German study questions impact of sustainability rankings on companies

Only two of 22 firms queried said rankings affect their business.

A new study by a German NGO that promotes sustainable economic development has called into question the impact that sustainability rankings have on the business of the world’s best known listed companies.

According to the study, released by the NGO Südwind, only two of the 22 companies interviewed said the desire to improve their sustainability score had led to changes in their business. Another six of the firms said they took the rankings seriously, but had yet to make their business more sustainable.

Moreover, 12 firms in the sample told Südwind that while they provided the information needed to be ranked on sustainability, they did not feel that their scores were in any way relevant. The remaining two firms had yet to be ranked on the issue owing to a lack of information.

“I personally was very surprised at the findings. I expected a much higher number of firms that either had been motivated by the rankings to make their business more sustainable or at least took them seriously,” said Antje Schneeweiss, the Südwind expert who authored the study. To conduct the research, she contacted 37 internationally known firms and got answers back from 22. Among those that didn’t respond were French firms like Carrefour.

Those that did respond included athletics apparel firms Adidas and Puma; mining giants BHP Billiton, Rio Tinto and Vedanta; food groups Nestlé and Unilever; retailers Marks & Spencer, Metro and J Sainsbury; and Swedish clothing firm H&M.The corporate officials Schneeweiss dealt with ranged from senior PR and investor relations personnel to chief financial officers.

According to Schneeweiss, the study shows that firms take engagement by the communities affected by their operations far more seriously than rankings. “There has to be a material effect on their business,” she said. “I had all three mining firms tell me that local protests were instrumental in getting them to improve their operations.”

Reacting to Südwind’s findings, Daniel Wild, Head of Sustainable Research and Investment at RobecoSAM, said sustainability rankings were useful in that they showed companies their weak spots and served as an important guide for investors. But Wild also acknowledged that rating agencies probably had to do a better job in communicating to firms the importance of sustainable criteria to their finances.

German sustainable rating agency Oekom called Südwind’s findings “very interesting,” though warned against interpreting too much from a small sample. “When we asked 199 companies what they thought of sustainability rankings, 60 came back and told us of concrete steps that they had taken to improve their scores,” said spokesman Rolf Häßler.

Häßler also speculates that some of the scepticism voiced by the firms in the study was due with their inability to score well on sustainability. Link (German)