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What use are CSR ranking systems?

On this blog recently I criticised catch-all CR ranking systems.

The latest in a crowded, mostly North American, marketplace for these things is from CRD Analytics, which “screens and ranks companies based on over 150 quantitative financial, environmental and social performance indicators”.

Most of the companies at the top of the rankings are financial institutions and pharmaceutical companies.

Is it any coincidence that these sectors are both low carbon and low direct impact in terms of their corporate operations?

I suggest that comparing banks and pharma companies, or even miners and oil companies, is nonsensical.

We would not, after all, compare our dentist with the emergency room at our local hospital or our plumber with our electrician.

Why do some firms think such comparisons are credible?

Money is of course one answer. Everyone that does this has a business to run, and companies must pay to get information on themselves and competitors.

But are these apples and oranges rankings useful? Do they help companies embed sustainability and improve performance?

My suggestion is that issue specific comparisons are much more helpful.

But they also suffer from serious limitations. How might one compare a supermarket in the US with one in Thailand, for example, and to what end?

The Carbon Disclosure Project’s work, and other issuesspecific indexes, such as the Corporate Health and Safety Performance Index in the UK, are much more helpful.

But isn’t it true that really, if we want true benchmarking, companies should best look at their own historical performance, rather than their peers and companies outside their sector?

Many senior and experienced heads of CR and sustainability I have met have agreed with this.

My question to you is: “Have I missed something here?”

I’d be interested in your views.

(You can read Elaine Cohen’s comments on my original post at the bottom here)

2 Comments

  1. Thanks for this Toby. There's certainly clarity in your messages around benchmarks! I think, however, you put your argument too strongly. And in your criticism of hapless 'one-size-fits-all' benchmarks, you are torching a straw man.

    Of course heads of sustainability like the idea of comparing their performance only against their own historical metrics. This means that they can do sustainability on their own terms. They needn't respond to the initiatives of rivals, as their performance is non-comparable. And any company likes to exclude competition wherever possible – basic economics.

    Let's not forget that competition is a driver for sustainability. It's a significant part of the business case, whether in winning the capital of investors or the custom of increasingly concerned consumers.

    The benchmarks you cite above are indeed crude – you can't compare industrial apples with industrial oranges. Worse still, they don't really go to true performance. Yet your conclusion that we should therefore abandon all hope of comparability is, at best, defeatist. At worst. it is a capitulation to the interests of half-hearted CSR departments.

    The future of sustainability is in finding more accurate comparisons. The should focus on comparable operations in the same industrial circumstances. Companies' circumstances won't be identical – M and S, for example, will always use fewer refrigerants per square metre than Waitrose, because M and S sell clothes – but we must strive to mitigate that. That's our challenge.

    I'd be interested to hear your opinion on industrial benchmarks – how about Greenpeace's Greener Electronics for example?

  2. Hi Will, thanks for the thoughtful comments. You make some excellent points.

    I would just offer a clarification. You say "your conclusion that we should therefore abandon all hope of comparability is, at best, defeatist. At worst. it is a capitulation to the interests of half-hearted CSR departments."

    If I had said this, it would be true. But I didn't, in fact the opposite.

    I suggested comparability, where relevant, can be driven by issue-specific disclosure, such as CDP or CHaSPI, if you recall my original piece. There is some value in these, as I think I argued.

    Your question about Greenpeace's Greener Electronics is a good one. My take on their index is the same as my view on things like CDP: They are useful in that they paint a general picture of who is engaged with the issue, and which companies are less so. I wouldn't take their value much further than that really, given the comparability problems that arise when trying to do so.

    Toby

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