Deutsche Bank is tightening its sustainability requirements for vendors and suppliers across the world and plans to assign them a rating from July.
The German bank is implementing plans it announced last year which would require new or extended contracts worth over €500,000 a year to have an external vendor sustainability rating from EcoVadis or another eligible rating agency such as MSCI ESG, Sustainalytics, ISS ESG, S&P Global und CDP.
Deutsche Bank said it spends over €8 billion a year on products and services from third-party vendors and aims to use its significant purchasing power to drive greater environment, social and governance accountability and transparency across the supply chain and to ensure that all suppliers meet the highest ESG requirements.
As each supplier also has a network of interconnected suppliers, the policy should create a ripple effect, according to Alf Noto, chief procurement officer at Deutsche Bank.
“Sustainability is a collective responsibility,” Noto says. “We want to collaborate with suppliers to help make a positive impact to extend the reach and impact of our ESG footprint.”
Suppliers will need to register with EcoVarids to undergo ESG assessment. The agency’s comprehensive rating is based on a confidential sustainability questionnaire and evidence.
The process gives companies a score out of 100. This will help suppliers identify improvement areas and allows them to use their ESG rating with other customers.
The EcoVadis partnership follows the recent launch of the revised Supplier Code of Conduct which sets out the bank’s expectations for suppliers and reflects its ESG principles.
The bank said in May 2020 that it aims to facilitate over €200 billion in sustainable finance and investments and has since moved this target forward twice to end 2022, three years earlier than originally planned.
“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.”
Several ESG rating agencies have recently recognised the bank’s progress. EcoVadis commended it for being “proactive” in sustainable procurement, while CDP raised its climate change score from C to B.
Meanwhile, credit ratings provider S&P Global scored Deutsche Bank 60 points, putting it back in the Dow Jones Sustainability Europe Index. Sustainalytics and WWF both upgraded their ratings.
Earlier this year, the European Commission proposed a new regulation to foster sustainability in corporate supply chains.
If enacted, companies will be required to ensure that human rights are respected, and environmental impacts are reduced in their own operations and value chains.
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