How We Evaluated Companies
This report evaluates the degree to which 613 large, publicly traded U.S. companies are meeting the expectations outlined in the Ceres Roadmap for Sustainability. The Roadmap is a leadership framework that sets forth expectations for a 21st century sustainable corporation. Six hundred companies were last evaluated in a 2012 baseline report by Ceres and Sustainalytics called The Road to 2020: Corporate Progress on The Ceres Roadmap for Sustainability. As the journey toward business sustainability progresses, we continue to look for new and innovative practices from companies and have adapted this assessment methodology to reflect the evolving expectations of stakeholders.
The indicator mapping charts how each of the Ceres Roadmap expectations map to the indicators used to measure progress. Download it here.
The data used for this assessment report was compiled and evaluated by analysts at Sustainalytics, an independent environmental, social and governance (ESG) research and analysis provider with substantial experience and expertise in evaluating the ESG performance of publicly-traded companies. Each of the companies included in this report is profiled in Sustainalytics’ Global Platform, where a broad range of indicators are used to assess ESG policies, management systems and performance outcomes. The Platform’s framework was adapted to align with the expectations detailed in the Roadmap using the Sustainalytics’ standard research process and methodological approach.
Universe of Coverage
The research universe for this report is comprised of U.S. companies1 that are listed on at least two of the three following indices: S&P 500, Russell 1000 and the MSCI Developed Markets Standard. There were 613 such companies as of October 15, 2013. All companies included are publicly traded corporations; limited partnership and liability companies have been excluded from the research universe. To see a full list of the companies evaluated, click here.
Sectors The 613 companies have been organized into 21 distinct sectors based on their unique business models and operations. The sub-industries in these sectors are broadly aligned with the Global Industry Classification System (GICS). The report examined eight of the sectors in greater detail: Financial Services, Food & Beverage, Footwear & Apparel, Oil & Gas Producers, Retail, Technology: Hardware, Technology: Software & Services and Utilities. To supplement the main report, an in depth review of each of these priority sectors is available online, allowing users to delve into sector-specific performance on the Roadmap expectations.
Indicators & Weights
This report is based on the findings of 58 core and sector-specific indicators. Fifty of these indicators were selected from a larger pool of indicators tracked in Sustainalytics’ Global Platform, three of which are new to the 2014 report. In addition, Ceres and Sustainalytics collaborated in 2012 to develop 8 additional indicators to enable a more comprehensive assessment of performance against the Roadmap expectations. These 58 indicators were mapped to align with 22 Roadmap expectations. It was not possible, however, to capture all of the data required to fully assess all The Ceres Roadmap expectations.
The indicator mapping charts how each of the Roadmap expectations map to the indicators used to measure progress and also notes which three indicators are new to the 2014 report, in addition to those Roadmap expectations that are not covered in this assessment. Of the 58 indicators tracked, 27 are core indicators assigned to all sectors, while 31 are sector-specific indicators assigned on the basis of sector impact and risk exposure. Given the consistent set of expectations assigned to all sectors in the areas of governance, stakeholder engagement and disclosure, weightings were uniformly assigned to these accountability chapters. Customized weightings were applied at the performance-level chapters for each sector. For example, supply chain operations are weighted more heavily for sectors with considerable risk exposure by virtue of their complex supply chains, such as Technology: Hardware and Footwear & Apparel.
Controversy Assessment Process
Sustainalytics has a rigorous bi-weekly controversy assessment process that distinguishes the level of incident severity based on variables such as recurrence, degree of impact and company response, among others. This screening was applied to the 613 companies included in this study as an extra layer of analysis. Specifically, those companies that were highlighted in the report for having demonstrated a leading or innovative practice were carefully scrutinized for any involvement in egregious or serious activities. This screen was used to avoid acknowledging companies for having strong performance on a given expectation if they were also involved in significant, related controversies. Controversy assessments, however, were not accounted for in the performance assessment weighting. The partners acknowledge that it is not uncommon for a company to have a strong environmental management framework or human rights policy in place, yet still be embroiled in environmental or human rights controversies due to poor implementation.
