Deutsche Bank makes vendor sustainability ratings mandatory

• For new contracts worth more than 500,000 euros a year, the bank will only work with vendors with an adequately high ESG rating 
• Cooperation with ESG rating agency EcoVadis  

Deutsche Bank is taking a further step toward placing sustainability at the heart of all its business activities. Starting in July this year, every new or extended contract worth over 500,000 euros a year will require an external vendor sustainability rating from EcoVadis or another eligible rating agency. These are: MSCI ESG, Sustainalytics, ISS ESG, S&P Global und CDP.   

Deutsche Bank spends more than 8 billion euros a year on products and services from third-party vendors and aims to use its significant purchasing power to drive greater ESG accountability and transparency across the supply chain and to ensure that all suppliers meet the highest environmental, social and governance (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 EcoVadis 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. 

From the beginning of 2023, it will no longer suffice for Deutsche Bank suppliers to have undergone ESG assessment. From this date onwards, the bank will only grant new contracts worth over 500,000 euros a year to vendors who have an adequately high sustainability rating – in the case of EcoVadis, this means achieving at least 25 of the 100 possible points. 

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 euros 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.”

A number of ESG rating agencies have recently recognised the bank’s progress. EcoVadis commended the bank for being “proactive” in sustainable procurement, while CDP raised the bank’s climate change score from C to B. 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.