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Its been a busy month for Pierre-Francois Thaler. Not only did EcoVadis, the sustainability ratings company he co-founded and acts as co-CEO with business partner Frdric Trinel, receive a half-billion dollars in funding, but the company then acquired German sustainability data mining company ecotrek.

"We started 15 years ago. For many years we saw a slow tick up in adoptions," Thaler said. "Today, we are seeing mass adoption. In the past 12 months there has been a cascading effect, with Fortune 500 companies escalating the momentum, all working to drive improvement and scale in their sustainability impact."

EcoVadis offers a collaborative platform that companies use to assess and rank environmental, societal and governance (ESG) activities and programs, then build strategies and plans to improve scores. Since 2007, EcoVadis ratings have become widely used by environmentally conscious organizations and investors. The Paris-based company reports that about 750 multinational enterprises, representing more than 47,000 procurement and sustainability professionals, use the platform internally and to assess and monitor a global supplier base or selected business partners. To date, the EcoVadis database counts more than 90,000 rated companies in 175 countries and 200 industries.

Pierre-Franois Thaler and Frdric Trinel, co-founders and co-CEOs of EcoVadis

For anyone questioning the clout that EcoVadis carries, 1,000 of its largest customers represent $3 trillion in annual procurement spend in the supply chain.

EcoVadis methodology uses seven management indicators across 21 sustainable criteria in four themes: environment; labor and human risks; ethics; and sustainable procurement. EcoVadis follows international sustainability standards such as the Ten Principles of the United Nations Global Compact, the International Labor Organization conventions and the U.N. Guiding Principles on Business and Human Rights.

In June, EcoVadis raised $500 million to become one of the ESG ratings sector's first "unicorns" an unlisted firm valued at $1 billion or more. Private equity firms Astorg and BeyondNetZero led the funding, along with General Atlantic's climate investing arm, as well as Singapore's GIC and Princeville Capital. The infusion brings the total capital raised by the company to more than $725 million. In July, EcoVadis took the next step with the ecotrek acquisition; it plans to use ecotreks automated sustainability data collection, scanning and analysis capabilities to complement the EcoVadis portfolio.

EcoVadis ratings work in multiple ways. First, companies get ratings for their own ESG activities and performance. Enterprise organizations upstream in the supply chain use that information to improve internal processes and procedures, build on ESG strategy and broadcast the rating to investors as well as to customers. Many of these large companies are trying to serve as a model for their suppliers; larger companies can use the platform to assess and track companies in their chain. Small to midsize suppliers also use EcoVadis to assess and improve operations, while reporting to partners upstream and to investors and the market. All companies using EcoVadis pay a subscription fee that varies based on size and whether they request internal ratings only or are tracking companies in their supply chain.

John Wagner, founder of sustainability consultancy Paladin Pathway LLC, said EcoVadis is closing a gap surrounding inconsistent data gathering in the ESG market.

"Each company had its own questions and format. Now a company can report into EcoVadis, receive reports and ratings in a consistent format, and then share that information with suppliers and customers," Wagner said. "EcoVadis provides the feet on the street to chase down those answers and report in a comparable manner across all categories."

According to Thaler, EcoVadis initially launched with a vision to address the acute business need for reporting efficiency. Over time, the companys raison detre has evolved.

"The vision at the outset was to build a cloud platform and the technology to solve the efficiency problem. The whole system was not efficient," Thaler explained. As the company grew and as environmental problems got bigger, the vision changed. "We feel the role and responsibility. Our customers are a big part of the solution. This will be more impactful than what regulators or countries can do."

Thaler said the toughest aspect of gathering ESG data is finding the right combination between scale and impact. "Some actions can drive change but are not scalable. Other actions, like filling out endless forms, are scalable but have no impact."

Real impact will come when as many companies as possible are participating, Thaler said.

"In the Fortune 2000 supply chain, there are approximately 2 million companies. We want to be able to go in depth and very broad, and cover the millions of companies in that supply chain."

Key large enterprise customers include the likes of pharmaceutical giant Johnson & Johnson, heavy equipment manufacturer Deere and Company, British multinational consumer goods company Unilever, and automobile manufacturers Volvo and General Motors.

While these companies have all pledged to improve ESG practices and ratings, GM has asked its suppliers to sign an ESG Supplier Pledge to join in a commitment to carbon neutrality. "We took an internal journey last year to look at the landscape of rating platforms for suppliers. We found [EcoVadis] to be a great solution for GM," said Fred Gersdorff, senior manager of socially responsible and sustainable supply chains for the automaker.

Similarly, John Deere has instituted Leap Ambitions, focused goals designed to boost economic value and sustainability for Deere and all of its stakeholders, including its suppliers.

We want to be able to go in depth and very broad, and cover the millions of companies in that supply chain.

"Embedding sustainability deeply in the Deere business so that it is the focus in how we make decisions," is the goal, explained Kimberly Noe, program manager of Sustainability. "To manage both the economic and environmental and social impacts of our decisions, just not pure economics."

Noe said that sustainability gains will only happen when larger corporations incorporate as much of their networks of smaller companies.

"At Deere, we are taking a holistic view of our supply chain, and asking the companies we work with the important ESG questions: Are you taking care of the environment and considering the environment in your decisions? Are you considering your employees? Do you have controls in place and are you doing what you say you're doing? Its far more than just are you going to be on time with delivery."

EcoVadis also has partnered with a group of technology companies, such as Microsoft, SAP and supplier intelligence platform TealBook, all of which have embedded the EcoVadis platform into their offerings. TealBook provides procurement, financial and supply chain data for companies looking to find and partner with other ESG-minded companies.

"One of the reasons that EcoVadis dominates the market is the freshness of the data and getting the right information on the supplier. This helps with clear decision-making that makes an impact," said Matt Palackdharry, chief strategy and revenue officer for TealBook. This capability is especially important with disruptions like the pandemic or geopolitical wars changing supplier data on a daily basis, he said.

EcoVadis offers educational and informational products available to all levels of its customers and partners. EcoVadis IQ provides sustainability risk insights across an entire supply chain. The tool can provide recommendations on next steps and proactive sustainability risk management for a better assessment strategy. EcoVadis Academy is an elearning module with 16 courses covering introductory and more detailed courses in multiple languages designed to educate small- and medium-sized businesses. And to address the issue that only about 15 percent of suppliers globally report on emissions, EcoVadis offers the Carbon Action Module, which provides a carbon-specific ratings scorecard.

Editors note: This story includes information contributed by GreenBiz Editorial Director Heather Clancy.

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EcoVadis targets 'millions' in supply chain to drive ESG impact | Greenbiz - GreenBiz