Interest in data that assesses and ranks company performance in terms of sustainability has been growing substantially over the past decade. Launched in 1999, the Dow Jones Sustainability Index (DJSI) is one of longest-running global sustainability benchmarks worldwide and has become the gold standard measure for companies in different industries.
One of the challenges in developing assessment methodologies is in finding the balance between being thorough yet concise. The DJSI, for example is based on company responses to a lengthy 160-page questionnaire. For this reason, some companies, like ABB in Switzerland, have recently decided not to renew their participation in the DJSI. Though ABB has been a leading DJSI company in the past, the benefits to investors provided by the ranking are possibly incompatible to the immense work that goes into preparing the DJSI submission.
In some cases, ranking results have also proven to be blatantly incorrect, doing more harm than good. Volkswagen provides the latest example. Only weeks before the emissions scandal broke, Volkswagen was named the leading company in the automotive group in the DJSI. On September 29th the DJSI announced it would remove VW from the global and European indexes as a result of their manipulation of emissions tests. This reinforces how critical it is to formulate a ranking methodology that provides robust ad reliable metrics to consumers and investors.
There is a similar interest in defining indicators in the business and human rights field. An example is the Corporate Human Rights Benchmark project that was launched in December 2014 and seeks to assess a corporation’s human rights performance. Two weeks ago , our Center hosted a public consultation on the draft benchmark at NYU. The comments that we provided on the draft version highlight three potential shortcomings in the current approach -
1. Indicators that assess corporate human rights processes have greater weight than actual outcomes
2. Current indicators are expansive and are not targeted enough to generate information that investors and consumers could use to meaningfully differentiate between companies in the same sector
3. The reliance on data generated via companies self-reporting creates a systematic bias
The business and human rights field could learn from earlier attempts to set benchmarks and focus on developing industry-specific, performance-oriented benchmarks that are based on third party indicators. The benchmark should also be simple and easily digestible for an interested audience to analyze quickly. Therefore, a thorough assessment would require identifying the few critical questions about a companies’ human rights performance specific to their industry. Defining a benchmark that meets all these objectives is not an easy task. Yet it is the only way to truly increase corporate human rights accountability.
Dorothée Baumann-Pauly is the Center's Research Director and Tara Wadhwa is the Center's Assistant Director.