Year-over-Year Changes in CSR Rankings
In response to my recent post on CSR Rankings, Justmeans member JustJim asked the following:
Since this is the first time this list has been made public (according to CSR Wire). is there analysis explaining major drops or gains for listed companies? It would helpful to understand the driving factors behind moving up or down the list.
This is an excellent question and one deserving of comment from both CRD Analytics (the relatively new CSR rankings group that produced the CSR ranking published by Justmeans) and the larger ESG rating and ranking community including groups like CRO, Ethisphere, Corporate Knights, IW Financial, Sustainable Asset Management, and the various formerly independent ESG rating groups now falling under the MSCI umbrella (e.g. KLD, Innovest, etc). Â Indeed, while CSR ranking methodologies are often described as a response to the call for transparency), it is rarely if ever possible to figure out what drives changes in a companyâs ranking. Â In fact, for every year-over-year change in rank for a given company, possible reasons abound. Â Here are just a few scenarios that can come into play for an individual company:
*The company in question changes its behavior with respect to major ESG factors considered in the ranking.
*The company in question changes nothing about its CSR performance, but improves (or reduces) its disclosure of CSR data.
*The company in question changes absolutely nothing, but shifts relative to other companies evaluated in the ranking.
*The organization constructing the ranking changes its methodology, placing additional weight on certain topics or changing the way it rates specific factors.
*The organization constructed the ranking leaves constant the weights it places on its selected CSR factors, but changes the weight it assigns to the sub-factors underlying those weights.
*A company that previously failed to meet the minimum criteria to be included in the ranking qualifies for the first time and bumps the company in question up or down.
These are only a few factors that can contribute to shifts in CSR rankings, and Iâd be curious to hear what other considerations I have neglected here. Â Analysts, consider this an open invitation to comment on what has changed how your organization has rated companies from year-to-year. Â It would be interesting to hear thoughts from CSR practitioners outside the analyst community on feedback you have received about the rise or fall of companies you have worked with.