In recent years stakeholders have become increasingly demanding regarding the transparency of corporate sustainability performance. The importance of environmental and social performance ratings and reporting has increased in this context. The Dow Jones Sustainability Index (DJSI) stands as one of the most established and respected rating mechanisms, with stakeholder pressure compelling large companies to respond to the index’s yearly corporate sustainability assessment. According to a 2013 study from GlobeScan and SustainAbility, which polled over 700 sustainability experts, 65 percent of experts found the DJSI to be credible, second only to the CDP at 76%.
While the EcoVadis platform incorporates CDP data in the process of producing its supplier sustainability scorecards, the platform can, in turn, be used to answer the DJSI questionnaire, thus lessening the redundancy of responding to corporate sustainability information requests. EcoVadis provides targeted guidance on how to respond to the Supply Chain Management portion (section 1.6) of the DJSI assessment, which is divided into six question categories for companies to complete:
<1.6.1: Awareness – A company must determine which of its tier 1 suppliers are most important for its procurement strategy, whether it’s due to volume or criticality of products or services, for example.
1.6.2: Risk Exposure – After the most critical supplier have been identified, it’s important for a company to assess the level of risks they face, whether from issues relating to sustainability or a company’s purchasing strategy. EcoVadis provides a risk mapping and analysis services that identify risk areas within a company’s global supply chain for both purchasing categories and individual suppliers.
1.6.3: Risk Management Measures – This section goes into detail regarding the specific actions that have been undertaken to manage risks among tier 1 suppliers, including supplier codes of conduct, contract clauses, collaborative initiatives, monitoring, audits, corrective action plans, and capacity building. ICT and chemical companies, for example, may participate in collaborative initiatives such as the Global e-Sustainability Initiative (GeSI) and the Together for Sustainability (TfS) initiative. For supplier monitoring, the EcoVadis platform itself constitutes a comprehensive monitoring system, which also includes the ability to create customizable action plans for suppliers based on scorecard results.
1.6.4: ESG Integration – This is largely an internal decision a company must make regarding the integration of environmental, social, and governance (ESG) factors into its supplier selection. This can be based, however, on EcoVadis scorecard results with the help of detailed guidance and recommendations. This section also addresses training on ESG issues related to procurement, which EcoVadis provides through a variety of awareness-building webinars and trainings for clients.
1.6.5: Opportunities – While section 1.6.3 asks companies to declare actions and initiatives taken to manage sustainability risks in its supply chain, here companies are asked to describe the positive business outcomes resulting from such actions, whether they are in terms of cost or risk reductions, revenue growth or market opportunities.
1.6.6: Transparency – Here a company is asked about the areas of its supply chain management on which it publicly reports. This includes relevant policies, measures and key performance indicators (KPIs). If a company has made the results of its EcoVadis supplier monitoring public, it can reference a variety of KPIs relating to supply chain management, such as the percentage of suppliers that are ISO 14001 certified or are signatories to the United Nations Global Compact.
Fifty-one percent of sustainability experts find that sustainability ratings, such as the Dow Jones Sustainabiltiy Index, are more important than they were three years ago, while 64 percent believe the importance of such ratings will increase in the next three years. Participation in EcoVadis’ supplier monitoring platform can make fulfilling the obligation to respond to information requests more efficient, helping companies both management sustainability risks in their global supply chains and address the concerns of their diverse stakeholders.
This article was written by EcoVadis CSR Analyst Peter Rau. Find him on LinkedIn.