Posts Tagged ‘rankings’

I’ve always been sceptical about CSR rankings and ratings. Partly because there are just so many of them. It sometimes feels as if we have a ranking and rating system for every company. Just find the one that fits your needs and away you go! But this also underlines a deeper problem with rankings and ratings – is it even possible to have a ranking or rating system capture all the differences and diversity amongst businesses?

Citizen IBM had a good piece on how CSR Rankings Can Be Improved. They capture some of the key problems I have – from the needs to acknowledge the differences in industries to the need for continuous improvements to full transparency in the criteria used. But I don’t think they went deep enough – and I would like the scratch the surface a little bit more.

Firstly, as Citizen IBM mentions, the differences between industries should be acknowledged. But it goes deeper than purely the differences between those who manufacture and those who offer services. And it’s these differences that makes it even more difficult to take rating systems seriously. Let’s remove the obvious difference for a moment – let’s exclude for the sake of argument services companies and only focus on companies who manufacture.

Even within manufacturing the differences are just too steep to make a single standard rating workable. Most rating systems looks at the impact of the manufacturing process – environmental impact, workplace practices, financial performance,  governance etc. Most companies within manufacturing can be judged according to these, right? Well, just hang on for a minute there…

What most of these rating systems focus on, measure and rate are the impact of the process and not the impact of the actual product delivered by the manufacturing process. Let me give you an example, it is possible for a tobacco company to have excellent CSR practices in their manufacturing process and therefore rank better than say a pharmaceutical company. But the actual product delivered by the pharmaceutical company is vastly different than those from a tobacco company – the one contributes to the health of society and the other do the opposite.

Now it will be easy to exclude tobacco companies – and many do. However, the basic principle remains. The extremes are easy to differentiate – and we can exclude tobacco and arms manufacturers. But what about comparing the products of an oil company to a pharmaceutical company? How do we judge the end product and the impact of that end product? Especially when we start bringing in the idea of sustainability – leaving the future world in a better or no worse place. How do you rate a product that positions us better for the future against a company who serves an immediate need but at a high environmental and sustainability cost? How do you rate a software company who connects sustainable solutions to a company whose software is used for warfare? The differences in what the products deliver becomes complicated and makes comparisons complicated and almost impossible.

Even within a single industry it is complicated and problematic – how do you differentiate between an energy company that produces only oil to one that only produces solar or another “green” energy? And what about a traditional oil company spending more and more on alternative energy? How do you judge the future impact and value of the product or service?

The approach to ratings also undermines a key development in CSR over the last few years – finding the opportunity of mutual responsibility or shared value between the company and its stakeholders (or society at large). Companies are increasingly seeing CSR as a way to create new opportunities that will be beneficial to both the business bottom line and the needs of society. But the approach of rating systems doesn’t allow for this to be reflected because they focus on the impact of operations and not the business model and approach to CSR. You can (and will) therefore have companies who practice CSR the old way (ticking boxes, compliance etc) have a higher rating than companies who seek new ways to create product and service solutions that will benefit both society and the business itself. Too many ratings take a “tick the box” approach instead of looking at innovation, opportunity, mutual responsibility, societal benefit etc.

And it goes even deeper than that…

The drive towards a common standard has another unwanted impact – individual criteria might mean a company have excellent rankings on some but fail on others. Especially those areas where their major impacts are. Let’s say a company rates highly on governance, philanthropy, financial performance and the environment but their major impact is actually on human rights. And let’s say this company then operates in countries where child labor or forced labor are fine. The fact that they have great rating in all but one will most likely give them a good rating overall. But they fail in the area that matters most to their specific company as it intersects with society. Again, the standardization of ratings therefore fail to acknowledge the area of major responsibility and impact of the company.

That’s my biggest problem with ratings and rankings. They focus too much on the process and too little on the impact and value of the actual products and/or service delivered and those areas of major impact and responsibility. A single standard rating and ranking to compare all companies cannot capture these differences adequately. Rankings and ratings go for the lowest common denominator and fail to truly rate those who benefit society today and tomorrow and fail to acknowledge the differences in impact between different industries – or even different companies within an industry.

Frankly, I don’t rate ratings and rankings that much…


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The Stain...

Just a few short links and discussions of interesting pieces on CSR and Sustainability picked up on the web. No promises but I’ll try to have these bits and bobs often. Today we talk about Unilever vs Nestle, corn syrup vs table sugar – what’s good and what’s bad, CSR rankings getting Marc Gunther all worked up, cool video of anti-bottled water activist and cows watching television. Hope you enjoy.

