Could sustainability 'survey fatigue' launch a $1 billion industry?
Could sustainability 'survey fatigue' launch a $1 billion industry?
It's not always useful in practice, but one thing is for sure: there is no shortage of research, ratings and rankings somehow related to sustainable business.
The current $250 million sustainability information market includes some 150 rating systems covering more than 50,000 companies on about 10,000 performance metrics — a glut of sustainability data that has helped lead to more than $21.4 trillion in sustainability-oriented assets under management to date, according to a recent report (PDF) by the Global Sustainable Investment Alliance.
But this endless stream of information also has led to what some in the industry call “survey fatigue," which makes it difficult for business leaders and investors to know what to do with it all. It can be even harder for non-initiated prospective clients or consumers to decipher who's doing what to help (or harm) the planet.
What makes that challenge especially ironic is that these days, there seems to be a ratings aggregator for just about everything else: OpenTable for restaurants, Goodreads for books and Rotten Tomatoes for movies, among many others.
A few groups already are working to make the sea of sustainability information more transparent and actionable, such as CSRHub, which focuses on how individual companies stack up on environmental, social and governance (ESG) metrics. And now, for sustainability surveys, there’s also CORE.
Launched today by the nonprofit Global Initiative for Sustainability Ratings (GISR), the Center for Ratings Excellence (CORE) program is designed to cure survey fatigue by helping companies and investor groups cut to the center of copious ESG research and ratings.
The nonprofit will offer the service for free, but sees much bigger potential to realize the full market value of contextualized sustainability data.
“Our goal for CORE is to drive this market to $1 billion,” Mark Tulay, chief operating officer of GISR, told GreenBiz. “It will help drive market adoption among investors, bring market clarity, drive excellence and also the enhanced usage of financially relevant ESG factors in investment decision making."
The program was developed with the support of major companies such as UPS and Disney, as well as leading ESG ratings and research firms, such as CDP and Vigeo, whose products will be incorporated into the online program.
GISR aims to make sustainability intelligence more intelligible for businesses and investors by breaking the subject down into four “strategic workstreams" tailored to different reasons a user might be seeking ESG data: a framework for how to evaluate sustainability progress; an online research hub; a lab focused on new data and reporting innovation and an events section to help convene those working on common issues.
Sustainability ratings at an ‘inflection point’
As illustrated by new service offerings such as CORE, ESG ratings are at an inflection point, Tulay said.
Businesses face the challenges that come with adapting to the “new sustainability math” — or finding the right balance between investor, consumer and stakeholders interest in how businesses impact the society and the environment.
“Companies are looking to GISR and others, and this CORE platform, to help provide market clarity about these 100-plus ratings — what they are covering, and how they are covering it,” Tulay said. “We want to help enable the ESG ratings and information market to track that so that investors can get better, continuous improvement in the information they receive, and we can increase the usage of this information in investment decision making.”
Tulay emphasized that GISR is not a trade or watchdog association.
“We focus on the system — the system being the companies, the rated organizations, the rating agencies and the ratings users," he said. "We want to create a more virtuous cycle so there’s less friction in the marketplace.”
Finding a frame
When it comes to how the new CORE offering plays into all of this, GISR aimed to make sustainability information more meaningful by drilling down into several components of the issue.
The first workstream, the framework, is rooted in GISR’s existing principles for ratings excellence and an associated accreditation program to encourage transparency, rigor and usability. The principles initially were piloted in 2013, and serve as the core attributes of a ratings framework required to achieve credibility among key stakeholders.
“The principles were developed over the course of a year in a multi-stakeholder fashion,” said Tulay. “These have been downloaded over a thousand times. We also have over 5,000 organizations and individuals participating in our program from all corners of the globe.”
The second workstream is the Hub, a searchable online database of ESG ratings products that enables investors to make informed decisions on the ESG ratings and research specific areas of interest. The goal is to be able to search and compare hundreds of sustainability ratings products, while companies also might be able to glean where they can improve to move up the ranks.
“Sustainable business is about risk, opportunity, transparency, and who you associate with,” Steve Leffin, global director of sustainability at UPS, said in a statement. “GISR’s tools, including its ratings hub, will help us to improve, and obtain recognition for, our sustainability planning and performance.”
The database features some 381 ratings, rankings and indexes, including 252 investor-focused (66 percent), 118 consumer-focused (31 percent) and 11 company-focused (3 percent) data sets.
“The Hub is where you go to get the list of organizations providing ESG research and ratings, and to get impartial, independent information about them,” Tulay said.
Here is a mock-up of what the source looks like:
The third facet of CORE is the labs component, which houses cutting-edge research and development on new ways to enhance the theory and practice of ratings.
“The labs are meant to drive innovation, where we tackle the difficult issues in the field today such as how to quantify some of these more qualitative factors and social issues,” Tulay said.
Put more simply: It’s about gathering a lot of smart people around a table, asking a difficult question and working on the issue at hand.
The fourth and final workstream in the new program is the "convenings" section — a collection of in-person and online events aimed at fostering shared learning and dissemination of best practices among raters, investors, companies and other stakeholders.
“We have these convenings, including next year which will be our first ESG ratings summit where we bring together all the market players,” Tulay said.