13
Recognition, awards, and rankings

This chapter delves into the complex, but important, world of corporate responsibility rankings, lists, ratings, and awards.

Don’t worry when you are not recognized, but strive to be worthy of recognition (Abraham Lincoln).

Allow me to start this chapter with a bit of a rant: The field of corporate responsibility has become a ratings game. On the one hand, this can be viewed as a positive force as companies compete for top billing in the various public ratings. On the other hand, the ratings game has become something of a beauty contest that, at its worst, threatens the credibility of the corporate responsibility movement and, at its best, takes a sizable amount of corporate treehugger time. For a deep dive on this topic, I recommend the “Rate the Raters” study by Sustain-Ability mentioned in Chapter 10. It is a comprehensive and timely exposé on the issues associated with the proliferation of CR ratings.

A recently launched initiative called the Global Initiative for Sustainability Ratings (GISR) is aimed at bringing consistency to how companies are ranked on responsibility issues. Its goal is to create a framework for the convergence and harmonization of the vast number of sustainability ratings that have cropped up over the years. Its task will not be an easy one because sustainability ratings have become fairly entrenched in the corporate responsibility world.

Types of ranking and rating

Because there are many CR ratings and rankings, and because most companies take great pride in being recognized for their good deeds, working with the ratings organizations has become a major part of the corporate treehugger job. While I won’t dig into any of the specific ratings and rankings, this chapter categorizes them and lays out some tips on maximizing your effectiveness to receive public recognition for your CR program.

Socially responsible investor ratings

Socially responsible investor (SRI) ratings refer to the analyses of company CR performance used to select and screen stocks. I list this category first because it may be the most impactful for your program. As discussed in Chapter 10, the latest estimate of assets invested using social management is an eye-popping $3.07 trillion, or nearly one out of every eight dollars under professional management, and growing ten times faster than the overall managed asset pool. As this area of investment has grown, the imperative to attract social investment has become a high priority for many corporate responsibility programs. As described in Chapter 10 the SRI community can be divided into SRI analysts and SRI fund managers. While their traditional customers have been investment fund managers, many of the SRI analyst firms have found additional clients by supplying their data and analyses to corporate responsibility rankings and ratings. For example, the ESG analyst firm Trucost supplies the data for Newsweek magazine’s “Green Rankings” list. IW Financial is the data engine behind Corporate Responsibility (CR) Magazine’s “100 Best Corporate Citizens” list. The most well-known SRI ranking is the Dow Jones Sustainability Index (DJSI). Produced by the Sustainable Asset Management Group (SAM), the DJSI ranked 523 companies in four geographic regions of the world in 2011. The DJSI 2011 press release stated the purpose for the ranking this way:

The DJSI follow a best-in-class approach, including companies across all industries that outperform their peers in numerous sustainability metrics. Each year, SAM invites the world’s 2,500 largest companies, measured by free-float market capitalization, from the 57 sectors to report on their sustainability performance. The result of the Corporate Sustainability Assessment provides an in-depth analysis of economic, environmental and social criteria, such as corporate governance, water-related risks and stakeholder relations, with a special focus on industry-specific risks and opportunities.

There are many similar rankings and the number is growing every year.⁹⁸ The “Rate the Raters” study mentioned above inventoried over 100 responsibility rankings and ratings and is the most comprehensive study of this field to date.

Corporate responsibility lists and awards

There has been a recent explosion in the number of awards recognizing corporate responsibility. Other than a healthy balance sheet, companies like nothing better than to be recognized for excellence in corporate responsibility. Not only does this kind of recognition make everyone in the company feel good, but it also carries tangible business value.

I gave a talk at the 2011 Responsible Business Summit hosted by Ethical Corporation, and asked the audience, “Do companies compete on corporate responsibility?” I got an equivocal response when about half of the hands went up, so I said, “Okay, let’s look at some ratings.” On the next slide I showed the list of the top five companies on Newsweek’s “2010 Green Rankings” (Dell, HP, IBM, Johnson & Johnson, and Intel). Then I added a graphic from the Reputation Institute, which showed that over 40% of a company’s reputation stems from its corporate responsibility programs. The point was made with the final table, which showed the 2011 valuation of company brands from Millward Brown, which was led by Apple with a brand valued at $153 billion.

