Introduction
In the EcoVadis assessment system, the classification of a company's industry and size is of crucial importance. These factors not only determine the focus of the assessment but also affect the rating fees and scoring requirements, ultimately influencing the final rating result.
Although a company is required to select its industry category and enter its number of employees when initially registering for an EcoVadis platform account (as shown in the image below), EcoVadis applies its own methodology during the actual assessment and may revise the industry and size information submitted by the company.
Any change in company size will directly lead to a change in assessment fees and different scoring requirements. An adjustment to the industry category, on the other hand, will impact the key content areas of the assessment.
Today, we will break down the two core elements of "Industry" and "Size" to help companies grasp the assessment rules accurately and gain a competitive edge in the rating process.
How Industry Classification Defines the Assessment Scope?
Classification Criteria: Using Social Responsibility Impact as the Benchmark
EcoVadis uses the United Nations' International Standard Industrial Classification (ISIC) system to classify companies' economic activities. Adopting this system not only facilitates international company comparisons but also allows for the precise identification of core content and applicable standards for the company's social responsibility assessment.
When a company's business activities span multiple sectors, or when its activities can be classified into different ISIC categories, EcoVadis will prioritize the industry with the greater Corporate Social Responsibility (CSR) impact.
For example:
Example 1: A company that produces both plastic packaging and cardboard packaging materials will be classified under ISIC 22. This is because ISIC 22 "Manufacture of rubber and plastics products" covers more significant assessment points compared to ISIC 1702 "Manufacture of corrugated paper and paperboard".
Example 2: An advertising group owns several advertising subsidiaries and two printing subsidiaries. Although its primary business is advertising, EcoVadis will classify the group under ISIC 181 "Printing and service activities related to printing." This is because the activities of its printing subsidiaries have a more significant CSR impact, and this classification ensures a comprehensive review of all relevant issues.
"Fabless" Companies: A Special Status, A Special Classification
"Fabless" companies focus on product design and marketing while outsourcing all manufacturing activities. Despite not conducting any manufacturing themselves, they are still classified under a manufacturing ISIC code.
It should be noted that if such a company has fewer than 25 employees, it will be classified under the wholesale category instead.
Disagree with Your Industry Classification? Here’s How to Appeal
If a company disputes the industry classification assigned by EcoVadis, it can communicate with EcoVadis via email and must provide the following supporting documents:
Certifications: ISO 9001, ISO 14001, ISO 45001, etc.
Business registration certificate
Local industry codes (e.g., NAICS for North America)
How Company Size Affects the Requirements and Rating Costs?
Company Size Classification Standards
EcoVadis classifies companies into four size categories based on the number of employees:
Micro (XS): 1-25 employees
Small (S): 26-99 employees
Medium (M): 100-999 employees
Large (L): 1,000+ employees
In the EcoVadis assessment, an "employee" refers to personnel under a direct employment contract with the company, with the headcount calculated based on Full-Time Equivalents (FTE).
Please note that because the EcoVadis rating methodology is designed to assess an organization's management system based on supporting documents, a one-person company may find certain aspects of the rating challenging. Generally, one-person companies can use the EcoVadis Vitals module to provide direct information on their CSR performance.
Full-Time Equivalent (FTE) Calculation Method
The Full-Time Equivalent (FTE) is a core unit for measuring an employee's workload and applies to all forms of employment, including full-time, part-time, and temporary staff.
The formula is: FTE = (Total hours worked) / (Full-time hours)
For example, a part-time employee who works 20 hours a week (where a full-time week is 40 hours) would be counted as 0.5 FTE.
Disagree with Your Size Classification? Here’s How to Appeal
If a company disputes the size classification assigned by EcoVadis, it can communicate with EcoVadis via email and must provide the following supporting documents:
Legal Evidence: Financial reports, payroll records, etc.
Internal Documents: Employee handbook, any report containing workforce data (e.g., a summary in a social or annual report, or any other available report required by local authorities detailing this information), etc.
Special Circumstance: For requests to change a company's size to Micro (XS) or Small (S), a written statement signed by the HR department and/or senior management is also required.
A clear understanding of the rules for industry and size classification is the first step for any company tackling the EcoVadis assessment. With proactive planning and precise preparation, you can fully demonstrate your company's comprehensive strengths in the assessment!
If you have any further questions about the content above or the EcoVadis assessment, please contact us!
