S&P Global’s CSA allows companies to report key sustainability metrics and benchmark their performance on a wide range of industry-specific governance/economic, environmental and social criteria. The resulting data form an important source to assess companies’ ESG performance used by hundreds of thousands of stakeholders including investors, customers, employees and key NGOs. While delivering useful insights and results, participating in the CSA can be a cumbersome process which needs to be managed adequately.
During Finch & Beak's latest ESG Acceleration Webinar, guest speakers from WDP, Storebrand and METRO shared what they are doing to engage key departments, collect the required impact data in time, and distill the most relevant insights and actions from the assessment. In this article, we summarize some of the webinar’s highlights and recommend three ESG acceleration tips to move towards a lean DJSI 2022 process.
DJSI Rookie WDP, the real estate company from Belgium explained during the webinar, it is essential to “start with the strategy, not with the reporting”. Having a clear sustainability strategy is essential to know where to focus, thereby having a strong foundation that enables the company to streamline its efforts in participation in ratings.
This is also key to create engagement as internal stakeholders will be more inclined to cooperate if they have a good understanding of the company’s sustainability strategy and efforts, and if they have a true conviction that the company is doing well and should be recognized in ratings for its ESG performance.
Once the strategy is in place, having a small, dedicated team to oversee the company’s participation in the CSA can be beneficial, as shared by financial services company Storebrand from Norway. This is essential to organize the successful completion of the rating, keep track of the progress, and resolve potential issues that may arise in the process.
As a complement to the core team, it is helpful to map the required data and identify topic owners (people who will contribute to provide answers for the relevant questions) and keep them engaged. Food wholesale company METRO for instance did so by creating an internal process onboarding Human Resources colleagues and discussing CSA reporting needs which helped to raise awareness and clarify questions.
Having official support and/or engagement from the Executive Committee is evidently a plus for getting started and creating engagement throughout the organization on the topic.
One question was addressed on how to deal with the dilemma of the increasing need for publicly available evidence by raters on the one hand and confidential (competition-sensitive) information on the other hand. In addressing this issue, it may help to make the difference between two types of questions.
Throughout the CSA, there are questions that either require public evidence or grant additional credit for relevant public evidence. For these questions, the dilemma of how much to disclose may appear. Being transparent, even when things are not perfect, shows authenticity towards stakeholders. This explains why sustainability leaders are making the choice to disclose certain information - also where results are lagging behind.
When public disclosure is not required, companies can choose the level of confidentiality for their answers through the application of the Use of Information & Confidentiality Policy, and how much of the company’s answers will be communicated to different stakeholders through S&P Global’s data platforms.
Another question arose concerning how to address the CSA while navigating through the difficulties caused by the Covid-19 crisis. S&P Global has in fact not made it easier with companies, especially after the Covid-19 crisis with the addition of an extensive number of new and updated questions for companies to respond to.
That being said, some of the questions introduced or revised by S&P Global in the methodology changes seek to assess companies’ resilience to such crises, such as the Emerging Risks question in the Risk & Crisis Management criterion. In this sense, the CSA should be looked at with a long-term perspective that can help companies build resilience.
The CSA was developed to identify and recognize sustainability leaders. This includes looking at companies’ performance during moments of success and crisis. In addition, questions that would downgrade a company’s performance during times of crisis, such as employee turnover, are only a minor part of the questionnaire. In fact, S&P Global is looking to take a more holistic view of the company, depending on what topics are most important for the company.
Revising the company’s most material topics and setting the right direction is essential to obtain sustainable results (and thereby perform well in ESG ratings). In fact, the CSA focuses on criteria that are both industry-specific and financially material, and applies different weights based on the importance of certain criterion to certain industries. For some industries, the rating can be up to 50% industry-specific.
Having a sufficiently forward-looking materiality assessment, and thereby knowing where to focus allows companies to anticipate broader ESG developments and, as such, be ready for methodology changes.
Ratings are about showcasing companies’ performance to stakeholders. In this regard, companies that do good but don't tell it will underleverage their ESG efforts. For instance, a company may have important positive effects on society but if this not measured, it's hard to make credible statements about it.
Tools like Impact Measurement & Valuation and Portfolio Sustainability Assessment can help to quantify companies environmental and social impact on society, and obtain data to back up their story telling.
Although the 2021 CSA results will only be announced in November, it is strongly recommended not to lift the peddle and to make the most of the time until the opening of the 2022 process. Tackling open issues in this time, such as the lack of data or disclosure, or open mid-long term actions, is essential to strengthen the companies ESG performance and showcase it in future assessments.
Moreover, starting early and keeping topic owners engaged can help in staying alert. One example came with the introduction of new questions in the Climate Strategy criterion in the 2021 CSA, which link to elements in the TCFD framework and the CDP Climate Change assessment and are applicable across all the industries. Companies that have been staying alert are most likely to score high on this criterion because preparing for such a level of changes take time.
Related to this, companies that start engaging in the process early on and closing open issues from the current assessment, are more likely to be one step ahead for next year.
Finch & Beak's CSA Acceleration Roadmap is aimed at keeping the momentum once you've handed in your questionnaire, and improve your company's ESG performance year-round. It results in a clear overview of actions to take in the short, mid, and long term, and is delivered in time for next year's budget rounds and to incorporate new disclosures in the Annual Report FY2021. Download the service description at the top of the page to learn more.
If you would like to get more information on how to improve your ESG performance and get in touch with Josée van der Hoek, Director at firstname.lastname@example.org or call +34 682 048 301 for a frank conversation and to hear about how Finch & Beak can support you in meeting your ambitions.