So What About Sustainability Rankings?

04 March 2012 – Michael Sadowski

Among the perks to be a graduate student in the College of Michigan was use of football season tickets. With this particular, I learned the different traditions carried out through the student section on game day, including chanting, “who cares?” when opponents players’ names are introduced before each game.

This ritual still makes me smile for whatever reason, and it is an issue a lot of us within the sustainability area request throughout rankings and ratings season, which began a week ago using the discharge of the Carbon Disclosure Project and also the Dow Johnson Sustainability Indexes. These results, like individuals in the past years, sparked a flurry of press announcements by proud companies, angst in companies who fell short, blogs discussing the merits and weak points of rankings, and consultancies making themselves available to enhance company performance.

But, so what that company X was delisted in the DJSI, or that company Y made the CDP Leadership Index? This can be a question SustainAbility is striving to reply to through our latest round of Rate the Raters research.

The sustainability area cares – a great deal

Undoubtedly, individuals people within the sustainability area – company sustainability teams, think tanks, NGOs, consultancies, etc. – care a good deal about rankings.

Companies spend lots of time and assets reacting to rankings –- we all know of companies who’ve teams within the dozens which are involved over several weeks in certain means by reacting to DJSI. When companies prosper, they zip off press announcements towards the effect of “Company X acknowledged as a sustainability leader” (Google “Dow Johnson Sustainability Index” for any sample). When companies don’t prosper, many take concerted action to really make it back out there.

Sustainability professionals put particular weight around the rankings introduced a week ago, the CDP and DJSI. Based on our just launched survey of sustainability experts, these rankings are two of the most familiar to experts and therefore are among the very best three when it comes to credibility.

While every rating has room for improvement, CDP and DJSI did much to earn their credibility. For instance, CDP is fully transparent in the way it scores companies and makes public its full results – aspects that based on our survey lead substantially to some rating’s credibility.

DJSI is broadly famous for its rigorous approach, particularly diving in to the most material issues for businesses (also identified by our survey experts like a key driver of rating credibility). Based on a DJSI Review Presentation, it is really an area which DJSI placed greater emphasis this year.

Beyond PR and benchmarking

In interviews with more than 30 companies included in our Rate the Raters research, the outcomes which we’ll release within the coming days, we requested sustainability professionals the way they use and obtain value from rankings.

Two of the most common reactions would benchmark performance against peers but for the recognition by exterior parties. Merely a couple of stated to make use of rankings to consider specific actions to enhance business performance. Not just one pointed out the influence of rankings on traders, nor did anybody point out that rankings have an optimistic effect on employees or partners (including providers).

Our interviews support our survey findings, where many experts are utilizing rankings for information (e.g. benchmarking) instead of action (e.g. making purchase or investment choices).

What say traders?

In the release, CDP cites that it is work continues to be done with respect to 655 institutional traders representing $78 trillion in assets, while DJSI reviews numerous major traders that license the DJSI. These data points lend the sense that traders are switched to the sustainability agenda.

Yet it’s difficult to square this using the survey Bloomberg launched earlier in September that discovered that almost 50% of worldwide traders think that global warming may have “not much impact” on corporate profitability. From SustainAbility’s experience engaging using the financial community, the Bloomberg survey is nearer to the reality.

But we’re further exploring investor awareness and interest via a quantitative survey of traders we’re performing with Bloomberg in addition to qualitative interviews having a choose group, the outcomes which we’ll release within the coming days.

Getting good individuals to care

Throughout the 4th phase of Rate the Raters last spring, we organised numerous raters and firms to go over and debate the way forward for rankings. We covered important subjects like transparency, standardization, materiality, etc.

Yet, I strongly recall one participant temporarily halting at some point within the mid-day to opine that although the above mentioned subjects were important, the actual issue is that each rating faces a simple insufficient demand by mainstream audiences –- customers, traders, procurement departments, etc. -– which we should interact to improve this demand. Smart words without a doubt, then one SustainAbility continues to understand more about within our rankings research.

For that full outcomes of our expert survey go to the project library.

This short article initially made an appearance included in SustainAbility’s Altering Tack column on GreenBiz.com.

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