Take-Aways from S&P Global’s Sustainability Yearbook 2023

Introduction of new exclusion & controversy screening
Take-Aways from S&P Global’s Sustainability Yearbook 2023
Publ. date 20 Feb 2023
Early February, S&P Global published its annual Sustainability Yearbook for 2023 - highlighting the sustainability leaders which have emerged from the 2022 Corporate Sustainability Assessment (CSA). This article gives a brief summary of the takeaways from the Yearbook, with a deeper view on updates to the methodology and the main driving forces for selected key industries.

The S&P Global Sustainability Yearbook is a worldwide reference published annually at the beginning of the new year, containing an overview of the results of the organization’s annual CSA of the previous calendar year and highlighting leading companies and driving forces for sustainability for each analyzed industry.

Once again, this year a new record number of organizations have participated in the CSA, and a total of 7,822 assessed companies were considered for the Sustainability Yearbook - 268 more compared to 2022. Among them, only 710 organizations with top ESG scores made into the Yearbook.

From those organizations, 313 have positively distinguished themselves. More precisely, 67 of them achieved an S&P Global ESG Score within 1% of the industry’s top-performing company’s score (Gold Class distinction), 86 scored within top 5% (Silver Class), 112 scored within 10% (Bronze Class) and the remaining companies were included as Yearbook Members, which are companies within the top 15% of their industry and an S&P Global ESG score within 30% of their industry’s top performing company.

In addition, 48 organizations were recognized as Industry Mover, which are companies within the top 15% of each industry that participated in the CSA in 2021, and in 2022 achieved an improvement in their S&P Global ESG Score of at least five percent and the strongest improvement in their industry.

Changes in 2023: trends move out, new methodology moves in

As of 2023, the new S&P Global Sustainability Yearbook focuses on being a reference point for the top-performing companies in their industries, while the S&P Global’s commentary on sustainability trends will be published in a new, separate publication: the S&P Global Sustainability Quarterly.

The novelty of the Sustainability Yearbook 2023 is especially in the methodology used. More precisely, it contains some key improvements such as updated benchmarks to accurately distinguish best-performing companies – such as the introduction of top 1%, 5% and 10% top score - and the introduction of the exclusion and controversy screening process.

Exclusion screening approach: tobacco, weapons and coal no longer in eligible universe

Compared to Yearbook 2022, companies with specific business activities have been excluded from the eligible universe – in alignment with the approach taken to select companies into S&P Global ESG Indices. In particular, 234 companies were not considered for the Yearbook distinctions as a result of exclusion screening, for example for their significant involvement and/or ownership of those activities concerning the production and the distribution of tobacco, creation and commercialization of weapons, or coal extraction. This resulted in no companies selected from the tobacco, and coal & consumable fuel industries.

Controversy screening approach: a prerequisite for Yearbook inclusion

In addition to the exclusion screening, the controversy screening approach has been used this year. In fact, regardless of the score derived from the CSA, a screening activity based on S&P Global’s Media and Stakeholder Analysis (MSA) is applied as a prerequisite for the inclusion in the Sustainability Yearbook regardless of the company’s CSA-score.

This type of analysis is based on an examination of media coverage and publicly available stakeholder information provided by RepRisk ESG Business Intelligence, and it evaluates a company’s response to critical sustainability issues that may arise during the year. In fact, even if an organization is included in the Yearbook, its designation level may be adjusted or revoke if a company’s S&P Global ESG Score changes based on corporate controversies as a result of the Media and Stakeholder Analysis process.

Trends in key industries: chemicals, insurance, and machinery & electrical equipment

Taking a closer look at the results of the 61 industries, the following key take-aways can be distilled looking at a selection of three of the most impactful ones.

Chemicals: This interlinked sector plays an important role in sustainability acceleration thanks to the spillover effects on the production and manufacturing processes. Organizations operating in this sector must conduct risk assessments about hazardous substances in their products and use those that can contribute to a more effective circular economy. This requires companies to invest in innovation, product stewardship, customer relationship management, and health and safety. According to CSA results, the number of companies in the Yearbook for this sector increased from 23 in 2022 to 26 in 2023, led by PTT Global Chemical in the top 1%, LANXESS within the top 5% and the top 10% being completed by Arkema, Ecolab, Linde and Mitsubishi Chemical Group.

Insurance: As one of the sectors most directly exposed to losses from climate change events, this sector has demonstrated leadership in integrating sustainability considerations into its core business. Most of the companies in this sector start considering long-term sustainability strategy for the development of new insurance solutions, as well as new strategy for the risk assessment, for instance for climate change risk and cybersecurity risk. According to CSA results, there were no changes in the number of companies in the Yearbook from the last year and leading companies are AXA and Assicurazioni Generali both in the top 1%.

Machinery and Electrical Equipment: Innovation through product development of industrial equipment is an important factor for the competitiveness of this sector. While some important improvements with respect to energy efficiency, water consumption and emission reductions have already been set as goals both in operations and in product design, manufacturers are now shifting from being “equipment suppliers” to “solution provider”. This includes delivering integrated systems with software to optimize the use of an asset – for example performance monitoring and predictive solutions to mitigate downtime. According to the Yearbook 2023, the number of the companies that made into the Yearbook are 22, slightly more than 2022, with only CNH Industrial in the top 1%, and GEA Group being recognized as Industry Mover.

Eager to be in the Sustainability Yearbook 2024?

Eligible companies looking to be included or improve their position in the Yearbook next year (or the Dow Jones Sustainability Index, which is selected based on the same data) are advised to start preparing for the release of the new S&P Global Company Sustainability Assessment.

If you are looking for personal guidance in the assessment process, please contact Johana Schlotter at johana@finchandbeak.com or call +31 6 28 02 18 80 to discuss how Finch & Beak can help you improve your ESG performance.

Photo by Kristopher Roller on Unsplash

About Gabriele Vicario

Positive thinker with passion and involvement in sustainability and climate change, trying to find suitable solutions for everyday business activities. | gabriele@finchandbeak.com

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