Assessment in Corporate Sustainability

How a stakeholder assesses the sustainability of a company is affected by and can be affect by the company

Stakeholders positions can be contradictory as stakeholders will look differently at the same company

NGOs, consumers, labour unions, and employees all have different criteria for how they asses the sustainability of a company

Investors aim to get an objective and reliable assessment of a company’s sustainability

Such an assessment is yet not standardized, but an established spproach is the so-called ESG (Environmental, Social, Governance) approach

ESG Scores are calculated by aggregating quantitative information for each E-S-G Pillar

Each information is weighted to calculate aggregate scores in each pillar which are then further aggregated to one score for each of the three pillars

Further aggregating the scores of each pillar provides the overarching score for the company. The higher the score the more sustainable a company is.

The ESG scores make it possible to measure a company’s performance in a quantitative and data-driven way, to enable a comparison of companies

Ratings cannot always exhausively capture all true sustainability efforts

ESD data providers are commercial companies, and thus, try to differentiate their offerings to gain competitive advantage

Data accuracy is hard to achieve and hard to be judged

Sustainability assessments depend on cultural, temporal or regional background in which they are made

Some ESG measures are weak and are not able to give an indication of the thoroughness or the result of a sustainability action

Investigate the company’s position on a few, industry decisive, sustainability topics

Identify whether and to what extent the company embeds sustainability in core products, services and processes

Understand if and how companies pursue absolute rather than relative sustainability targets

Analyse the company’s progress and significance in its efforts towards sustainability

Check if the company provides comprehensive data to prove its transparent and genuine effort to address sustainability issues

Be aware that there are neither one-size-fits-all criteria nor are there clear black-or-white answers, thus, including the additional criteria will help to provide a comprehensive assessment for financial investors