1. Unilever Top Ranked Sustainability Company in Food and Beverage Industry

I wasn’t too surprised at Unilever being judged the most sustainable company in the food and beverage industry. Well, the most sustainable amongst its peers – large multinationals. What did surprise me was how close it was and the companies who followed Unilever. Unilever scored 64% in the benchmarking by Two Tomorrows. Not great if it was to be your school grade but pretty good for a sustainability score. I mean really, you can’t score 100% and still breathe…

Anyway. What did surprise me was Nestlé being ranked number two just a few percentage points behind Unilever – 59% vs 64%. Nestlé ranked above companies who are generally viewed as pretty good – Coca-Cola and Anheuser-Busch InBev for instance. I do think this is one example where communications and benchmarking passed each other like ships in the night. Nestlé has never been the most popular company in the world. Greenpeace just launched another campaign against Nestlé because of palm oil. And, of course, everyone is still on their back because of baby milk and coffee sourcing. I’ve worked with Nestlé a few times in the past and they aren’t a bad bunch – not perfect but not as bad as what people would like to believe. What they do struggle with is communicating what they do effectively. Their second place ranking is pretty good compared to the others on the list. Unfortunately for them the same can’t be said for their ranking on how the general public and activists in general perceive them to be.

Nestlé apart, go have a look at the list. It’s pretty interesting. The best part is the “key findings” section. Some really insightful observations. I hope those companies listed use this to make some changes in how they operate. In Nestlé’s case – how they communicate.

2. High Fructose Corn Syrup is Much Worse than Table Sugar

Looks like high fructose corn syrup is losing the battle with table sugar. A new study shows that rats eating HFCS instead of sugar and even fat will all turn into obese not-so-little rats. I won’t go into the scientific details as it bores even me to death but the short of it is… HFCS is bad for you and much worse than the alternative. Of course the guys living of HFCS will fight this tooth and nail to save their rather large behinds. Unfortunately this isn’t really an argument they can win. Firstly, the move to use HFCS and the obesity rates in the US have an uncanny similarity in time and increase in the USA. Secondly, this is a scientific study not paid for by one group or the other. I tend to find truly independent studies more believable than those paid for by industry groups or companies. That’s just me.

Thirdly, HFCS really tastes worse than good old table sugar. I hope this study can convince Coke and Pepsi that they really need to bring good old sugar back into their sodas. The stuff they sell here in the US is just not the same as those back home or in the UK. Or pretty much anywhere else in the world. Why? Because they use the syrup stuff instead of the real thing.

But don’t celebrate by eating a couple of spoons full of sugar. The medicine won’t go down easily just yet. HFCS is worse than table sugar. But that doesn’t mean table sugar is good for you. Let’s just say that HFCS is worse than the other crap being sold to us and our kids daily. The best would be to try to avoid as much of both HFCS and table sugar as you can. We take in too much of the stuff. The choice between HFCS and table sugar is like the choice between being bunched or kicked. I prefer neither.

3. The Story of Bottled Water

Now I’m not one to believe all the hype about how bad bottled water is for the environment. Yes, it’s pretty crap – especially the bottle but it’s not the most evil product in the world. And tap water isn’t as innocent as everyone would like us to believe – from either an impact or health perspective. However, this video by Annie Leonard is pretty cool in explaining the Story of Bottled Water from an activist perspective.

4. Lies, damn lies and CSR ranking

Of course that man Marc Gunther would write another thought-provoking piece just as I write about Unilever and Nestlé above. Bet on Marc to cut to the chase – the problem of ranking companies on their CSR practices. Very interesting piece where he tackles CRO for their list of the 100 Best Corporate Citizens. He questions the list and especially the methodology they use because companies generally seen leaders in CSR, such as Timberland, Google and GE, did not make the list but companies such as ExxonMobil, Hess and Southern Co did make the list. One example that really triggered Marc to question the relevancy of the CRO ranking is that Whole Foods, a long time leader in CSR, did not make the list but Yum! Brands does. To quote Marc, “Yum!’s contributions to corporate responsibility include KFC, Pizza Hut and Taco Bell.” Point taken…

Marc has some excellent arguments ranging from questionable ratings, preconceived beliefs influencing ranking, difficulty to assessment across different industries and the methodology used – best to go read it yourself. It’s pretty short and to the point.

I know many companies who aim for these rankings. And for some it makes perfect sense. However, I’ve never really looked at rankings to make a judgement on a company. And most activists don’t care about rankings either – except their own rankings targeting the “bad companies.” Rankings should not replace actual work and will never do the job of good solid stakeholder engagement. It’s like reading a movie review, the critic will give you their opinion but you will really not know if it is a good movie for you until you’ve seen it yourself. But Marc always gets a high-ranking in my books. Excellent and thought-provoking article.

5. Have You Seen the Latest Episode of Desperate Cows?

Got to love ecorazzi for finding some fun stuff. This one is about a Russian farmer providing his cows with a few televisions showing beautiful pictures of green grass and meadows. Okay… Maybe he can give them a few treadmills to get their bodies working. Hopefully they won’t need any steroids or hormones when they work out. And please refrain from showing them Food Inc.

Have fun and I’ll be back tomorrow. Or sometime close to that!

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