Bridging the gap : building environmental, social and governance capabilities in small and medium logistics companies

Abstract

Nowadays, the popularity of environmental, social, and governance (ESG) performance measurement has dramatically increased, particularly to listed companies, for supporting various investment decisions. Companies with high ESG scores imply that their ongoing business development is recognised to be economically, socially, and environmentally sustainable. From the current ESG measurement practice, the measurement frameworks are built on rating schemes, such as KLD and ASSET4, so as to derive the ESG scores for listed companies. However, such existing measurement frameworks are difficult to be implemented in small and medium enterprises (SMEs) with unstructured and non-standardised business data, especially in logistics and supply chain management (LSCM) practice. In addition, it is inevitable for listed companies to work with SMEs, for example logistics service providers, but they need a systematic framework to source the responsible SMEs to maintain the ESG performance. To address the above industrial pain-points, this study proposes an ESG development prioritisation and performance measurement framework (ESG-DPPMF) by means of the Bayesian best-worst method enabling the group decision-making capability to prioritise the ESG development areas and formulate the performance measurement scheme. Through consolidating the opinions from logistics practitioners, it is found that fair labour practice, reverse logistics and human right in supply chains are the most essential areas to further enhance ESG capabilities in the logistics industry. In addition, the viability of the ESG performance measurement has been validated, and thus the sustainable and human-centric logistics practice can be developed to achieve business sustainability.