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No Cause for Concern: Key Considerations to Help Demystify CSR Rankings

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As stakeholders continue to increase scrutiny of companies’ performance beyond the bottom line, companies have been placing greater focus on measuring and tracking their social and environmental efforts. And with an increasing number of corporate social responsibility (CSR) and sustainability rankings being released over the past several years, companies are commonly relying on these rankings as an easy way to assess their performance and benchmark against competitors.

Being included on highly visible rankings, such as Newsweek’s Green Rankings, Corporate Knights’ Global 100, the Ethisphere Institute’s World’s Most Ethical Companies, and Corporate Responsibility Magazine’s Best Corporate Citizens (to name a few), can strongly boost a company’s corporate reputation and be leveraged in internal and external communications to validate social and environmental performance. When companies are excluded from these rankings it could raise a red flag given that in today’s business environment “citizen consumers” increasingly want companies to spend time thinking about not just the interests of their own company but those of society as a whole.But before you run to see where your company, competitor or client stands on the most recent CSR ranking (the 2012 Newsweek’s Green Rankings were released a few weeks ago) and make judgments about performance, there are some important considerations to keep in mind:

1. Concern Over Credibility and Value of Rankings Exists 

It’s important to raise upfront that there has been a significant amount of discussion over the past few years about the credibility of CSR rankings and whether they are truly helping or hurting the CSR field. Methodologies of CSR rankings vary significantly, making it difficult to glean any consistent insights. In many cases, CSR rankings do not account for differences in industries and sectors and as a result, the rankings are not truly comparing “apples to apples.” And in the case of those rankings associated with media properties, such as Corporate Responsibility Magazine’s Best Corporate Citizens, skeptics have raised concerns as to whether these publications have conflicting interests when determining rankings (e.g., selecting companies that will pursue sponsorships, advertising, etc.).

2. Prioritize Some Rankings Over Others to Maximize Engagement 

With an increasing number of CSR rankings appearing each year, it can be a bit overwhelming to determine which ones to prioritize. Many of the research companies that compile data for these rankings reach out to companies directly, offering an opportunity to review findings and provide any corrections or additional information. This is a time intensive process and as a result, it’s important to prioritize which rankings are most significant to you and your stakeholders.

3. CSR Rankings Commonly Differ in  Scope and Scale  

While some CSR rankings focus on a variety of environmental and social attributes – such as greenhouse gas emissions, human rights, and philanthropy – several drill deep in a specific area. For example, Newsweek’s Green Rankings focus primarily on the environment while the Ethisphere Institute’s World’s Most Ethical Companies list focuses predominantly on ethics and compliance. Furthermore, some CSR rankings focus exclusively on U.S. companies while others are global in nature. Both the scope and scale of these rankings can have a significant impact on where companies stand and as a result, you should look past the overarching rank and where applicable, assess how the company performs against the specific attributes measured and against competitors in their industry/sector and geographic region.

4. Disclosure Is a Key Part of the Ranking Equation

Many rankings focus on companies’ disclosure and transparency of reporting on their social and environmental impact in addition to their actual performance. For example, Corporate Responsibility Magazine’s Best Corporate Citizens places emphasis on whether a company transparently discloses its greenhouse gas emissions versus the size of a company’s carbon footprint. Additionally, Newsweek’s Green Rankings includes an “environmental disclosure score,” which accounts for 10 percent of the total score that determines a company’s ranking.

5. CSR Performance Isn’t Always Black and White

CSR rankings are commonly faced with a catch-22—they need to use a standardized “check the box” approach to objectively measure and compare companies’ operational performance across CSR areas yet this approach limits the opportunity to assess how sophisticated companies are tailoring their CSR efforts to strategically align with their business objectives and strategies. Through these rankings it is difficult to showcase how some companies are taking a “shared value” approach to enhancing both profit and societal impact. Nonetheless, it’s important that companies focus on taking a holistic approach to improving CSR performance as opposed to trying to check the boxes for a ranking.

Overall, when viewing CSR rankings with an understanding of the points above, these rankings can be helpful tools to generally track and assess companies’ CSR performance and reputation. However, rankings should by no means be viewed as the be-all end-all. At the end of the day, implementing CSR strategies that are tailored to your company and stakeholders and tracking against your short-term and long-term social and environmental goals should outweigh everything else.

This post originally appeared on Edelman Southwest’s blog, E-volution, on November 27th, 2012.

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