In conversation with

Our ratings are designed to turn complex sustainability information into something companies can use in their decision-making. Large multinational companies can sit on both sides of the process: they may be rated themselves while also using EcoVadis to rate their suppliers.

We have around 1,500 buyers, with more than €2 trillion in procurement spend influenced by our ratings. They use the information we provide to understand supplier performance, manage regulatory risk, drive greenhouse gas reduction and build more resilient supply chains.

The EcoVadis rating provides a scorecard showing benchmarks, strengths and areas for improvement, which can support conversations between buyers and suppliers about gaps, major risks and corrective actions.

I’ve also seen sustainability leaders use the scorecard internally to help justify investment. It can highlight areas where the company is underinvesting and reveal material issues it may not have fully considered. So the information can influence decisions both externally, through procurement and customer relationships, and internally, by helping make the case for investment in sustainability performance.

For almost 20 years, we’ve assessed information based on international standards, most of which are voluntary. Mandatory reporting is founded on many of the same principles: from understanding what is material to exploring how a company manages its risks and opportunities.

We continually update our methodology, but we haven’t significantly changed it in response to mandatory reporting. Instead, we’ve focused on ensuring interoperability between our assessments and different reporting standards.

Disclosure quality and comparability are two different things. A company can produce a high-quality disclosure under one standard, but that information may not be directly comparable with a disclosure produced under another. That’s why we support interoperability rather than convergence around one single global standard, which I don’t think is realistic or necessarily desirable when the field is evolving so quickly.

Standards need to be built around clearly defined information that can be mapped to equivalents in other standards. As a rating agency, we see a role for ourselves in advocating for interoperability and greater standardization of emerging topics such as biodiversity.

We’re very conscious of the risk that AI can create false comparability, particularly if different rating providers map standards in different ways. We’re therefore taking a mindful approach to its use. Consistent digital tagging and coordination around how standards are mapped will be important if AI is going to support meaningful comparison.

At the same time, one of the biggest opportunities for rating agencies is to use AI to reduce the disclosure burden on companies. Companies are responding to multiple parties, from rating agencies to financial institutions. If technology can help them use information they’ve already produced to pre-fill responses and streamline the process, that has real value.

But keeping humans in the loop is critical. Companies need to check the information AI generates rather than simply trusting it, and our analysts continue to verify the information used in our assessment.

Our assessments draw on both publicly available information and evidence provided directly by the company. This is particularly important for SMEs in supply chains, which may have limited publicly available information. We rely on them to provide evidence of their policies, actions and reporting, alongside external sources such as third-party audits and our own 360-degree watch of real-world signals.

Having a sustainability report is gold for us. It shows that a company has thought through and is reporting holistically on the policies, actions and results that are material to the organization. A holistic sustainability report covering what is material to the company – ideally with third-party assurance – can significantly reduce the burden of collecting and providing individual pieces of evidence.  Take a large company with 80 sites around the world. If all those sites are ISO 14001 certified, we don’t want to receive 80 individual certificates. An independently audited sustainability report that tells us the percentage of sites covered by that certification can give us what we need.

Mandatory reporting has raised the baseline, but mainly for larger companies in scope of regulation. This has exposed a divide between reporting compliance at the top tier and the reporting capabilities of companies not in scope of mandatory requirements.

One significant gap among the smaller companies we assess is carbon data and climate transition planning. More than 70% of the companies rated by EcoVadis have fewer than 1,000 employees, and many are suppliers to much larger organizations. More than 85% of the buyers and procurement functions in our network are asking for primary carbon emissions data, which is critical for organizations looking to reduce Scope 3 emissions. Yet 30% of suppliers still share no carbon data at all.

We also see a gap around sustainable procurement. We assess not only how companies manage sustainability within their own operations, but whether they have a management system in place to engage their own suppliers in responsible sourcing. It’s currently the lowest-performing theme in our assessment and it’s understandable: companies generally need to mature their own sustainability practices before they can start to effectively engage their supply chains.

If you’re required to report under a regulatory framework, clearly you need to follow it. But if you’re not, I would still encourage you to look at these frameworks and use them as a guide to best practice. EcoVadis itself voluntarily reports against CSRD, and we’ve learned a lot through that process.

Our double materiality assessment, for example, has led to meaningful conversations between the sustainability and finance teams, and the CFO. It comes back to understanding what is material, how you manage those issues and how you assess whether you are improving.

Companies outside mandatory reporting thresholds have more freedom to adopt these approaches at their own pace. But doing so can demonstrate to customers, investors and rating agencies that they are adopting best-practice and being transparent about performance – while making it much easier for others to assess and use that information in decision-making.