Ranking the Titans: Dow Jones Sustainability Indexes

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Corporate reporting and assessment frameworks are powerful tools to help investors and consumers choose their investments and products wisely. In the wake of the World Resources Forum 2011, corporate sustainability assessments are an important tool to help consumers and investors drive change towards a less-resource-intensive world. One of the oldest, the Dow Jones Sustainability Indexes (DJSI) started in 1999 as a way to list the top 10 percent of sustainable global companies for investors.  SAM,  a boutique sustainable investing fund, invites the largest 2500 companies each year to submit sustainability data for DSJI scoring; companies are added and dropped from the list based on their performance.  The process is third-party reviewed by Deloitte Consulting.

Two companies that attended the World Resources Forum 2011 are ranked on the DJSI; Kraft Foods and Syngenta. Listing on the DSJI is not only for internal corporate social responsibility initiatives, however. Companies such as Kraft Foods view sustainability both as a short-term competitive advantage and as a way to ensure the company’s long-term value and success, as Philip Hodges, Senior VP of Supply Chain, Kraft Foods Europe in a Student Reporter interview. More and more investors and consumers are also coming in line with this view. In fact, studies show that investors view sustainable corporations as having long-term shareholder value  and better financial performance.

A 2008 assessment by UN Environmental Programme Finance Initative (UNEP-FI) found that SAM’s process for the DSJI is “among the most rigorous.” There are issues however, with its methodology and practices. Another WRF2011 participant, Hewlett-Packard, was dropped from the DSJI this year without clear explanation.

Other surprising deletions from the DSJI this year were Coca-cola, Hewlett-Packard, FedEx, Waste Management Inc., among others.  These companies have invested heavily in sustainability programs, or at least sustainability communications. This shows that socially-aware consumers and investors now need to follow complex and changing story-lines within corporate sustainability. DJSI, however, does not release the reasons why companies are removed from the list, citing company privacy concerns.  More obvious recent deletions were the Tokyo Electric Power Company after the nuclear emergencies post-earthquake and tsunami and BP post-oil spill. But what about the others?

While one can understand the need for privacy protection, the withholding of information leaves the public to speculation. James Farrar of ZDNet.com commented that HP’s 2010 Sustainability Report was a “mixed bag.”  Farrar also speculated on the reasons Microsoft was not included and noted that Microsoft has been inconsistently reporting on sustainability.  Coca-cola, who has several sustainability and social responsibility initiatives, said via Tweet, “We were disappointed to learn that we were not included, but pleased to see scores reflect our investments in packaging, water-related risks & raw material sourcing.” Meanwhile, some of the world’s recent environmental criminals like Halliburton, Nalco (maker of Corexit) and BP have all been on the DJSI (BP was removed after the BP oil spill in April 2010).  In response, blogger reactions ranged from incredulous to just plain outraged: TheStreet.com editorial staff simply called it “dumb.” Not being clear about why a company is delisted from the Index is a communications and transparency issue that could hurt more marginal companies by lumping them in with flagrant abusers.

Sustainability reporting and assessment is still a nascent and growing field. Sustainability assessment is by no means a perfect process; it is still a relatively new field that is continually refining itself.  Submitting information to assessments is a costly process for companies, meaning that smaller companies (and large companies cutting back) have a barrier to participation. Other broader corporate social responsibility assessment groups are also examining transparency and enforcement issues as well as corporate privacy concerns like Global Footprint Network (which presented  20/09 at WRF), UN Global Compact, and the widely used Global Reporting 

As the field becomes more established, best practices will continue to emerge.  A Rate the Raters is currently underway to help consumers, investors and companies choose credible rating systems and to help grow the field. Academics, companies and nonprofits are all working towards making this sector better and more efficient: to read about a recent conference on sustainability metrics, head here.  We can hope that this trend will continue at the World Resources Forum 2012.Initiative. Other specific investor rankings include the Carbon Disclosure Leadership Index and Vigeo, among others.

Leading Companies by Sector, DSJI and SAM, 08-09-2011

2 thoughts on “Ranking the Titans: Dow Jones Sustainability Indexes

  1. With you regarding the issue of transparency. I can’t even seem to find the full list of companies included in the index. Do you know where I could get this? (I’m a PhD student in business and sustainability is my area of research).
    Thanks and regards
    Dwarka

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