Just 1 in 10 shipping and logistics firms consider geopolitical risks a part of their ESG programme, finds S-RM

• Only 19% of European corporates factor geopolitical risks into their sustainability programmes
• Corporate Sustainability Due Diligence Directive (CSDDD) most concerning regulation for nearly a fifth (18%) of shipping and logistics corporations

1 August 2024 – London – S-RM, leading global intelligence and cyber security consultancy, reveals an overwhelming majority (90%) of shipping and logistics companies do not incorporate geopolitical risks into their ESG planning.

While supply chains register as a significant concern for both corporates and investors when it comes to a responsible ESG programme, S-RM’s ESG Report 2024 highlights that this is not routinely reflected in the current ESG programmes and policies in place.

Supply chain interruption

Shifting geopolitical alliances, trade disputes, and regional conflicts can significantly disrupt supply chains. It is therefore surprising that just 10% of shipping and logistics companies consider geopolitical risks a part of their ESG programmes, particularly as their specific operations can be so susceptible to shifting dynamics.

Events this year have proven that geopolitical risks must be factored into decisions about sustainability priorities and overall ESG strategies. For example, attacks on commercial vessels in the Red Sea have led global shipping companies to halt voyages along this route, leading to extended journeys. The enforced change has hindered their ability to meet industry targets of reducing emissions by 20% by 2030, along with meeting corporate net zero targets.

Concern without action around supply chain legislation

Shipping and logistics corporates are focused on international and domestic regulations, including the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD). Agreed this year, the CSDDD legislation will be implemented by 2027 and comprehensive in scope, assessing both value chains and supply chains.

Nearly a fifth (18%) of European shipping and logistics corporations ranked the CSDDD as their most significant regulatory concern, while 25% of investors ranked it as their primary issue. Corporates and investors have shown that compliance with supply chain regulations is a priority but are failing to act upon this within their ESG strategies. According to S-RM’s report, 77% of companies do not incorporate responsible supply chains into their ESG programmes.

Social issues

Although shipping and logistics companies fail to factor geopolitical risks into their ESG planning, they do have a marked focus on social issues. S-RM’s ESG Report 2024 found 70% of shipping and logistics companies have legal teams actively monitoring these issues, while nearly a quarter (24%) indicated that they were most concerned by domestic modern slavery laws.

Social issues are a key focus for shipping and logistics corporates against the backdrop of increasing regulatory scrutiny. However, the data reveals that geopolitics and supply chains in general are being considered separately from the wider sustainability agenda. This is already impacting companies’ bottom line, their ability to meet sustainability targets and their future ability to meet demanding regulations.

Natalie Stafford, Director and Head of ESG at S-RM, commented:

We cannot stress enough the importance of integrating geopolitical risks into ESG strategies. Our recent report has shown that many shipping and logistics companies haven’t fully recognised the significance of geopolitical risks when it comes to devising effective ESG plans.

“As global trade and regulatory landscapes evolve, issues like CSDDD are climbing higher on corporate and investor agendas, driven by the need for robust supply chains and regulatory compliance. Organisations must tackle these challenges head on, ensuring their strategies are equipped to manage the risks and opportunities that come with evolving global standards. Being reactive to global events will not suffice. Instead, companies must work to integrate their understanding of geopolitics into ESG strategies to avoid reputational and financial costs.”

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