EcoVadis: Who Should Get and How to Improve Performance
ESG certifications serve as a critical indicator of a company’s commitment to sustainable practices. Popular certifications like MSCI ESG ratings, Bloomberg ESG, and S&P Global ratings offer broad evaluations. However, sector-specific and customised ratings, such as GRESB, the Carbon Disclosure Project (CDP) and EcoVadis, provide more precise assessments. These certifications are highly regarded by investors and clients, offering a reliable and clear measure of a company’s ESG performance. This article delves into the usefulness of EcoVadis, elaborates some challenges in EcoVadis application and suggests some tips to increase EcoVadis performance.
Who Should Get EcoVadis Certification
Companies with clients in international companies:
EcoVadis certification is particularly beneficial for companies with clients in Europe, where there is significant pressure on green supply chains. Large international companies registered with EcoVadis often use its ratings for their supplier evaluations. Companies that score well on EcoVadis can benefit from improved supplier relationships and opportunities.
Companies with “ANY” relationships with international markets:
This certificate has been widely recognised by international markets. For companies in Asia and other regions, EcoVadis provides a pathway to align with international standards, enhancing their global standing. It would gain advantages in sourcing from international clients, suppliers, and consumers or fulfilling local regulatory requirements.
Companies seeking green investors:
According to “Rate the Raters 2023,” EcoVadis achieved the highest average quality score of 4.2 out of 5.0 in investor surveys. High EcoVadis ratings are attractive to investors focused on sustainable and ethical investments, providing companies with a competitive edge.
Documents Required
So how should we get prepared for the certification?
Here are all the basic documents required from our EcoVadis consulting experience:
| ASSESSMENT PILLAR | CRITERIA | DESCRIPTION | EXAMPLE MATERIALS |
|---|---|---|---|
| Policies (25%) | Policies (80%) | Set of objectives addressing sustainability issues | Vision & mission statement / Health & safety policy / Code of conduct, etc. |
| Endorsements (20%) | Public commitment to meet sustainability goals | Company’s official public participation letter or web links | |
| Actions (40%) | Measures (65%) | Concrete actions implemented | Green power purchase contract, etc. |
| Certifications (35%) | Certifications in sustainability areas | Certificates and certification audit reports by accredited agencies | |
| Coverage | Extent to which actions have been implemented across its operational sites | Percentage of ISO 26000 or EMAS-certified operational sites / Percentage of employees covered by social benefits / Percentage of employees who received training on business ethics within the year | |
| Results (35%) | Reporting (40%) | Reporting based on quantitative KPIs that measure sustainability | Documents clearly stating KPIs to stakeholders |
| 360 Watch Findings (60%) | “News” investigated by EcoVadis analysts over the past 5-10 years, both positive and negative | Legal arbitration documents, mediation letters if any negative events occurred |
Challenges and Tips for EcoVadis Assessment
1: Identifying Key Assessment Criteria
One of the primary challenges in the EcoVadis assessment is understanding the key criteria behind each question. The scoring system varies based on industry, company size, and operating region, which can be complex and not immediately apparent.
For instance, a company might need to outline their Scope 1, 2, and 3 emissions plans in the environmental policy evaluation. Additionally, certain industries might also need to include policies on customer health and safety. If any of these elements are missing, it can significantly impact the score. However, companies are often unaware of these detailed scoring criteria.
Tips for Overcoming This Challenge:
Conduct Benchmark Analysis: Review EcoVadis reports of benchmark companies in the same industry and region. For example, a manufacturing company can browse the EcoVadis reports of other manufacturing companies (if they are publicly available; just Google “EcoVadis report filetype”). They can look at EcoVadis’ evaluation of these companies, such as Rubix Industrial. If they are unsure about the standards for policies, they can refer to the points that EcoVadis lists as “good” in these reports as guidelines.
2: Providing a Coherent and Consistent Narrative
Each document submitted should be self-explanatory and follow a clear storyline, rather than merely listing evidence. The coherence between policy, actions, and results is crucial.
Tips for Effective Documentation:
Consistency Across Policy, Actions, and Results: Align your policies with actions and measurable results. For instance, Envision Energy’s approach demonstrates this alignment well, with clear policies on carbon neutrality, comprehensive actions across their operations, and tangible results documented through certifications and achievements.
Here is a case study about how Envision, a Chinese renewable energy private company has built its narrative and achieved a gold medal in EcoVadis in 2023 (ranked 4%).
| Policy | Action | Results |
|---|---|---|
| Policy: Commitment to achieve global operational carbon neutrality by 2022, and promise to achieve full value chain carbon neutrality by 2028, with a long-term goal of net-zero emissions by 2040. | Action: Managing the environmental factors throughout the lifecycle of its business operations through its management system, covering Envision’s own wind farms, delivery and service sites, manufacturing plants, laboratories, warehouses, logistics, office spaces, and other locations and activities. | Results: Achieved operational carbon neutrality in 2022. |
| Policy: By 2025, key suppliers supplying products to Envision must achieve 100% green electricity production. | Action: Using the Ark Carbon Management System to implement comprehensive end-to-end carbon management across the group, including calculation, reduction, offset, and certification. Currently, Ark has integrated over 60 operational plants, R&D centres, and offices worldwide, collecting real-time data using IoT technology and establishing a comprehensive data collection network. | Results: Completed 100% carbon accounting for key suppliers, helping them understand their own carbon emissions, identify hotspots, propose energy-saving and emission-reduction plans, and efficiently engage in green certificate and carbon credit transactions. |
Handling Negative Public News
EcoVadis conducts a 360-degree assessment, including a review of public news from the past five to ten years. Negative news can significantly impact scores, even if the company has since rectified the issues.
Tips for Mitigating Negative News Impact:
Create a Transformation Narrative: Focus on the story of change and improvement. Provide sufficient legal documents or announcements to demonstrate the company’s efforts to address and resolve past issues.
Conclusion
EcoVadis certification offers a robust and reliable measure of a company’s ESG performance, aligning with international standards and attracting green investors. While the assessment process can be challenging, understanding key criteria, maintaining a consistent narrative, and effectively managing past negative news can help companies achieve high scores and enhance their sustainability credentials. By leveraging these insights and strategies, companies can navigate the EcoVadis assessment with confidence and achieve meaningful recognition for their ESG efforts.
