This study aims to examine Sustainability Reports (SR), Business Responsibility Reports (BRR), among others. It also brings information disclosed publicly, whether online or in annual reports (including those with integrated reporting [IR] framework).
It is no longer sufficient for companies to follow a compliance driven approach. One needs to understand whether Sustainability and CSR are being looked at strategically and how are they governed. Which is why we look at a rigorous, wholistic framework that covers Environmental, Social and Governance (ESG) issues.
This study, therefore, examines and ranks companies on the basis of the three criteria.
Governance: How well is the governance for responsible business structured? How forthcoming are companies with respect to responsible business activities & performance?
Social: How well are key stakeholders (employees, community, customers and suppliers) integrated within a company’s responsible business framework?
Environment: How pervasive are sustainability practices (initiatives and targets to manage waste, water, energy, emissions) of companies?
The ranking is based on a weighted average of these three criteria. We assign a 35% weight to Environment, 30% to Social, and, 35% to Governance. The highest score that a company can get is 100.
Companies are ranked on their focus on responsible business by creating a combined score that weighs each of the three parameters.
The scores are arrived at by evaluating each company’s sustainability/GRI reports, company annual reports (including IR) and company websites by an analyst who scored based on a number of dimensions under the three parameters. The scoring was kept objective by requiring the analyst to score based on the presence or absence of the dimension. For example, if the company’s website provided a sustainability/GRI report on the website then it received a score of 1 on that dimension otherwise the analyst scored it 0. Thus, if the criteria disclosure has four sub-criteria then each of the four sub-criteria will be scored as below:
This company has scored 3 marks out of 4 for disclosure. If the total marks assigned for Governance are 35 then the score is taken as (3/4*35) or 26.25.
The criteria include:
Environmental (35%) – How pervasive are the sustainability practices of companies?
- Programmes related to waste, water and energy, and targets to reduce their impact
- Promoting sustainable products and services
- Programmes and targets to build sustainable supply chains
- Programmes and targets to build sustainable logistics
Social (30%) – How well are key stakeholders (employees, community, customers and suppliers) integrated within a company’s responsible business framework?
- Employee-centric initiatives
- Customer-centric initiatives
- Community-centric initiatives
- Supplier-centric initiatives
Governance (35%) – How well is the governance for responsible business structured?
- Board oversight of CSR and sustainability issues
- Managerial accountability of responsible business issues
- Corporate policies and management systems, such as a signatory to the United Nations Global Compact (UNGC), a formal policy on sustainable practices, a formal CSR policy, etc.
- How forthcoming are companies with respect to responsible business activities and performance?
- Sustainability reports as per standards, such as the GRI reports
- Disclosure in financial filings
- Participation in global projects such as the Carbon Disclosure Project
- Mapping business goals with Sustainable Development Goals
- External assurance and impact assessment of responsible reporting
After the analyst has reviewed one company, another analyst reviews the scores for a quality check. Where there are differences of opinion on a score they are resolved through (i) mutual agreement or (ii) reference to the authors. This process makes the study as rigorous as possible.