While the assessment portal will open its doors on Tuesday 5 April for companies eligible for inclusion in the Dow Jones Sustainability Indices (DJSI), S&P Global has already announced the forthcoming methodology changes for the 2022 CSA during a webcast on 15 March. Finch & Beak has summarized the announced changes in this article. Please note that further changes might still be made until the questionnaire is released.
Every year, S&P Global raises the bar of its CSA and applies methodology changes to continue to be able to identify the world's leading ESG companies. These changes are motivated by different factors, including evolving trends and emerging material issues, company engagement, alignment with thought leaders, and the most important sustainability reporting standards such as GRI, CDP, and the TCFD. And finally, the investor audience which makes use of companies’ ESG scores also provides input for which elements they would like to see assessed in the CSA.
Overall, this year’s changes reflect a general expansion of the criteria applicability to a larger number of industries. Most changes have been implemented in the Environmental dimension, with two new criteria added and updates across several existing criteria, while only minor changes are observed for the Governance & Economic and Social dimensions. Moreover, an important re-distribution of criteria across the Environmental, Social, and Governance & Economic dimensions can be noted with 9 criteria being moved from one dimension to another.
Business Ethics (previously called Codes of Business Conduct)
S&P Global has renamed and updated this criterion, adding one new question to further encourage businesses to align their strategies and operations with 10 principles of sustainability and the Sustainable Development Goals through their commitment to the United Nations Global Compact (UNGC). It is now verified whether companies have taken this important public stand, regardless of their size. This change is applicable across all industries, except Tobacco.
Environmental Policy & Management Systems
This criterion has been updated to capture essential elements of Environmental Management Systems (EMS), including oversight by the board of directors or executive management and related public commitments to target setting and continuous improvement of environmental performance. The changes apply to all industries, except Banks, Diversified Financial Services and Capital Markets, and Insurance.
Some important changes apply to existing questions on Scope 2 emissions, energy consumption, and waste disposal. While reporting of both market-based and location-based Scope 2 emissions is now allowed, simplification of energy consumption data breakdown has been implemented as well. In addition, changes in metrics have been implemented for waste data where the focus is now on total waste recycled and total waste disposed of, disaggregated by specific disposal methods. These changes apply to all industries. Several smaller, industry-specific changes have also been implemented for Hazardous Waste, Ash & Gypsum Waste, and Mineral Waste.
Two major updates have been implemented in the Climate Strategy criterion. The new question Net-Zero Commitments and updated question TCFD Disclosure now further align with the Science-Based Targets Initiative (SBTi) Corporate Net-Zero Standard and the TCFD framework. Companies are asked about the timeline, emission reduction targets linked to their net-zero commitment, whether the targets are validated by the SBTi, and if there are plans to neutralize any remaining emissions. When it comes to TCFD Disclosure, companies are now expected to provide further detail upon the integration of the framework in its management of climate-related risks and opportunities.
The main change for the Biodiversity criterion compared to last year is the significant expansion of its applicability to new industries. This results from the rapidly increasing interest of investors and financial institutions to better understand the associated risks of corporates’ dependency and impact on biodiversity. Beyond the expansion to additional industries, the change per question narrows down to providing a greater level of guidance when formulating the question to help companies get a better understanding of what is expected from them.
This new criterion aims to capture the actions financial institutions have taken to manage the impact of their lending on climate change. S&P Global now looks at their net-zero and emission reduction targets, scope 3 financed emissions, and policies covering coal and unconventional oil & gas financing, investment, and insurance underwriting activities. These changes are applicable to the three financial industries Banks, Diversified Financial Services and Capital Markets, and Insurance.
Occupational Health & Safety
This criterion has been reviewed to reflect and further align with the expectations of the most relevant OHS standards (ILO and ISO 45001). The main changes are that companies across all industries are now assessed on the comprehensiveness of their approach towards health and safety, including OH&S Policy and Programs.
Talent Attraction & Retention
This criterion now captures Employee Support Programs which was an aspect previously captured by the Occupational Health & Safety criterion. Companies across all industries are now required to provide public information on aspects of employee benefits, such as working from home, flexible working arrangements, parental leave, and breastfeeding facilities, among others.
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