Here is the equation: corporate responsibility is about half of company reputation; reputation is a big part of your company’s brand value; your company’s brand value is the largest intangible asset on the company balance sheet. Do companies compete over their CR reputations? You bet they do. And one sure way to burnish your reputation is by being named in a lot of corporate responsibility awards and rankings.

A first step to approaching CR awards and rankings is to understand how the ratings systems evaluate your performance. For example, AMD appeared on Corporate Responsibility Magazine’s “100 Best Corporate Citizens” list in 2010 and 2011. This is one of the more transparent rankings, which gave me some insight into some of the issues inherent in their systems.

When AMD was initially listed, the company ranked first in overall governance and ethics. The next year, AMD was still on the overall Top 100 list, but was ranked 270th in governance and ethics. Nothing had changed in AMD’s programs, so I was perplexed about how this score could have dropped so much. When we talked to the CR Magazine folks, we learned that they had changed their grading system to “Olympic scoring.” This meant that 269 companies tied for first and all received a grade of one. For unknown reasons, AMD was dropped into the second group and the score dropped from first to 270th. This example gives you a sense of the somewhat random ways that your company will be judged by the various rankings and ratings schemes.⁹⁹

By definition, sustainability is a broad concept that incorporates many disparate issues ranging from profitability to diversity and from environmental protection to ethics and fair labor practices. The notion that you can aggregate these items into a single score or into a meaningful ordinal ranking is nonsensical. The key for the CR manager is to understand the various rankings schemes and put your best foot forward. For example, some rankings may put more weight on environmental performance than labor issues, while others focus on human rights or ethics. Understanding these weightings and matching them with your company’s strongest stories will give you a guide for where to invest your time.

Great place to work lists

At the other end of the rankings and ratings spectrum is the plethora of “great place to work” lists. The best known is the Fortune^® “100 Best Companies to Work For” list which is compiled from data collected and ranked by the Great Place to Work^® Institute.

There are also a myriad of specialty lists. For example, Working Mother magazine publishes several lists that rank companies such as:

• Working Mother 100 Best Companies List

• Best Companies for Multicultural Women

• Best Companies for Women’s Advancement

• Best Companies for Hourly Workers

• Best Green Companies for America’s Children

Another important list is the “Corporate Equality Index” from the Human Rights Campaign, which lists the top companies that support equality for LGBT (lesbian, gay, bisexual, and transgender) employees.

You could fill up a whole chapter with all of the “best places to work” lists, but the critical thing to understand is how best to approach these lists. As with the responsibility rankings discussed above, focus on a few of the lists with the highest return on your investment. The “best places” lists are usually based on a survey of your company’s employees. While this method is arguably more realistic than relying on company-provided information, there are some issues you need to consider before signing up. The surveys can be very long and require a large number of employees to take time to fill them out. Collectively, this can be a considerable investment of resources into the survey which, when added to all the other surveys your company issues, may be too burdensome.

Also, because the responses are beyond your control and the scoring methods are often not transparent, you have little control or insight into the final results. Regardless of your ranking, these surveys can be useful to evaluate the strengths and shortcomings in your programs. Most companies prefer to use a professional survey service for assessing employee satisfaction and engagement rather than relying on a “great place to work” survey. While you get some feedback from a “great place to work” survey, you may not be able to extract enough detail from the data to really understand what is going on in the workforce.

