EcoVadis is the 1 billion pound gorilla in the Environmental Social Governance (ESG) ratings world. EcoVadis has many companies in a bind because they gave them a low ESG rating. A low ESG rating that more and more upstream buyers are using to justify switching suppliers.  EcoVadis has a BILLION dollar valuation, completed an ESG review for 95,000 companies in 175 countries, 200 industry categories, and insane double digit growth.  They projected 50% growth in 2022.  If you know anyone who isn’t taking ESG ratings seriously you should tell them about the billion dollar ESG rating agency. This is not going away!  My beloved Elon Musk is not taking ESG seriously, he thinks it’s an annoying fad that will go away and although he has legitimate concerns about ESG… my buddy Elon is going to get absolutely run over by the ESG movement. Below is a link to an excellent Reuters article about EcoVadis. ESG rating agencies are loved and hated but EcoVadis is not going away.

Countries, particularly in Europe, are writing laws requiring businesses to ensure their downstream suppliers are running effective ESG programs.  From the Reuters article “The European Commission recently proposed rules that would force boards to check suppliers do not use slave or child labour and respect environmental standards.”

EcoVadis was quoted in the article “Most of our growth today is coming from the North American market.”

ESG laws that focus on suppliers are increasing and so is the scrutiny of your ESG program by your buyers.  The EcoVadis process includes… 1. Registration, 2. Questionnaire (completed by you), 3. Expert Analysis (by an EcoVadis analyst), 4. Report.  If a company receives an undesirable report from EcoVadis, their best option is to do a focused assessment of their overall ESG efforts and directly address ESG deficiencies identified by rating agencies.

European lawmakers have high expectations for companies to review their suppliers ESG programs effectiveness, however Germany may have the most aggressive new laws forcing companies to evaluate their downstream suppliers ESG acumen.  More and more laws are being written that mandate ESG related activities. These laws are impacting suppliers from every country in the world. No company or country will be immune. The law makers don’t care if your suppliers are from the US, Russia, Congo or Iceland… suppliers will be held accountable. Suppliers who don’t pay attention to their ESG ratings are currently and will continue to lose business because of these laws.

Nothing impacts the call to action like losing valued customers.  Change is coming. Lawmakers are driving the implementation of effective ESG programs like nothing else. Rating agencies are providing the data and lawmakers are providing the motivation.  ESG investing, Larry Fink, Blackrock, activists and the motivation to make the world a better place combined will not move the ESG needle like the enforcement community.  It happened in corporate compliance 25 years ago and it is happening in ESG as we speak.

We best pay attention.

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