This report is not a benchmark and does not disclose individual scores, although scores were used to determine performance. Instead, this report is a tool for companies to assess their performance against sector peers and to learn from the sustainability initiatives that other sectors are adopting. It is not an absolute measure of performance but a relative one. If a company performs better than its peers with regard to a specific Roadmap expectation, it does not necessarily mean it has fully met that expectation. The report focuses on solutions and improvements companies can make to meet the Ceres Roadmap expectations by 2020.
To demonstrate relative company performance, Sustainalytics mapped its scoring methodology to Ceres’ tiered framework, which outlines the degree to which companies are making progress towards the Ceres Roadmap expectations:
- Tier 1: Setting the Pace
- Tier 2: Making Progress
- Tier 3: Getting on Track
- Tier 4: Starting Out
It is important to note that singling out a company’s performance on a given expectation does not imply it is an overall sustainability leader. Rather company examples are used to illustrate specific practices that others can choose to emulate, adapt, or innovate for implementation within their own businesses.
To produce this corporate progress report, the partners enhanced the breadth and depth of the indicator mapping to better capture the spirit of the Roadmap expectations and identify leading companies. In addition to adding 3 new indicators to Sustainalytics’ standard framework, we also expanded sector coverage for some indicators in the 2014 report.
Improvements in the Accountability chapters – which cover governance, stakeholder engagement and disclosure – included assessment adjustments to the following expectations:
- Governance: Board Oversight
- Governance: Management Accountability
- Governance: Executive Compensation
- Governance: Corporate Policies & Management Systems
- Disclosure: Disclosure in Financial Filings
- Disclosure: Verification & Assurance
Improvements in the Performance chapters – which cover operations, supply chain, transportation, products and services, and employees – included assessment adjustments to the following expectations:
- Operations: Facilities & Buildings
- Operations: Water Management
- Operations: Human Rights
- Supply Chain: Align Procurement Practices
Greater detail on the adjustments made to the assessment of specific expectation can be found in the body of the report. Please reference the indicator mapping to see which indicators are new to the 2014 report methodology and the list of sector covered per expectation.
Sustainalytics’ Standard Research Process
The analysis for this report was supported by a comprehensive set of data gathered through a variety of primary and secondary sources and specialized third-party data providers. With the exception of direct company feedback, the sources consulted were publicly available, or available through subscription. Company reporting constitutes the starting point for research, with key sources including sustainability reports, financial reporting documents and corporate websites.
A company spokesperson was contacted upon completion of each performance assessment report and sent a draft copy for verification. Any relevant feedback communicated by companies in this process has been processed and incorporated. To conduct a comprehensive search of any company involvement in controversies and incidents, Sustainalytics’ analysts used a proprietary media database that centrally houses over 24,000 news sources. An extensive list of NGO sources was also consulted. Other core sources included the Carbon Disclosure Project, UN Global Compact, Organization for Economic Co-operation and Development (OECD) Watch, and Business & Human Rights. Regional sources were consulted for labor relations, environmental, and health and safety data (e.g. OSHA, EPA, and NLRB in the U.S.). Further, each analyst also tracked sector specific sources tailored to the key ESG issues in their sectors.
Data Collection Frequency and Process
The data assessed in this report represents a snapshot of company ESG performance based on data housed in Sustainalytics’ Global Platform as of October 15, 2013. As such, company reporting corresponds to FY2012 or 2013, depending on fiscal year-end and reporting schedules between the research period of January to September 2013. Sustainalytics has updated relevant information derived from media and NGO sources on a bi-weekly basis, while other performance data points are updated on an annual basis.
Quality Control Process
Sustainalytics applied a rigorous quality assurance process, which includes an internal peer review of all profiles prior to company verification and tabulation of scores. The peer review process ensures overall consistency in accordance with Sustainalytics’ analyst guidelines and quality standards. A quality assurance team at Sustainalytics that oversees broader quality control initiatives was explicitly tasked with supporting this report by fact checking a number of scores across a broad sample of companies and indicators.
1. Note that 25 companies listed on the S&P 500 and/or the Russell 1000, while traded on a U.S. exchange, are headquartered outside the U.S.