To get an idea of how much companies value information that can help lower their carbon footprints, look no further than EcoVadis, which provides sustainability data and ratings to businesses worldwide. The Paris-based company recently raised $500 million in a funding round that pushed its overall valuation above $1 billion and put it into the unicorn category.
The fact that so much money is pouring into EcoVadis speaks volumes about the importance of sustainability data as businesses worldwide transition to net-zero carbon emissions. The company provides ratings on Environmental, Social, and Governance-related (ESG) issues and helps develop plans for clients to improve their scores. Its information is used by more than 95,000 businesses across 200 industry categories and 175 countries.
Unlike most providers of ESG ratings, EcoVadis mainly serves smaller, privately held companies that make up the bulk of larger companies’ supply chains. This is increasingly important to major corporations under heightened regulatory pressure to meet certain climate goals. They must not only ensure that their businesses operate more sustainably – they also must ensure that their smaller suppliers do the same.
General Motors, Deutsche Bank, Microsoft, and SAP are among the heavyweights that have turned to EcoVadis to help improve the ESG performances of their suppliers.
“We see a tipping point in the market – everything is really accelerating,” EcoVadis Co-founder and Co-CEO Frederic Trinel said in a recent interview, noting that EcoVadis expects to grow its business 50% this year after growing it 45% in 2021.
“Every year, we’ve been gaining five points of growth,” he added.
That kind of growth should continue well into the future, thanks to EcoVadis’ latest funding round, which was announced on June 14. The $500 million round was led by a pair of private equity firms: Paris-based Astorg; and BeyondNetZero, General Atlantic’s climate investing venture. Other participants were Singapore-based GIC and Princeville Capital’s Climate Technology Fund.
EcoVadis will use the funds to accelerate its global expansion, broaden its artificial intelligence and machine learning capabilities, and make strategic buyouts.
“This investment is validation of EcoVadis’ model for scaling impact across global value chains, despite the pandemic, geopolitical or financial headwinds,” Trinel said in a press release. “We expect this investment to enable us to build on our traction to meet companies, including SMEs and private companies, at any stage of their sustainability journey, and collaboratively drive improvement in practices and impact at scale.”
EcoVadis’ data is used across many areas, including Scope 3 carbon emissions management, private equity, ESG-linked loans, supply chain finance, and third-party risk and resilience. The company’s wide footprint is one of its biggest attractions to investors.
“We invest in companies that have the potential to combat climate change at scale,” Rhea Hamilton, managing director at BeyondNetZero, said in a statement following the funding round.
“We believe EcoVadis has all the critical elements to make global impact and a meaningful contribution to the net zero transition.”
In addition to growing its revenue by 50% over the past year, EcoVadis also increased its global workforce to 1,300 employees. As recently as 2017, it had only 400 employees. The company was founded in 2007 by Trinel and Pierre-François Thaler, who also serves as Co-CEO. Since then, EcoVadis has grown into the world’s biggest provider of business sustainability ratings.
EcoVadis plans to expand its reach in North American and Asian markets. North America should prove particularly fruitful because of various regulatory trends, including a potential move by the U.S. Securities & Exchange Commission to implement new ESG disclosure rules for companies
“Most of our growth today is coming from the North American market,” Trinel told Reuters. “Getting on board General Atlantic in addition to Astorg as the co-leads in this round is really a way to continue to accelerate in the North American market.”