What good are sustainability ratings?

One of the perks of being a graduate student at the University of Michigan was access to football season tickets. With this, I learned the various rituals undertaken by the student section on game day, including chanting, “who cares?” when opposing team players’ names are announced before each game.

This ritual still makes me smile for some reason, and is also a question many of us in the sustainability field ask during ratings and rankings season, which kicked off last week with the release of the Carbon Disclosure Project and the Dow Jones Sustainability Indexes. These results, like those in previous years, sparked a flurry of press releases by proud companies, angst in companies who fell short, blogs debating the merits and shortcomings of ratings, and consultancies offering their services to improve company performance.

But, who cares that company X was delisted from the DJSI, or that company Y made the CDP Leadership Index? This is a question SustainAbility is striving to answer through our latest round of Rate the Raters research.

The sustainability field cares -- a lot

Without question, those of us in the sustainability field –- company sustainability teams, think tanks, NGOs, consultancies, etc. –- care a great deal about ratings.

Companies spend considerable time and resources responding to ratings –- we know of companies who have teams in the dozens that are involved over months in some way in responding to DJSI. When companies do well, they zip off press releases to the effect of “Company X recognized as a sustainability leader” (Google “Dow Jones Sustainability Index” for a sample). When companies don’t do well, many take concerted action to make it back on the list.

Sustainability professionals put particular weight on the ratings announced last week, the CDP and DJSI. According to our just released survey of sustainability experts, these ratings are the two most familiar to experts and are amongst the top three in terms of credibility.

While every rating has room for improvement, CDP and DJSI have done much to earn their credibility. For example, CDP is fully transparent in how it scores companies and makes public its full results –- aspects that according to our survey contribute substantially to a rating’s credibility.

DJSI is widely recognized for its rigorous approach, in particular delving into the most material issues for companies (also recognized by our survey experts as a key driver of rating credibility). According to a DJSI Review Presentation, this is an area on which DJSI placed greater emphasis in 2012.

Beyond PR and benchmarking

In interviews with over 30 companies as part of our Rate the Raters research, the results of which we will release over the coming weeks, we asked sustainability professionals how they use and get value from ratings.

Next page: What ratings are used for