Building Your Scorecard or Raising Your Ranking?
Whenever I dive into the landscape of reporting standards, guidelines, ratings, rankings, indices…. I get dizzy very quickly. The ecosystem of companies measuring and reporting on how they are a force for good in society is alive and well. The nuts and bolts of how companies accomplish reporting can be a major operational challenge, not to mention the resource investment. How will companies’ tough choices on where to focus their efforts change over the years? A counter-balance to ratings and rankings is improvements to how a company reports and measures itself, such as through a Strategic Scorecard.
Rankings and awards are loved, but for how long?
CECP did a Pulse survey[1] in November 2017 and found that the majority of companies feel ratings and rankings add value to the field overall. Some reasons given include that they inspire competitive spirit, they garner attention from senior colleagues, and “tell us how we’re doing.” As a current state of affairs, we can’t disagree with these reasons.
When we peer into our corporate societal engagement measurement and reporting looking glass, there is a challenge our industry will face if the reliance on ratings and ranking (R&R) continues to grow and expand as *the* measure of good or bad work. There are also a variety of R&Rs out there including those that require the company to submit information versus those which are determined by publicly available information.
Not every company can achieve
An obvious issue with rankings and indices specifically (not ratings) is that there have to be winners and losers. Senior executives that rely on a ranking as their measure of whether the company is doing a good job may in the future find themselves doing an excellent job creating value for the society and business, but end up outpaced on the ranking by other companies. They then will face critiques which would be unwarranted. Yet, how can we blame senior executives who aren’t engaged in the details of the work that are used to hearing solely about a ranking? In this case, senior executives more focused on the company’s measures, such as through a Strategic Scorecard, could counter-balance this viewpoint.
Hearing the answer without understanding the question
An issue with ratings in particular is that they assign a number or score which anyone can interpret whether or not they understand how it was determined. Depending on the person using that rating, they will have different levels of knowledge on how that rating was determined – both the sources and the calculation. Some ratings are fairly opaque while others are more transparent, and there are tools out there to help people understand them better, such as the Global Initiative for Sustainability Ratings.
The long-term solution? Double-down on the story you can control
Companies can anticipate their future today by trying to continuously improve the metrics-driven components of their reporting. Getting more stakeholders to use the companies’ reports instead of what are essentially proxy metrics produced by ratings/rankings will pay off. The company increasingly controls their story. What a company presents publicly online, in the annual report, in the sustainability report or internally in a Strategic Scorecard is a counter-balance to R&Rs. We aren’t naive that this is not necessarily simple – it takes resources to collect information and time to socialize new reporting methods with senior execs. Complex? Yes. Impossible? We don’t think so.
So many companies are already doing both: standing strong in rankings/ratings while producing solid, metrics-driven internal and external reporting. We salute your work to invest in strong reporting and balance the demands of multiple stakeholders!
This is the second in a series of four blog posts sharing CECP’s approach to measurement, focused on the “S” in Environmental, Social, and Governance (ESG) world. Here’s the first. Next up, our What Counts: S in ESG work. We are moving towards a shared definition for Total Social Investment – for now, focused on “external social.” Stay tuned! Please reach out to share your point of view!
[1] CECP conducts Pulse surveys on timely issues with its coalition of companies. The November 2017 pulse survey asked “Please share your current stance on ratings/rankings that assess or score companies on environmental, social, and governance (ESG) issues.”