We have been conditioned to want rankings. It starts with our Apgar score at birth and continues throughout our lives as students, consumers and investors. So of course in the sustainability world we want to see companies ranked according to their sustainability credentials.
But I am skeptical of broadly scoped CSR and sustainability rankings.
Rankings require quantification and quantification requires applicable data to be available consistently and transparently. And then the scores need to be weighted. A broad ‘most sustainable company ranking’ needs to compare the relative importance of diversity, philanthropy, environment, workers rights and a dozen other things.
The correct weightings will vary enormously across countries, across industry sectors and even between companies in the same sector. The quantification underpinning a ranking can appear deceptively scientific. But the final ranking is predominantly determined in a subjective judgment of the weighting accorded to each measure.
Hopefully my skepticism is a healthy one. I fully understand the value of ranking companies as a tool for continual improvement in the general level of sustainability across the business world. And rankings can be more representative within a single industry vertical, or within a single theme such LGBT equality in the workplace as defined by the Corporate Equality Index of the Human Rights Campaign or its UK equivalent the Stonewall Workplace Equality Index.
My suggestion for the c-suite exec is that when it comes to ‘best overall company’ rankings, not to worry too much about precise positioning in the ranking. If the criteria and rankings are not transparent don’t pay much heed at all. If they are transparent and they are representative of what is material to your sector then it is worth taking applicable action and striving to improve your position. But focus on what quartile or decile you are in. Don’t worry too much about why you are sixteenth and not fifteenth – the methodology is unlikely to justify that level of granularity.
Sunday, December 7, 2008
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A great man once wrote that rankings are sports by different means. And those who produce the rankings know they must be no less battle-ready than those who strap on their boots to take the field. In the CR field, top rankings such as FTSE for Good, the DJ Sustainability Index and the 100 Best Corporate Citizens List are, like sporting events, always well-watched and cause a great deal of heated conversation. And while it may be less than perfectly healthy to invest as much credibility in the rankings as we all do, CEOs and others in the field pay very close attention to lists. The cruel fact is that CEOs are among the most competitive characters on earth. That's why they got the job. Encouraging CEOs and their C-suite colleagues to ignore CR lists is as futile as hoping they can ignore their stock price. Competitive position matters. 'Twas ever thus. And 'twill ever be.
ReplyDeleteJay, my intent was not to encourage CEOs to ignore CR lists. My mistake if my words indicated that. My hope was to stimulate consideration of the methodology in evaluating various recognition programs. I do question the quantitative value of granular rankings but I accept your point about appealing to the competitive characteristic that is critical in our business leaders.
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