Navigating the ratings and rankings landscape A focus on the Dow Jones Sustainability Indexes
March 31, 2011
Agenda Introduction Context DJSI overview Reasons to respond Navigating the application Questions and answers
Presenters Peter Truesdale – Associate Director Peter is an Associate Director of Corporate Citizenship, he specializes in a number of aspects: reporting, report assurance, and external standards. He has worked with a range of global companies and professional firms including ANZ, Lafarge, Mars, and SABMiller.
Megan DeYoung – Director, United States Megan manages Corporate Citizenship’s US practice and works with clients to develop and implement citizenship strategies that are closely tied with the business and to communicate clients’ initiatives to internal and external stakeholders. She has worked with many global companies including Abbott, Hershey’s, Aramark, and Unilever.
Corporate Citizenship’s work is global Corporate Citizenship is a corporate responsibility management consulting company with offices in the US and UK Since 1997, we have advised leading, global corporations on how to enhance and align their citizenship and traditional business activities to create strategic business value We have a team of 30 and experience in 40 countries
“They have a real understanding of the issues in diverse countries around the world� - Unilever
We work across the spectrum of corporate responsibility and sustainability activity We have developed strategy for several FTSE 100, Fortune 500, and DJSI Super Sector leaders We have devised and implemented environmental data management systems in over 100 countries We helped businesses invest $2.2 billion in local communities in 2009 We are one of the most awarded and trusted reporting consultants worldwide, working on 135 reports over for more than a decade with FTSE 100 and S&P 500 companies We are global market leaders for assurance (135 reports verified) “They understood what was important to the way we operate, and where we could make the greatest difference� - Abbott
Reputation comes from a robust CR program and authentic communications
• Pursue ratings and rankings • Enable others to praise you
• Be yourself • Communicate, don’t just report • Create transparency
4. External recognition
3. Authentic communications
1. Internal buy-in
2. Robust CR program
• Engage managers and employees about value of corporate responsibility
• Focus on priority areas • Align with business objectives • Engage internal and external stakeholders
It is easy to become overwhelmed by ratings and rankings, but you can survive and prosper Trends
Enormous growth Consolidation of research firms Some coverage in mainstream media
Added value
Challenges
Variation in methodology (information sources, criteria) Varied performance by single company
Tips
Prioritization (ratings/rankings, programmatic improvement areas) Leverage of existing material
Third-party validation of corporate responsibility commitment Comparison with competitors Internal buy-in and support of corporate responsibility Insight into company’s strengths and weaknesses Leverage for increased transparency
Many ratings / labels focus on a subset of citizenship issues Economic
Dow Jones Sustainability Indexes are one of the few ratings that touches numerous aspects of citizenship across a company
Environment
Social
Dow Jones Sustainability Indexes combine finance with corporate responsibility Dow Jones launched the first set of global sustainability indexes in 1999 called Dow Jones Sustainability Indexes (DJSI) DJSI tracks financial performance of leading sustainability-driven companies worldwide DJSI focuses on how company recognizes risks and opportunities arising from sustainability issues in its business strategy Sustainability Asset Management (SAM), an investment group focused exclusively on sustainability investing, manages DJSI Top companies within industry group are included in DJSI
DJSI is four indexes that include top companies by sector
DJSI World
600 largest European companies
• Top 20% in each industry group selected • 45% market cap coverage in each market sector
DJSI Europe
• Top 20% in each industry group selected • Each industry group has 45% target market cap
DJSI North America
• Top 20% in each industry group selected • Each industry group has 45% target market cap
DJSI Asia/Pacific
600 largest North American* companies
600 largest Asia/Pacific** companies
SAM assessment
Dow Jones Total Global Stock Market Index
2,500 largest global companies
• Top 10% in each industry group selected • Each industry group has 20% target market cap
* Includes Canada and US. ** Includes companies from South Korea, Australia, New Zealand, Japan, Hong Kong, Taiwan, and Singapore.
