As domestic and EU regulation tightens, companies across Europe are increasingly coming to regard sustainability and procurement as two sides of the same coin. The ability to leverage ESG intelligence, best practices, and network effects is becoming the "new normal" and, without it, companies struggle to maintain competitiveness.
An Evolving Regulatory Landscape
The ground is shifting - again - for procurement in terms of the environmental, social and ethical performance of value chains.
From Germany and France, to the UK and the Netherlands, a torrent of new supply chain regulations are mandating that companies adhere to extensive due diligence and reporting requirements for which most supplier “compliance programs” are fundamentally ill-equipped.
The forthcoming Norwegian Transparency Act will impose extensive new due diligence obligations on firms employing as few as 50 full-time staff, while on February 23, 2022, the European Commission published its proposal for a comparable, EU-wide scheme. Furthermore, the record-breaking flow of capital into ESG-focused funds globally demonstrates that investors have long since come to regard sustainability risk and capital risk as one and the same.
Across Europe, companies are increasingly turning to third-party providers for support with remote-based desktop audits that can help them prepare for the EU Taxonomy. EcoVadis is a leader in this space.
In the eyes of regulators, investors and consumers, therefore, the time has come for companies to get serious about tackling adverse social and environmental impacts emanating from the supply base, not least with respect to Scope 3 carbon emissions. Procurement will necessarily be fundamental to this task.
“As domestic and EU regulation tightens, companies across Europe are increasingly coming to regard sustainability and procurement as two sides of the same coin. The ability to leverage ESG intelligence, best practices, and network effects is becoming the 'new normal' and, without it, companies struggle to maintain competitiveness. ”
Robert Ekqvist, EcoVadis.
From Cost to Resilience: The Changing Role of Procurement
Executives increasingly require that their procurement teams evolve from a narrow, traditional focus on cost to become an impactful and strategic organization capable of creating competitive differentiation through agile and secure supply chains. The COVID-19 pandemic consolidated this trend, highlighting that the most sustainable businesses are also the most resilient and are best placed to withstand sudden and unpredictable contractions in supply and demand.
But although most companies now aspire to integrate sustainability into procurement processes, many struggle with the practicalities of the task. How, exactly, can purchasing managers best go about gaining visibility into the social and environmental governance practices of oftentimes thousands of suppliers spread across diverse regions and industries, and continually monitor their performance?
EcoVadis ratings, communicated via an interactive digital dashboard, measure the quality of a company’s ESG management system. The provision of supporting documentation from suppliers forms a key part of the assessment, while the EcoVadis 360° Watch feature integrates information from a range of trusted external data sources to augment supplier inputs.
A Scalable Monitoring Solution
By providing a scalable ratings and intelligence solution across more than 200 purchasing categories and 160 countries, EcoVadis supports purchasing organizations of all sizes in precisely this task. Evaluating suppliers’ sustainability performance across four themes – Environment, Labor and Human Rights, Ethics, and Sustainable Procurement – EcoVadis provides an overall rating that can be benchmarked against the performance of industry peers, as well as more granular data that can be leveraged for reporting and disclosure.
Now, more than ever, businesses require visibility into the sustainability performance of the supply base to minimize exposure to risk and enhance operational resilience. Those that refuse to adapt to imperatives of this new corporate climate are already being left behind.
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