London-based research consultancy and think-tank sustainAbility just published the fourth part of its year-long investigation in rating agencies focused on sustainability and csr. “Over the last decade, there has been a significant proliferation and diversification of ratings. While this has certainly led to confusion and sometimes even griping amongst companies, users and other stakeholders, this is also an indication that ratings are going mainstream. Companies are linking executive compensation to performance on ratings. Asset managers are leveraging sustainability ratings and research in their investment decision-making. And citizens and consumers are starting to pay greater attention to sustainability information on products and companies… We observe too many ratings failing to live up to expectations.”
To overcome those issues and to make the sustainability rating business model sustainable itself, ratings must become financially viable (most of them aren’t now). There should be fewer ratings, which in turn need to generate greater demand. Sustainability and csr ratings should compete on data analysis, not on data collection, and they’ll have to add value for companies (mostly by forecasting). In addition, sustainAbility suggests rating agencies to focus on the core issues and impacts, taking into account the unique risks and opportunities associated with specific business sectors, such as regarding climate change: Ratings should not be universal or standard across sectors. Last but not least, ratings have to be transparent, consistent yet adaptive to retain credibility and interest.
The report is available for free download here
What’s your opinion on sustainability and csr ratings? Do you agree with those findings? Share your view, leave a comment :)
Picture credit: jvleis