When it comes to grading companies on their sustainability, some leading organizations fall short as far as transparency and methodology. That's according to a white paper released this week by SustainAbility.com, an organization that is both a think tank and a consulting firm for corporations looking to improve green standings and sustainability practices.
SustainAbility.com issued a video Tuesday along with its report discussing how 21 of the leading eco-ratings organizations it investigated based on 13 criteria (see chart) appeared to be insufficiently evaluating the companies they target. Its partners include the United Nations Environment Programme and the Global Reporting Initiative , while its clients include Starbucks, Coca-Cola, and Shell.
This latest paper was phase three of its "Rate the Raters" series, an investigation into corporate sustainability ratings geared at developing best practices. The series was sponsored in part by Ford Motor, Sara Lee, Autodesk, and ExxonMobil, among others.
The Access to Medicine Index, CDP, Climate Counts, and FTSE4Good received kudos from the organization for their "strong public disclosure." But Sustainability said in its report that many of the ratings organizations investigated don't make their evaluation process for companies transparent, and because of this the public is less likely to trust their opinion. But it also made clear that one of the reasons why these ratings agencies fail to be transparent may be their own lack of confidence in what it says are often complicated points systems with a lack of sufficient quality control.
The organization also advised that ratings evaluation focus less on a company's past history, and more on evaluating its current stance as a company. It also advocated company outreach in which ratings organizations give companies with poor ratings specific targeted goals on how they can improve the way their company operates.
Keep in mind that the companies evaluated in phase three willingly participated in Sustainability.com's questionnaire and investigation of their ratings system. The organizations that agreed to the phase three scrutiny include:
Access to Medicine Index
ASSET4 (Thomson Reuters)
Bloomberg ESG Disclosure Scores
Carbon Disclosure Project
Murky Waters: Corporate Reporting on Water Risk (Ceres)
CR Magazine 100 Best Corporate Citizens
Dow Jones Sustainability Indexes
Ethisphere's World's Most Ethical Companies
FTSE4Good Index Series
The Global 100 Most Sustainable Corporations in the World (Global 100)
Maplecroft Climate Innovation Indexes (CIIs)
Newsweek Green Rankings
Oekom Corporate Ratings
Trucost Environmental Impact Assessment