It’s that time again – the annual benchmarks are on their way. One question we hear a lot is: what does it really mean to participate in benchmarks such as RobecoSAM’s Dow Jones Sustainability Index (DJSI) and the Carbon Disclosure Project (CDP)?
Investor interest in the sustainability performance of listed companies is increasing. As a result, the world’s largest asset manager – BlackRock – announced in January that it would pay more attention to the social impact of the companies in which it invests. Earlier, ABP announced that it was going to move away from fossil fuels. And like ABP, Robeco has stopped its investments in the tobacco industry. $22.89 trillion is currently invested sustainably across the globe (2016, GSI Alliance), representing a 25% increase since 2014. The trend is clear: sustainability is increasingly a priority for the institutional investor.
|“KPN wants to be a Green Provider in word and deed, and a leader in Corporate Social Responsibility. The fact that we are now the Industry Group Leader in the Dow Jones Sustainability Index and once again one of the 112 Climate Leaders in the Carbon Disclosure Project confirms this role among all our stakeholders. This includes employees and customers (business and consumers), shareholders, our Supervisory Board and all other people who are important to us. Research shows that 85% of our employees are aware of KPN’s pioneering position, and that it makes them feel even more involved. Our reputation has never been better: we are ranked third in Europe according to the Reputation Institute. We do what we promise and the benchmarks are proof of that.”|
The importance of participating
This development makes it increasingly important for listed companies to demonstrate their sustainability performance credibly and independently. The DJSI (RobecoSAM) and CDP benchmarks lend themselves perfectly to this. These ratings question listed companies on a detailed level about their (provable) sustainability performance. The DJSI only records the top 10% of the companies in the sector, and for investors, being included in this index is a reliable indicator sustainability performance.
A similar reasoning applies to the CDP, which focuses specifically on dealing with climate change, supply chain management and water. Here too, good performance within the sector demonstrates to investors an adequate approach to climate change, both from the perspective of mitigation and adaptation. Both indices are actively used by investors to assess whether companies are eligible for inclusion in their portfolio.
Good performance in this rating raises visibility among investors – who are increasingly demanding it – and it also allows better access to the capital market, brings a higher market price and creates higher return for the investor. It is therefore logical that a link between sustainable performance and financial performance is clearly demonstrable. After all, these companies will be better prepared for the future.
An increasing number of companies are now taking part in these rankings, and are investing their time to provide the requested information. It represents important value for shareholders and the company.
What is needed?
Providing the requested information takes considerable effort, and providing provable information across many topics requires an organized approach. Topics include climate change, energy consumption, employee satisfaction, executive remuneration, as well as safety, health data and diversity. Many different internal stakeholders therefore need to take a significant amount of time and effort to access all of this the information. How do you organize a streamlined process in which all sources meet their deadlines and successfully participate in a ranking? In general, we distinguish the following steps:
- Organize an early kick-off with everybody involved
Invite all involved information suppliers (HR, risk management, operational management, investor relations, etc.) to a meeting during which top management clearly indicates why participation is important and what is expected of everyone.
As a CSR manager, explain how the DJSI and the CDP work as well as perhaps the unstated rules-of-the-game. It is useful to emphasize that wording can play an important role in the way points are awarded. Look back on your last year’s score and discuss points for improvement per subject. How are you going to deal with this?
The responsibility for action lies with the professional disciplines involved, but your help as a CSR manager is certainly needed in terms of formulation and coordination. Finally, share planning and deadlines with everyone involved.
- State your questions, information requirements and improvement actions
Divide the questions among the various people involved, including stated actions to improve previous scores. As a CSR manager, continue to monitor the progress of implementation.
- Collect information
Prepare yourself for completing the questionnaire. A lot of proof is demanded for most of the questions, which you should take seriously while collecting the relevant information. Answers without proof or reference to reliable sources (such as an approved annual report) yield little or no points. We often see companies steadily build their answers during this phase until they have a complete response. As a CSR manager, if you see some answers faltering or lagging behind, then take the initiative to offer support.
- Perform a final check at the coordination level and upload the file
We strongly recommend that you complete a final, full check. This way you can assess quality and guarantee completeness. Are you sure that all necessary information is in the right place? Then upload the complete answer, and don’t forget to officially ‘submit’ the text!
Everyone will be happy once the deadline has been met. Now it is a good idea to immediately perform an internal evaluation while everything is still fresh in your memory. Look back on the process and identify aspects that you could improve next year. You can also carry out a similar analysis when the results of the benchmarks are received: where have you received a good score and where is there room for improvement?
The DJSI and CDP benchmarks offer an excellent opportunity to demonstrate the value of your company’s sustainability efforts and performance. You will be reinforcing the business case for sustainability. Give your company that chance – it will pay off!
Jacqueline Houweling is a consultant at Sustainalize and advises a variety of companies on CDP and DJSI.
Sustainalize has advised a large number of companies to participate in the DJSI, CDP and other benchmarks/ratings, including KPN.