EcoVadis targets ‘millions’ in the supply chain to drive ESG impact

It was a busy month for Pierre-François Thaler. Not only did EcoVadis, the sustainability rating company he co-founded and serves as co-CEO with business partner Frédéric Trinel, receive half a billion dollars in funding, but the company went on to acquired German sustainability data mining company ecotrek.

“We started 15 years ago. For many years we saw a slow increase in adoptions,” Thaler said. “Today we are seeing massive adoption. Over the past 12 months, there has been a cascading effect, with Fortune 500 companies building momentum, all working to improve and scale their their impact on sustainable development.

EcoVadis offers a collaborative platform that companies use to assess and rank environmental, social and governance (ESG) activities and programs, then develop strategies and plans to improve scores. Since 2007, EcoVadis ratings have been widely used by environmentally conscious organizations and investors. The Paris-based company reports that around 750 multinational companies, representing more than 47,000 procurement and sustainability professionals, use the platform internally and to assess and monitor a global supplier base or selected business partners. To date, the EcoVadis database has more than 90,000 rated companies in 175 countries and 200 sectors.

Pierre-François Thaler and Frédéric Trinel, co-founders and co-CEOs of EcoVadis

For anyone wondering how influential EcoVadis is, 1,000 of its largest customers account for $3 trillion in annual supply chain procurement spend.

The EcoVadis methodology uses seven management indicators across 21 sustainable criteria in four themes: environment; social risks and human risks; ethics; and sustainable purchases. EcoVadis adheres to international sustainability standards such as the ten principles of the United Nations Global Compact, the conventions of the International Labor Organization and the United Nations Guiding Principles on Business and Human Rights.

In June, EcoVadis raised $500 million to become one of the first “unicorns” in the ESG ratings industry – an unlisted company valued at $1 billion or more. Private equity firms Astorg and BeyondNetZero led the financing, along with General Atlantic’s climate investment arm, as well as Singapore’s GIC and Princeville Capital. The infusion brings the total capital raised by the company to over $725 million. In July, EcoVadis reached a new milestone with the acquisition of ecotrek; it plans to use ecotrek’s automated sustainability data collection, digitization and analysis capabilities to complement the EcoVadis portfolio.

EcoVadis ratings work in several ways. First, companies get ratings for their own ESG activities and performance. Corporate organizations up the supply chain use this information to improve internal processes and procedures, build on ESG strategy, and disseminate the rating to investors as well as customers. Many of these large companies attempt to serve as role models for their suppliers; larger companies can use the platform to rate and track companies in their chain. Small and medium-sized suppliers also use EcoVadis to assess and improve their operations, while reporting to upstream partners, investors and the market. All companies using EcoVadis pay a subscription fee which varies depending on size and whether they only request internal assessments or track companies in their supply chain.

John Wagner, founder of sustainability consultancy Paladin Pathway LLC, said EcoVadis fills a gap regarding inconsistent data collection in the ESG market.

“Each company had its own questions and its own format. Now a company can report in EcoVadis, receive reports and assessments in a consistent format, and then share that information with suppliers and customers,” Wagner said. “EcoVadis provides the feet in the street to research these answers and report comparably across all categories.”

According to Thaler, EcoVadis was initially launched with a vision to meet the acute need of businesses for reporting efficiency. Over time, the raison d’être of the company has evolved.

“The vision at the start was to build a cloud platform and the technology to solve the efficiency problem. The whole system was not efficient,” Thaler explained. As the company grew and environmental issues worsened, the vision changed. “We feel the role and the responsibility. Our customers are a big part of the solution. This will have more impact than what regulators or countries can do.”

Thaler said the most challenging aspect of collecting ESG data is finding the right combination of scale and impact. “Some actions can lead to change but are not scalable. Other actions, like filling out endless forms, are scalable but have no impact.”

The real impact will come when as many companies as possible participate, Thaler said.

“In the Fortune 2000 supply chain, there are about 2 million companies. We want to be able to go deep and very broadly, and cover the millions of companies in that supply chain.”

The main big companies include pharmaceutical giant Johnson & Johnson, heavy equipment maker Deere and Company, British multinational consumer goods company Unilever, and automakers Volvo and General Motors.

While these companies have all pledged to improve ESG practices and ratings, GM has required its suppliers to sign an ESG Supplier Pledge to commit to carbon neutrality. “We undertook an internal journey last year to examine the landscape of rating platforms for vendors. We found [EcoVadis] be a great solution for GM,” said Fred Gersdorff, senior director of socially responsible and sustainable supply chains for the automaker.

Similarly, John Deere has implemented Leap Ambitions, targeted goals designed to drive economic value and sustainability for Deere and all of its stakeholders, including its suppliers.

We want to be able to go deep and very broadly, and cover the millions of companies in this supply chain.

“To embed sustainability deeply into the Deere business so that it is at the center of how we make decisions,” is the goal, explained Kimberly Noe, sustainability program manager. “Managing both the economic, environmental and social impacts of our decisions, but not pure economics.”

Noe said sustainability gains will only happen when large companies incorporate as many of their small business networks.

“At Deere, we take a holistic view of our supply chain and ask the companies we work with the important ESG questions: Are you caring for the environment and considering the environment in your decisions? Do you know about your employees? Do you have controls in place and are you doing what you say you do? It’s not just about being on time for delivery.

EcoVadis has also partnered with a group of technology companies, such as Microsoft, SAP and vendor intelligence platform TealBook, all of which have integrated the EcoVadis platform into their offerings. TealBook provides procurement, finance and supply chain data to companies looking to find and partner with other ESG-conscious companies.

“One of the reasons EcoVadis leads the market is because of fresh data and getting the right supplier information. It helps with clear decision-making that has impact,” said Matt Palackdharry, Chief Strategy and Revenue Officer at TealBook. This capability is especially important with disruptions like the pandemic or geopolitical wars that alter supplier data daily, he said.

EcoVadis offers educational and informative products accessible to all levels of its customers and partners. EcoVadis IQ provides insights into sustainability risks across the entire supply chain. The tool can provide recommendations on next steps and proactive sustainability risk management for a better assessment strategy. EcoVadis Academy is an e-learning module with 16 courses covering introductory and more in-depth courses in multiple languages ​​designed to educate small and medium-sized businesses. And to solve the problem that only around 15% of suppliers worldwide report their emissions, EcoVadis offers the Carbon Action module, which provides a specific carbon scorecard.

Editor’s Note: This article includes information provided by GreenBiz Editorial Director Heather Clancy.

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