External sustainability research important, less so for business strategy, say corporates – Oekom

Response from almost 200 companies on how they view sustainability ratings.

Almost two thirds of companies (61.3%) responding to a survey by Oekom, the German ESG research firm, said the ratings formulated by indices and raters – collectively known as Sustainability Ratings Agencies (SRAs) – was decisive in driving their work on sustainability issues, but less than a third said it actually influenced their overall business strategy. The Oekom study was answered by 199 companies. Of the respondents, 65.8% said customer demand was the only more important driver to their sustainability work than external sustainability research. More than half, (58.1%) rated the importance of “sustainable development” to the future development of their company as “very high”. Nine out of ten companies (87.9%) said it was ‘important’ or ‘very important’ to be awarded a good sustainability rating or be included in sustainability indexes and funds. Almost all (97%) said they expected a good sustainability rating to have a positive effect on their reputation, and one in three companies said their performance in sustainability ratings impacted management remuneration. More than two-thirds of the companies (70.8 per cent) are also convinced that good sustainability rating results help them recruit highly qualified employees.A similar number said they detected growing interest in sustainability­-related issues among conventional investment analysts. More worrying, however, was the finding that 44.4% had only a vague idea of how the sustainability rating of their company was put together by external index or research companies, and only a third found the ratings processes to be transparent. Of the sustainable investment strategies used by investors, 39.9% of companies said the ‘best­ in­ class’ approach had the greatest influence on their own internal strategy, followed by engagement (37.4%). By contrast, most companies said they attached little importance to the use of exclusions. Just under half of the responding companies (48.2%) said that overall they thought the benefits of sustainability ratings outweighed the costs involved. However, the other half said the cost­-benefit ratio was negative. Nonetheless, the majority of companies said they used sustainability ratings as a management tool, e.g. as a trend radar (96%), for analysing strengths and weaknesses (84.3%) or for monitoring the success of sustainability management measures (65%).
Link to Oekom study