How much do stakeholders trust corporate sustainability ratings?
<p>A new survey provides insights on stakeholder confidence in key rating agencies and indices.</p>
Who do you trust to interpret data for your business decisions? If you're a CEO, it may be the members of your executive team; if you're a mainstream investor, you may look to Bloomberg or the Dow Jones Index to decipher the data on Wall Street. But what if you're a sustainability professional?
With companies producing increasingly transparent sustainability reports, each with extensive metrics, a bourgeoning industry of rating agencies has emerged to help stakeholders identify industry leadership. We're not alone in applauding transparency while loathing the complexity it results in. Amid floods of data, the waters are now clouded with a bevy of rating agencies and indices, each with a distinct approach in identifying leaders and laggards in sustainability. Although these systems are intended to clarify the competitive landscape in sustainability leadership, stakeholders, investors and consumers are left wondering which rater is the best and most trusted overall in the sustainability industry.
What the research reveals
To help answer this question, GlobeScan and SustainAbility polled more than 700 sustainability experts with significant exposure to these raters, gaining key insights on how they make sense of their data and whose rating system they trust the most. We found that not all raters are created equal: In measuring trust in specific agencies and organizations, stakeholders identified significant variation in trust levels. Consistent with previous years, stakeholders identified the most credible organizations to be the Carbon Disclosure Project, Dow Jones Sustainability Index and Access to Medicines Index.
In 2013, this study was more material than ever: 51 percent of experts identified ratings as more important than they were three years prior, and 64 percent predicted that their importance would grow even more over the next three years.
Building on Rate the Raters research conducted since 2010, GlobeScan and SustainAbility have been able to identify trends and changing perspectives from global experts. These insights can help companies, investors and other stakeholders make sense of and get more value from ratings. While 2013 responses revealed unprecedented levels of trust in raters, these rating agencies have yet to emerge as the trusted source for corporate sustainability rankings. As in previous years, NGOs remained the top trusted organizations, with 49 percent of stakeholders qualifying high levels of trust. Interestingly, stakeholders reported near-equal trust in raters in 2013, with a new high of 48 percent having solid trust in these organizations.
Although sustainability experts most trust NGOs, their trust has decreased annually. Interestingly, this drop is accompanied by a 3 percent increase in stakeholder trust in rating agencies, which may indicate that some stakeholders are turning away from NGO opinions in favor of raters. With this data in mind, we can expect that raters will continue to gain trust among stakeholders, and may even overtake NGOs as the most trusted evaluators of corporate sustainability performance.
The significance of ratings
Ultimately, discerning sustainability professionals gain trust in raters through their consistency and application across industries, and the degree to which they can hone in on the most material issues. Ratings can help guide sustainable business decisions, but their role in driving stakeholders' perceptions of corporate performance is even more critical.
Watch for an upcoming Proof Points column about which companies these same stakeholders think are best at integrating sustainability into their business strategies. Will they align with what the raters tell us?
Photo by Nicoleta Raftu via Shutterstock