Rating sustainability performance: an essential business metric
EcoVadis sustainability ratings and scorecards help procurement teams monitor supply chain CSR/ESG practices across 190 sectors and 150 countries. Pierre-Francois Thaler, co-founder and co-CEO, explains the company’s business model and why it’s important to get rated.
Why is it advantageous for a company to seek an EcoVadis rating?
Corporate social responsibility (CSR), which is often referred to as environmental, social and governance (ESG) in the finance industry, is becoming an essential criteria for measuring business performance. It is being demanded by stakeholders, not only for reporting and regulatory requirements, but as a key factor in business relationships, supply chains, investment – and now – business lending.
EcoVadis ratings and scorecards provide businesses with a reliable indicator of their CSR performance that they can share with stakeholders. We combine the latest technology with a team of expert analysts and a well-refined methodology that simplifies the process.
Companies use EcoVadis ratings to enhance business relationships, such as in selection for tenders, participation in preferred partner status, or co-innovation programmes. And now they are able to obtain better loan rates!
What reputational benefits does a rating offer?
EcoVadis has rated over 45,000 companies that share their results with over 200 of the world’s largest corporates (such as Verizon, L’Oréal, Nestle, GSK, Johnson & Johnson, Michelin and BASF) and six industry initiatives. Having a good EcoVadis score brings a status that companies can use to enhance their brands, both externally with customers and stakeholders, as well as internally with employees and for recruiting. Every month hundreds of companies proudly communicate (examples here) when their score has made them eligible to earn an EcoVadis Gold, Silver or Bronze medal.
Why else might a company seek a rating?
In addition to sharing results with stakeholders to enhance business relationships, companies use our ratings to benchmark and guide improvements in sustainability performance, and use the data when reporting to other evaluations and indices. Our ratings have also been adopted by six industry initiatives such as chemicals, consumer goods, rail and beauty as a standard for entire supply categories.
How can gaining a rating affect how companies view CSR and sustainability issues internally?
An evaluation by an external expert with broad global benchmarks such as EcoVadis can give CSR professionals and executives an independent view on their performance, and how it compares to peers. This can be a powerful incentive for taking action and steps toward increasing performance.
As a quantitative measure, CFOs can use a rating to see how investments improve performance over time (e.g. after subsequent evaluations). Larger groups use EcoVadis Ratings as a global standard to align their sustainability performance across many subsidiary entities around the world (such as Toyota MHE and Belron).
What is involved in seeking an EcoVadis rating?
EcoVadis is a simple four stage process. There are no restrictions; just register, answer the online questionnaire, receive and share results, improve!
What areas does it cover?
The methodology covers 21 CSR criteria across four themes: environment, labour/social, ethics, and sustainable supply (relating to sourcing practices). The process includes a 360 degree watch, which checks over 2,500 sources including Regulatory DataCorp watch lists and sanction lists, and thousands of local news sources, all of which may be factored into the evaluation.
How long does the process take and what burdens does it place on the company being rated?
The rated company responds to a customized questionnaire depending on company size and business activity. They may add as many users (e.g. colleagues) as they like to collaborate on finding and providing the right documents, usually over several weeks. Our pricing plans are based on company size.
How frequently does a company need to be re-rated?
Our subscription service includes re-evaluation every year. As companies get re-assessed, they are able to track their improvement progress over time in each theme. On average, about 65% of companies that are reassessed improve their score.
How do the CSR/sustainability credentials of suppliers affect a company’s rating?
Sustainable procurement is one of the four themes of our assessment; it has its own theme score and is included in the overall rating. However, we do not factor in performance of the company’s suppliers, but rather assess the maturity of a company’s procurement management system to integrate CSR criteria into its procurement and supplier management processes.
How do you expect the role of sustainability ratings in business to evolve?
We are encouraged by this expansion of the use of our EcoVadis ratings beyond supply chains to lending relationships, and it presages many other similar uses yet to come, where trust and transparency build value in relationships.
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