Managing SRI funds and analysts

The best way to approach SRI analysts and funds is to pick out a few companies and get to know them. You should work with your investor relations department to create a list of the SRI funds that already own shares in your company as a starting point. Then, take an inventory of the SRI funds that don’t currently invest in your company and prioritize a few of them as potential investors. Next, add the SRI analysts that are influential with the funds you have targeted. From the combined list, create a schedule by which you and your IR representative will contact each entity on the list either by visiting in person or by phone. In these meetings, you will present an overview of your corporate responsibility progress and plans, but remember to leave plenty of time for feedback and interaction (see the section in Chapter 10 on the investor road show). Your goal in these meetings is to learn as much as you can about the issues of importance to the fund managers and analysts so that you can address them in your program.

Managing corporate responsibility rankings

How can you effectively work within the world of rankings and ratings? Because many of the rankings depend on publicly available information, recognition depends on being able to tell your company’s story in a clear and compelling way to a focused audience.

Start by creating a list of the awards and rankings that your company currently receives. Identify those that you want to continue participating in as well as new awards that you believe are within your reach and would be impactful for your company. Next, dig into the “data engines” behind the awards. Since many corporate responsibility awards rely on the same analyses as the SRI funds, you may already have relationships with the SRI analysts that evaluate your performance for the awards you selected. Make a list of all the analysts that research your company and make it a priority to speak to each of them to walk through your story, answer questions, and provide the background behind the data. You will also need to track down the award or ranking process and discover as much as possible about the weighting and scoring system. Get to know the people at the conferring organization to understand their process and let them know you are interested in their award.

The bottom line is that the criteria and process for being selected for awards can be subjective, non-transparent, and somewhat frustrating. There will be awards your company will receive that will be a happy surprise, and awards panels that reject your company for unsatisfactory reasons. Stay focused on your priority list of awards and avoid the temptation to fill out every award application and survey. Do a reevaluation of your target awards at least annually to revise your list. It can be hard to stay focused when you get e-mails about a competitor that is listed for an award that you did not receive.

When you review your target list, do a sober evaluation of the awards and rankings that your program has a reasonable chance to attain. For example, it may become clear that you will never break in to the Dow Jones Sustainability World Index, but you have a great shot at the 100 Best Corporate Citizens list. If it is clear that you are wasting time with an award or list, consider reallocating the resources to an award that you might have a better chance of winning. While there is always a “big fish, little pond” trade-off, it can be a good strategy to look for awards where you can stand out as a leader rather than being an runner-up to better funded programs.

OneReport^® is a service that aggregates the survey questions from many of the major ESG research organizations into a single online questionnaire that can be parsed into topic areas and sent to the various data providers within your company for completion. While OneReport^® is an excellent tool, the sheer number of ESG surveys means that the aggregated list contains more than 1,500 questions. Completing and reviewing all of the questions requires a tremendous amount of work and can stress your network of data providers. If you use this service, remember that all of the effort you invest in filling out the survey is still not sufficient to assure that your program will stand out. In today’s world, there is increasing competition for a place on CR ratings or rankings lists and the best way to get your story out is to tell it yourself.

There is no substitute for getting in a room with the analysts face to face (or at least on the phone) to walk through your company’s CR story. The personal storytelling approach will allow you to build relationships with your counterparts in research and ranking firms, and permit you to talk through the story behind the data. For example, when AMD transferred major manufacturing assets to a joint venture, it impacted the overall environmental footprint of the company. Through a series of discussions, AMD helped the analysts understand the new business model and explained how the company had adjusted its environmental and CR programs.

Rankings and ratings matter, but they have to be kept in context. Remember that, while external recognition is great, it is not the sole reason that you are working in corporate responsibility. The important elements to remember about rankings and ratings are:

• Prioritize and focus on those the rankings with the highest applicability and return on investment for your company

• Tell stories rather than just dumping data

• Build relationships with your analysts; and, above all

• Remember that ratings are often subjective and may not be representative of your company’s actual performance

As a final word, try not to get too wrapped up in the ratings and rankings world. While filling out surveys and managing everyone’s expectations will take up large amounts of your time, the majority of your bandwidth should be focused on developing programs that continuously improve your company’s genuine performance measures.