Corporate Responsibility Ratings Need Improvement

A study of 21 corporate responsibility ratings highlights a number of ways ratings must improve. 

Think tank and consultant group SustainAbility, released the third white paper in its Rate the Raters series.

The firm says it is working to better understand the universe of corporate sustainability ratings and to influence and improve the quality and transparency of such ratings. The first phase explored the evolution of the ratings agenda over the last decade and identified key trends. Phase two inventoried over 100 ratings and surveyed sustainability experts to shed light on the ratings landscape as it stands today.

For phase three of Rate the Raters, SustainAbility conducted in-depth evaluations of 21 ratings to better understand how they work in practice. The research has identified a number of good practices which every rater should consider, and offers specific recommendations on how to improve ratings in the future.

The key findings include:

  • Transparency = Trust = Value: Ratings which users perceive to be of highest value tend to be the ones that are most transparent. Raters who seek to keep their methodologies secret must realize that people are more likely to trust their rating – and thus adopt it – if they understand it.
  • Simple is Beautiful: In the race to stand out from the crowd, many ratings are becoming highly complex, but the analysis found some of the best ratings to be the simplest: again, understandability is critical to fostering trust.
  • Focus on the Future: Too many ratings focus on companies’ current or past performance rather than on how they are positioned to deliver sustainable value going forward. The ratings that survive and prosper will be those that favor the winners of the future.

The 21 ratings systems assessed in the study are:

— Access to Medicine Index

— ASSET4 (Thomson Reuters)

— Bloomberg ESG Disclosure Scores

— Carbon Disclosure Project

— Murky Waters: Corporate Reporting on Water Risk (Ceres)

— Climate Counts

— CR Magazine 100 Best Corporate Citizens

— CSRHub

— Dow Jones Sustainability Indexes

— EIRIS

— Ethisphere’s World’s Most Ethical Companies

— FTSE4Good Index Series

— The Global 100 Most Sustainable Corporations in the World (Global 100)

— GoodGuide

— GS SUSTAIN

— Maplecroft Climate Innovation Indexes (CIIs)

— Newsweek Green Rankings

— Oekom Corporate Ratings

— Sustainalytics

— Trucost Environmental Impact Assessment

— Vigeo

For additional information, watch SustainAbility’s video briefing or download the full white paper at the link below.

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