To celebrate and kick off the launch of Aravo’s new ESG Solution, Colin Campbell sat down for a fireside chat with Daniel Perry from EcoVadis to discuss the value of risk intelligence as part of an organization’s ESG and third-party risk management (TPRM) programs.
Daniel Perry: There are a number of reasons why a business may decide to start assessing their suppliers on sustainability topics. Some of them can be born out of legislative pressure. It may be other stakeholders involved that are pressuring the organization to move in that direction as well, be that investors, employees, or customers. But by and large, you’re safest if you are aiming to go beyond compliance. If you can drive sustainability performance within your supply chain, you are in a better state and more prepared when those new regulations and legislations come into place.
What we are seeing historically is a shift from disclosure, like the California Transparency Act, through to regularly updated disclosures, such as with the UK Modern Slavery Act, to now full due diligence and duty of care, which is what’s happened in France with the Duty of Vigilance, and more recently with the German Due Diligence Law. The companies that have been most prepared for these changes are the ones who have been incorporating sustainability into the way that they track the performance of their suppliers because essentially, they’ve had their bases covered based on global best practices. But there is a big knee-jerk reaction coming from the many companies that are immature on these topics and are now scrambling to ready for regulatory changes that are coming very soon.
Daniel: I think the Aravo role is so valuable because you can be the single point of entry for a supplier to start trading with a company or continue to trade with their customer. The sustainability responsibility of a risk manager may be one small piece of a much broader puzzle. But being able to have that single pane of glass and see all of the different risks at play for a particular supplier in one location is super valuable. And then, should sustainability be one of the areas for risk or opportunity, they can drill down into that and go into our platform and see the full scorecard.
Daniel: What we did from the outset at EcoVadis was to find a way that we can put all businesses on a level playing field. Whether you are a manufacturer in Latin America or a wholesaler in China, or you’re a retailer in Europe, if you’re providing the same product to a customer, the customer needs to be able to say which is more or less sustainable than the other. At the very highest level, we have medals like bronze, silver, gold, and platinum. The next level down is the scores, an overall score out of 100. Environmental labor, human rights, ethics, and supply chain all have their own scores within those four themes. However, you may end up in a situation where all things being equal, you’ve got a few suppliers that are of similar scores and you want to go another level down where you’re thinking about positive impacts, e.g., what can I nudge the supplier on to help them do better on sustainability. And that’s where the strengths and improvement areas come in.
Within the scorecard, you can see some highlights of what we’ve found in our assessment of that company based on evidence that they’ve provided, what they’re doing well, but also some gaps. And those gaps are prioritized. It’s fully transparent so that the supplier has the same information that you do. Even if they’re on the other side of the wilderness and in another language, they are looking at the same score sheet, and those improvement areas can be converted into corrective actions. Rating typically happens once a year. But in between those 12 months, you may want to know that the supplier is taking some action and closing out some of those key corrective action items. And that’s where the functionality comes in.
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