolitical tensions, and the rapid advancement of new technologies. “Sustainability remains important, but the optimism of recent years is being tempered by a more pragmatic approach,” said Katarzyna Wal, junior partner at Bain & Company. She explained that some companies are re-evaluating their ESG commitments, which could damage their reputation in the long term.

Wal emphasized that companies that successfully integrate sustainability and related technologies will gain a lasting competitive edge. Bain’s forecasts suggest that several sustainable technologies will reach critical mass faster than expected, offering new opportunities for innovative companies.

The report also underscores the importance of sustainability to consumers. Sixty-one percent of respondents said their concern about climate change has grown over the past two years, driven by personal experiences of extreme weather. Consumer choices are increasingly influenced by brands and retailers promoting eco-friendly products, with 35% of shoppers swayed by media reports and 28% guided by social campaigns.

“There’s no going back from sustainable business practices,” Wal concluded, highlighting that B2B customers, regulators, and consumers now expect companies to prioritize ESG. “Sectors like energy and food production are prime examples of where sustainability and innovation will lead to significant business opportunities.”

Source: Bain & Co. and ISBnews