The EcoVadis Scientific Committee recently convened for its annual meeting, where emerging sustainability trends are explored and reviewed to determine their potential impact on our assessment process. The meeting brought together leaders from within EcoVadis and across the sustainability ecosystem, including John Elkington from Volans, Jacqueline Aloisi, a former board member at GRI and Rosey Hurst from Impactt.
Among the many topics discussed, two key themes emerged: The rapid evolution of the environmental, social and governance (ESG) reporting landscape and the acceleration of reporting in Asia. These are explored in greater detail below.
The Rapidly Evolving ESG Reporting Landscape
Supply chains are evolving due to the effects of the COVID-19 pandemic, digitalization and other innovative technological drivers, and the growing significance of sustainability in the global economy. Chief Procurement Officers across sectors, now fully recognizing the extent of supply chain risk their companies are exposed to, have expressed significant interest in the type of services and products offered by EcoVadis. A growing number of investors are also waking up to the opportunity of ESG investing, with inflows into sustainable assets reaching a record high in 2020.
Harnessing this significant potential will require careful consideration of the factors that will shape these trends in 2021 and beyond. Here are some of the key factors highlighted by the Scientific Committee:
- The market increasingly expects ESG reporting to be underpinned by data-driven, high-quality key performance indicators (KPIs).
EcoVadis is continuing to develop a KPI module that can serve a wide variety of use cases.
- The EU is developing policy mechanisms, such as the carbon border tax set to be implemented in 2023, to drive supply chain decarbonization.
In anticipation of this, EcoVadis is developing products centered on carbon and supply chain finance, such as the recently released Carbon Action Module.
- New technologies are enabling remote auditing and assessment at scale.
EcoVadis will consider utilizing emerging solutions like Climate Trace, a satellite-based service for verifying greenhouse gas emissions remotely.
- There are several initiatives seeking to unify the plethora of existing reporting standards and frameworks. For example, the Better Alignment Project has brought together the CDP, CDSB, GRI, IIRC and SASB to identify opportunities for harmonization.
EcoVadis is closely monitoring these developments with the ultimate goal of ensuring that it collects aligned KPIs that are reliable and consistent.
The Acceleration of ESG Reporting in Asia
The Scientific Committee also discussed recent trends in Asia, where EcoVadis is rapidly expanding its operations of late. According to Rajesh Chhabara, the Managing Director of CSR Works International and guest speaker of this year’s meeting, growth in ESG reporting has been particularly pronounced in the region. The growth has been primarily driven by state regulators, multinational customers looking to enhance their supply chain sustainability and ESG-oriented investors.
While willingness to go beyond compliance is still relatively low, Asian companies are producing an ever-increasing number of integrated reports, submitting to the CDP more frequently (29% of responses now come from the region) and have even surpassed their North American counterparts in several TCFD reporting categories. These developments, combined with the emergence of green bonds and carbon taxes, will continue to drive supply chain sustainability in the region.
Supply chain assessment will be particularly relevant in markets like Singapore, which is home to a large number of multinational companies with complex supply chains and ambitious sustainability agendas. The Philippines, which is beginning to mandate ESG disclosure for certain companies, also represents an emerging growth market for assessment. EcoVadis will look to capitalize on these opportunities as more and more companies, governments and investors realize the importance of sustainability in the wake of the COVID-19 pandemic.
About the Scientific Committee
- Provide guidance on methodology principles and processes underpinning EcoVadis assessments;
- Make recommendations on how to take into account for new sustainability standards, practices and regulations;
- Provide opinions on external market context and developments (economic, geopolitical, scientific, etc.); and
- Address any issues arising with application of the ratings, as part of the internal escalation process.
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