Companies are being pressured by investors to participate in multiple ESG ratings. Having their own set of sustainability topics and methodologies, it can quickly become a daunting task to identify which one is the most relevant for your organization to participate in.

The reach & richness of the ESG Benchmarks

As part of the session introduction, Finch & Beak's Nikkie Vinke explained how we mapped out the most prominent sustainability ratings, based on their richness and reach. The richness is defined by what you can learn from participating in an assessment, both by the level of detail of the questionnaire, as well as the feedback on the answers provided. The reach is defined by the reputation of the benchmark and how well-known it is among the investor community.

A 2019 study by The Sustainability Institute, found that the CSA is the most recognized ESG benchmark by sustainability experts . Being asked which ESG ratings they consider to be of highest quality and which of the most use to companies, the CSA also ranked first in both.

The relevance of the CSA as an ESG benchmark

The CSA is a reliable benchmark for investors, as it is well-known (reach) and provides participating companies with detailed insight their own performance, best practices, and benchmarking to industry peers (richness). Moreover, S&P Global has raised transparency on the results of the CSA on company-level to all interested stakeholders, not just its clients.

The CSA has also aligned its questionnaire with other well-known frameworks and benchmarks. This greatly facilitates the reporting process and increases comparability between companies. The CSA is especially well-aligned with the GRI standards, CDP, the TCFD Framework, and the EU Taxonomy, and uses methodologies from specialized sources, such as the GHG Protocol.

"DJSI World Index inclusion has been found to have a positive impact of visibility among analysts and a larger share of long-term shareholders". S&P Global (2019) Sustainability Indices: Do Investors Actually Care?

As part of a dedicated Q&A section in the session, the webinar participants were asked about their most important objective for participating in the CSA. 90% of respondents said that they aim to improve their company’s ESG profile. Benchmarking companies’ performance against their peers was named second (60%) and becoming eligible for green investments/loans/bonds was named the third most important goal (40%).

What you should know about the CSA

The Corporate Sustainability Assessment (CSA) by S&P Global is an annual assessment of companies’ sustainability performance. Companies are invited to participate in the assessment by filling out an industry-specific questionnaire on Environmental, Social, and Governance (ESG) topics. Companies that choose not to participate will still be scored based on publicly available data. The resulting ESG scores are used to benchmark companies’ performance across questions to their industry peers.

In 2022, over 11,000 publicly traded companies have been invited to participate in the CSA. Of these, approximately 3,600 are in Group A, meaning they are eligible for inclusion in the Dow Jones Sustainability Indices (DJSI). Another 3,400 make up Group B, which are eligible for inclusion in the S&P ESG indices. The remaining 6,000 companies are included in Groups C and D. The data from all four groups is provided to the investment community, through which asset managers, banks, and other investors make sustainability-informed decisions.

A major change effectuated in this year’s assessment is the publication of the results, as is elaborated on in this article.

Challenges in completing the CSA

In a second Q&A part of the session, the question to participants was: what are your organization’s biggest challenges to participating in the CSA? From the available answering options, most respondents indicated that collecting data and supporting documents is their biggest challenge.

The second biggest challenge faced by today’s webinar participants was obtaining the necessary resources or having insufficient capacity to fill out the questionnaire and changing policies was regarded as the third largest challenge.

A strategic approach to the CSA

What we’ve learned from supporting companies in improving their ESG score on the CSA over the past fifteen years, is that one of the most important aspects is to focus on your sustainability program, rather than on the actual reporting to benchmarks. This includes setting a clear direction by creating a vision or ‘spot on the horizon’, as well as identifying the sustainability topics most material to your company. The latter includes engaging with key stakeholders to know their expectations of your company. After setting the direction, determining the speed of implementation will depend on the resources, processes, and programs that are launched to improve sustainability performance.

“Start with strategy, not with reporting.” – Nikkie Vinke, Finch & Beak

Practical tips & tricks for successful CSA participation

Nikkie emphasized that participating in any ESG benchmark requires a mindset of continuous improvement and reiterated that improving sustainability performance needs to become part of the daily work of key employees and become business as usual, in order to record and report progress and elaborated on the four-step process that Finch & Beak advises that companies follow throughout the year.

When completing the assessment, limited capacity and resources may force you to prioritize working on some instead of all topics. In this case, the starting point should be to work on topics that are of strategic importance to your company (material topics) and topics for which data is already internally available, which are the quick wins.

Thereafter, the next focus should be the topics that have the highest improvement potential in terms of weight and points to be gained. This will provide leverage to internally argue for spending resources on a larger project, such as conducting human rights assessments in the supply chain, if a clear improvement potential can be gained. This heatmap of topics also provides you with a roadmap of the items that need to be worked on in the mid-and long-term.

Our downloadable checklist at the top of this article with practical tips & tricks for your organization’s CSA participation provides helpful step-by-step guidance as you prepare for and complete the assessment.

Is your organization ready for the upcoming CSA season?

If you are looking to elevate your company’s sustainability strategy, accelerate on meeting targets and performance as well as seeing your efforts reflected in ESG benchmarks, contact Johana Schlotter, at johana@finchandbeak.com or call +31 6 28 02 18 80.

^{Photo by Jonathan Chng on Unsplash}