One of the hardest sustainability goals companies strive to achieve is to ensure their own operations and suppliers comply with a defined set of ESG criteria. It’s no different for financial institutions.
As investors become more ESG-conscious, banks, money managers, and fund issuers feel pressured to incorporate third-party ESG risks into their operations. Those are then disclosed in their sustainability reports to clients.
Deutsche Bank announced that starting in July this year, all new or extended vendor contracts worth more than 500,000 euros a year will require an independent vendor sustainability rating from EcoVadis or another eligible rating agency such as MSCI ESG, Sustainalytics, S&P Global, CDP, or ISS ESG.
“Sustainability is a collective responsibility,” said Alf Noto, chief procurement officer at Deutsche Bank. “We want to collaborate with suppliers to help make a positive impact to extend the reach and impact of our ESG footprint.”
Deutsche Bank spends more than 8 billion euros ($7.5 billion) annually on vendors’ products and services. By making this new ESG requirement, the financial firm hopes to achieve a ripple effect trickling down to each supplier’s network of interconnected suppliers.
Vendors will need to undergo an ESG assessment with EcoVadis, the world’s largest provider of sustainability ratings for more than 90,000 companies globally. EcoVadis will request vendors to answer a confidential sustainability questionnaire and provide certain evidence. It will then assign a score out of 100 and help suppliers identify improvement areas within their operations.
As of the beginning of 2023, however, Deutsche bank will only accept suppliers who also score high on sustainability ratings. Out of the 100 points measured, they will need to meet at least 25 points.
This new directive comes on the heels of the recently released Supplier Code of Conduct by Deutsche Bank. The code focuses on the bank’s six core values: integrity, sustainable performance, client centricity, innovation, discipline, and partnership.
“The purpose of this Supplier Code of Conduct is to make sure that organizations are aware of these core values and additional standards of behaviour that Deutsche Bank requires and expects its suppliers to conform to when providing goods and services to Deutsche Bank,” the company noted.
It is not meant as a set of rules for specific situations but more as a general guide. In addition to suppliers, the bank expects the supplier’s owners, officers, directors, employees, affiliates, consultants, contractors, and subcontractors to comply with its requirements.
“Global Procurement is a great example of how we are moving from ambition to impact and partnering with our vendors to cover our whole value chain,” said Jörg Eigendorf, head of sustainability at Deutsche Bank. “This is a big step to gradually improve the sustainability of our value chain.”