EU importers are affected by the Corporate Sustainability Reporting Directive (CSRD) which came into force on 5 January 2023 and aims to drive importers to clearly report on their own (and their suppliers’) environmental, social, and governance (ESG) performance and gives a framework for them to present consistent and reliable sustainability information.
A few questions for you…
- Even if you’re willing to gather this information, the question is, can or will your Chinese and Asian suppliers provide it?
- Are your key customers asking you to provide some information about your company and your supply chain? Maybe you are even requested to provide documents for a voluntary scheme such as Ecovadis?
- Or maybe your company is already falling under the scope of the Corporate Sustainability Reporting Directive?
To obtain the information necessary to satisfy the CSRD rules, Sofeast’s supply chain management team steps in to do the research for you on the ground wherever your supplier is and to assess the suppliers’ factories and in particular their ESG readiness.
Under the CSRD, companies need to provide supply chain information on a wide range of sustainability topics, including:
- How production affects the environment such as causing climate change and negatively impacting water, biodiversity, causing chemical waste, etc
- How their products affect the environment, such as how easy they are to be recycled rather than sent to landfill
- The nature of resources used
- How human resources are used, such as health and safety provisions
- The treatment of human rights, such as child and forced labor not being used
- The supplier’s ethics and social and environmental practices
Sofeast’s supply chain management team follow a 3-step process:
- We ask the supplier for typical documents on each of those topics. We can do that for 45 USD per factory. We give them a list of “examples of typical documents” for each topic, so they have an understanding of what is needed.
- Based on the supplier’s response, we do a document review and comment on them. We charge 45 USD per hour for that review. In most cases, it only takes 1 or 2 hours, as most Chinese suppliers have very few documents to submit. The objective of step 2 is to evaluate if the supplier has at least a “minimum level” of systems or at least a policy. On each of the topics. If they have nothing on a certain topic, step 2 allows us to recommend not to assess the supplier on that topic. When a supplier has nothing to show on a few topics, it can typically save 1 man-day of audit time (and fees).
- Finally, we assess the factory on-site. That plan needs to be formulated after the document review (step 2), as sometimes this will not be required. For example, if the supplier is unable to send us a list of environmental aspects & impacts, there is no need to evaluate them against ISO 14001, as there is a 100% certainty they will get a very low score… If there is no system in place, there is no need to send someone to check that system on-site.
There is no way to know how strictly the Corporate Sustainability Reporting Directive will be enforced. We envision they will get stricter after year 1, so around 2024/2025.
However, if you sell products to a company that falls under that directive, your customer will request this information and they might not have much patience.
Yes, sure. We put together a table such as the one shown below (preview only), which is configured to your needs.
How much does the Supplier ESG Readiness Assessment cost?
There are a few components to this solution with the following costs:
- Requesting the documents from your supplier costs US$45.
- The document review costs US$50/hour – the number of hours can vary, but typically it takes a couple of hours.
- An on-site factory assessment typically costs from US$495, depending on the topics to cover and the location.
