Dive Brief:
- The French sustainability ranking firm EcoVadis has received roughly $30 million in funding from Partech Ventures, a venture capital firm in France, The Wall Street Journal reported Wednesday.
- EcoVadis, founded in 2007, is one of many companies working to increase transparency in the supply chain in order to prevent association with slave labor, the pollution of natural resources and political corruption.
- Firms such as Johnson & Johnson, Nestlé and Verizon already use EcoVadis, lending credibility to the company's goal to increase awareness and vigilance toward preventing slavery and other crimes.
Dive Insight:
Self-regulation in the supply chain has proven to be prohibitive for most companies, as we have seen numerous stories break regarding human rights violations within the past few months. Despite companies pouring billions into uncovering these violations, results have been mixed. In response, sustainability companies such as EcoVadis are seeking to fill the need for supply chain transparency, particularly at the second and third tiers of supply.
EcoVadis is similar to other audit companies, including Facta, Moss Adams, Siemens and Triple Pundit, but separates itself from competitors through its expansive SaaS platform, which serves extremely large and diverse companies.
Venture capital firm Partech chose EcoVadis in part thanks to its already established clientele, with roughly 30,000 rated suppliers for over 150 corporations both overseas and within the U.S. That said, the obvious question is, what does Partech receive from its investment? In what way is an audit company such as EcoVadis expected to be a growth opportunity able to yield the returns that venture firms seek, and how long will it take?
While 3rd party oversight is a step in the right direction for supply chain, there is the outstanding issue of how to gain independence, especially when the clients are the ones paying EcoVadis to perform the audits. In the U.S. for example, auditors may be subject to significant penalties from the SEC if they fail to uncover fraud. But in this new landscape of third party audit, no apparent legal or organizational framework exists.
