Evaluating Corporate Social Responsibility Performance
In today's fast-changing business world, companies are facing multiple new environmental, social, and cultural challenges that in large part determine their capacity to establish, maintain, and protect their business, and to deliver sustainable growth to benefit all.
The achievements of companies in the area of sustainable development are currently evaluated using the data provided on their website, in their annual report, and in their CSR report. There is an underlying trend to merge these into an integrated report that discloses, in one reference document, the company’s financial and extra-financial information. Rating agencies rework and interpret the elements provided using criteria and methodologies they have developed in-house to rank company performance and results.
A panel discussion at the World Economic Forum concluded that the approach adopted by rating agencies presents a number of shortcomings, including:
- Inadequate transparency on evaluation criteria and methodology
- High degree of inter-agency divergence with respect to a company's evaluation and ranking
- Absence of media impact and reputation analysis
- Essentially backward-looking evaluations that provide little prognosis
In addition, rating agencies sell their analysis to the evaluated companies, thereby creating a potential for conflict of interest. Not surprisingly, the output from these rating agencies is of limited value to both the companies concerned and its stakeholders, including the financial sector in search of sustainable investment opportunities.
A broad range of stakeholders from academia, government, NGOs, and industry have come together to create a Global Sustainability Index (GSI) that overcomes the limitations previously cited and allows companies to be ranked in a transparent and pertinent manner. In this way, companies working to develop win-win scenarios can be identified and gain competitive advantage.
The GSI was launched last week in Davos, Switzerland. It is a multi-stakeholder, not-for-profit initiative whose goal is to develop a practical tool that will provide guidance and benchmarking to companies and stakeholders, including investors, that encourages progress.
Concretely the GSI will compile a set of weighted social, environmental, and economic Key Performance Indicators (KPI) and establish an overall classification with the possibility of direct comparison between companies, even those in different sectors of activity. The KPIs will be compiled in collaboration with industry experts, academics, NGOs, and public agencies to ensure both the quality and general acceptance of the initiative.
In addition, a sound theoretical basis for the GSI will be developed with academics—particularly in areas such as data modeling and metrics. Setting up the GSI will require some time (two to three years) as well as considerable financial and human resources to get all the necessary expertise around the table building, testing, and validating the index.
CSR has created a new paradigm for business reporting in the 21st century, and its consequences on how business viability and growth potential are evaluated. Tagged business reporting provides a language (syntax), standardized terms (semantics), and templates for relating these terms (models). It brings consistency, transparency, and comparability to reporting. Because it is a shared resource for all companies, it can bring significant improvement in the efficiency of cyclic reporting and automation to the tests for verifiability and regulatory compliance, and it has much to offer the CSR community.
The Wdesk CSR Reporting solution gives users the control with its single document datamodel. The syntax, semantics, and models are already built within the tagged information data model, thus ensuring consistency among different formats of CSR Reporting. This technology also permits seamless, instant collaboration for multiple authors and enables disclosure controls.
Reference: Francesco de Leo and Francis Quinn ‘CSR Report 2013’ Innovation, 2013.
About the Author
Liv Watson is Senior Director of Strategic Customer Initiatives at Workiva, with a primary focus on monitoring and evaluating new market opportunities globally. She helped found XBRL International and is one of the original developers for XBRL.