EcoVadis: How Can Supply Chains Adapt to CSDDD Regulations?

Pete Rau helps drive EcoVadis’ mission to enable sustainable action from insight in his role as VP of Enablement and Solution Consulting. 

His background in sustainability and supply chains has enabled him to lead a team who are passionate about helping customers understand and apply the value of EcoVadis solutions.

EcoVadis, a global company dedicated to embedding sustainability intelligence into every business decision worldwide, produces detailed insights to comply with ESG regulations and sustainability goals.  

It serves clients such as Unilever and BASF, as well as 130,000 other world-leaders. 

Here, we chat to Pete about the impact of new sustainability regulations on these companies’ supply chains. 

What new challenges do regulations such as CSDDD present for businesses?

To comply with the Corporate Sustainability Due Diligence Directive (CSDDD), companies will have to identify a broad spectrum of human rights and environmental risks for their supply chains, and collaborate with their partners to mitigate and prevent them. 

There are three aspects of the CSDDD that will make procurement’s job even more complicated: 

1-  Global reach across supply chains: 

Roughly 5,500 EU-based companies will be directly in scope of the law, with the first batch required to comply by 2027. 

As companies prepare for compliance, they will increasingly pressure their suppliers to provide better sustainability data and more transparency. 

This will inevitably cascade into deeper tiers within their supply chains and across regions and exponentially increase the number of impacted companies.

2- CSDDD covers environmental and social matters: 

Built on the UN Guiding Principles of Business and Human Rights, and OECD guidelines for multinational companies, CSDDD covers a broad range of environmental topics and social issues.

The law requires procurement and sustainability teams to develop a holistic approach to due diligence across both risk domains, which will likely challenge companies working to comply with laws like Germany’s LkSG and eventually CSDDD.

The CSDDD’s climate change component will be particularly difficult, as companies must develop a time-bound, science-based transition plan showing how they’ll achieve net zero by 2050. 

3- Non-compliance can result in brand damage, fines, and civil liability: 

Companies that fail to comply could be subject to brand reputation consequences, removal of products from market, and fines of up to 5% of their global net turnover. 

The directive also provides for civil liability, giving affected stakeholders around the world recourse in European courts if in-scope companies are found to have been negligent in their due diligence efforts.

How is EcoVadis helping firms to prepare for CSDDD regulations?

To help companies prepare for and comply with CSDDD regulations, EcoVadis enables companies to conduct three key compliance processes:

1- Map their supply chain for environmental and social risks: 

CSDDD prescribes a “risk-based approach” to due diligence, which requires companies to scan their supply chain for a broad spectrum of sustainability risks and identify potential hotspots needing further investigation. 

EcoVadis IQ Plus offers scales and accelerates this process with intrinsic country and industry-risk profiling based on our proprietary sustainability performance database. 

It’s enhanced by procurement “spend” data, AI-enabled data mining and live news monitoring capabilities, to scan their entire supply base and create a clear view of the risk landscape. 

2-  Carry out in-depth assessments of high-risk and prioritised suppliers: 

EcoVadis Ratings enables companies to assess their most at-risk strategic suppliers. 

Our methodology covers seven management indicators across 21 key sustainability criteria, in four themes: Environment, Labor and Human Rights, Ethics, and Sustainability Procurement. These map closely to CSDDD’s topics. 

The scorecards generate flag priority improvement areas, and the integrated Corrective Action Plan tool enables companies to work with their suppliers to address them. 

3- Assess suppliers’ carbon performance and collect primary emissions data: 

To develop a compliance-worthy climate transition plan, most in-scope companies will need to greatly enhance visibility into their suppliers’ carbon practices and improve the scope and quality of the emissions data they collect. 

Our Carbon Action Manager enables companies to gain a more granular understanding of the carbon hotspots and opportunities in their supply chain. 

Companies can also use platform tools to request various emissions data and other carbon-related metrics from their suppliers. 

EcoVadis’ solutions are widely applicable across the regulatory landscape, so companies can leverage our solutions to comply with regulations, such as CSDDD.

S-211 is designed to combat forced labour in Canadian supply chains. How critical is it for companies to comply?

The S-211 law requires many companies to publish an annual report describing their corporate policies and due diligence related to both forced labour and child labour. 

Under the law, businesses must also include assessments of modern slavery risks within its operations and supply chain. 

Complying with the new law, which went into effect in January 2024, is critical for companies since it prescribes monetary fines of up to US$250,000 on entities that fail to submit reports, or knowingly make false or misleading statements. 

EcoVadis is helping companies comply with this law by not only mapping which suppliers are at risk of forced labour practices but providing action plans to remediate these issues. 

Enforcement is important, but working with suppliers to improve their labour practices is ultimately how companies can comply with this law and make an impact.

What does the future look like for EcoVadis?

EcoVadis’ ongoing solution and business expansion is aligned with our customers’ evolving needs and priorities. 

We will further simplify and enhance our solutions to support compliance use cases, including supply chain due diligence (such as CSDDD) and reporting (such as CSRD). 

We will also deepen and expand our scope 3 Carbon Action Module solution, enhancing data collection alignment with reporting, and deepen support for partner networks like PACT.  

We are continuing to grow the reach and capability of our network and ecosystem. This includes, for example, helping customers deploy our Vitals solution to gain insight into ‘long tail’ risks. 

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