A conglomerate is the combination of two or more corporations engaged in different business activities that fall under one corporate group, usually involving a parent company and multiple subsidiaries. Often, multi-industry conglomerates are large and multinational. Examples of conglomerates are Sogo Shosha (in Japan) or Chaebol (in South Korea).
In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. The companies under the conglomerate are entirely different from each other and there are no synergies between them. Those companies diversify business risk by participating in a number of different markets, i.e., financial diversification. The conglomerate's subsidiaries operate independently of one another, but the subsidiaries' management reports to senior management at the parent company.
Conglomerates cannot be rated by EcoVadis because of the dilution of sustainability issues in their superstructures. An EcoVadis group assessment would not reflect the conglomerate’s sustainability performance accurately given the number of industries they operate in. Conglomerates, therefore, would require the EcoVadis assessment to be performed at the site, subsidiary or business unit level.
General rule regarding conglomerate assessments
When assessing a company, EcoVadis first determines whether or not the company is a conglomerate (based on the definition above) and confirm it from other sources.
In general, conglomerates cannot be rated by EcoVadis.
The only exception that allows EcoVadis to assess a conglomerate is when more than 60% of the conglomerate’s turnover is generated from activities that fall under a single division.
What solutions are available to best manage conglomerate assessments?
Organizations should have EcoVadis assess the legal entity that best represents their business relationship with the requesting company.
EcoVadis can offer business unit assessments if your organization is defined as a conglomerate.
To help prioritize your company’s assessment, EcoVadis can analyze the inherent risk of particular companies within the conglomerate and identify key business units that we recommend assessing in priority.
The EcoVadis Corporate subscription allows you to centralize multiple assessments on one platform.
Contact the EcoVadis Support Team for more information at support.ecovadis.com.