Logistics firms neglect geopolitical risks in ESG plans

Fewer than two-in-10 shipping and logistics firms consider geopolitical risks a part of their ESG programme. A new study from S-RM has found that many will also struggle to meet with coming regulatory burdens on the matter.

From the latest Brexit border rules to the Tawain earthquake, recent events from across the globe have served as an undeniable reminder of the importance of resilience and agility within the supply chain. Over four years on from the UK’s official withdrawal from the EU, the aftershocks of Brexit are still being felt across industries such as food, agriculture, and pharmaceutical.

However, despite the mounting geopolitical pressures on the global supply chain, S-RM’s researchers found that a meagre 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. The global intelligence and cyber security consultancy, warned that this could come back to haunt firms sooner, rather than later.

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.”

Illustrating the risks at play, S-RM cited attacks on commercial vessels in the Red Sea by Houthi rebels, which were aimed at pressuring Israel to end its war against Hamas in Gaza. S-RM said that the attacks meant global shipping companies have already had to halt voyages along the route. Making this change without any kind of Plan B in place had led to extended journeys, and subsequently hindered their ability to meet industry targets of reducing emissions by 20% by 2030, along with meeting corporate net zero targets.

This inaction is causing governments to consider whether corporate interests can be left to their own devices, too. The forthcoming Corporate Sustainability Due Diligence Directive (CSDDD). Agreed this year, the CSDDD legislation will be implemented by 2027 and is comprehensive in scope, assessing both value chains and supply chains.

This poses a major issue for corporates and investors, which purport 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. As a result, an 18% portion of European shipping and logistics corporations subsequently ranked the CSDDD as their most significant regulatory concern, while 25% of investors ranked it as their primary issue.

Stafford added, “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.”