Investors can opt to exclude certain sectors DJSI World
DJSI Europe
DJSI North America
DJSI Asia Pacific
Armaments & Firearms
X X X X
X X X X
X X X X
X X X X
Adult Entertainment
X
X
Alcohol Gambling Tobacco
Companies within a sector are evaluated for listing
Automobiles & Parts Auto Parts & Tires Automobiles Banks Banks BNK Basic Resources Forestry & Paper Aluminum Steel Mining Pipelines Alternative Energy Chemicals Chemicals Construction & Materials Building Materials & Fixtures Heavy Construction Financial Services Financial Services Food & Beverage Beverages Food Producers Health Care Healthcare Providers Medical Products Biotechnology Pharmaceuticals
Industrial Goods & Services Aerospace & Defense Containers & Packaging Diversified Industrials Electrical Components & Equipment Electronic Equipment Industrial Engineering Industrial Transportation Supersector Support Services • Food & Beverage Waste & Disposal Services Insurance Insurance Media Media Oil and Gas Oil & Gas Producers Oil Equipment & Services Pipelines AlternativeTwo Energy(2) Sectors Personal & Household Goods • Beverages Durable Household Products Furnishing • Food Producers Home Construction Nondurable Household Products Leisure Goods Personal Products Clothing, Accessories & Footwear Tobacco
Real Estate Real Estate Retail Food & Drug Retailers Specialized Consumer Service General Retailers Technology Software Computer Services & Internet Communication Technology Semiconductors Computer Hardware & Electronic Office Equipment Travel & Leisure Gambling Hotels, Restaurants, Bars, and Recreational Services Travel & Tourism Airlines Telecommunications Fixed Line Telecommunications Mobile Telecommunications Utilities Electricity Gas Distribution Water
Polling question #1 Did your company respond to the DJSI invitation in 2010? Yes No Did not receive an invitation
The DJSI selection process is competitive
2010 Selection Process 2,617 companies invited to submit applications
1,393 companies analyzed • 698 companies submitted questionnaire • 695 companies analyzed exclusively on publicly available information
318 companies qualified
There are external and internal benefits to even responding to DJSI Inclusion is competitive: what do companies gain?
1,393 companies analyzed
There are numerous internal gains whether companies are listed or not: Build corporate citizenship reporting Increase awareness and reputation of citizenship internally Identify areas for operational and strategy improvement
318 companies listed
DJSI is the equivalent of a sustainability Oscar! Most prestigious Most recognized Most respected benchmark of sustainability performance
Polling question #2 Is your company planning to respond to the DJSI invitation in 2011? Yes No Not anticipating an invitation
DJSI evaluates companies based on several sources of information 1. Survey
There are generic questions and sector specific questions Dozens of questions; can be as much as 100 Sector survey usually changes only slightly year-to-year, but occasionally is overhauled Topics related to economic, environment, and social Web-based application process
2. Company documentation
Inclusion of documents that support our responses and provide additional information and/or proof points of our activities; DJSI accepts documents which are: Publicly available (preferred) Confidential Documents may be policies, spreadsheets, snapshots of intranet web pages, and many other types of support
3. Media and stakeholder analysis
SAM conducts additional research to review media coverage and stakeholder views on certain topics are considered
What criteria does DJSI cover? DJSI focuses on how a company recognizes the risks and opportunities arising from sustainability issues in its business strategy DJSI looks at a company’s economic, environmental, and social impacts General criteria Economic Corporate governance Risk and crisis management Codes of conduct / compliance / anti-corruption and bribery
Environment Environmental reporting
Social Labor practice indicators Human capital development Talent attraction and retention Corporate citizenship / philanthropy Social reporting
What is the survey format?
Question
General question or industry specific question on company’s economic, environmental, and social impacts
Answer (table, check boxes)
Location to provide requested data or indicate the answer choice(s) that apply to your company
Qualitative response
Area to provide comments to explain answer and provide additional information
Relevant documents (attachments)
Option to add references to support or expand your response
What are the key considerations when responding? Investor survey DJSI is not interested in sustainability per se; they are interested in how the risks and opportunities arising from sustainability issues are recognized in business strategy DJSI lists companies with systems and processes that drive continuous performance improvement and lead to effective business long-term
Confidentiality
The entire submission is confidential Sensitive documents can be marked confidential
Relative scoring
Companies can improve their responses year-on-year without changing their position on an index because other companies improve as well DJSI rewards continuous performance
Expectations
If this is your first submission, have realistic expectations There is much to gain internally just by going through the process
There are three models for external review Quick review of response We identify questions with perceived easy opportunities to enhance a company’s response We can conduct this review at any point, but find it is often useful to perform this review at the beginning and when the draft is close to complete, but there is still time to make revisions before the submission deadline
Deep dives of response We conduct a review of priority sections of a company’s response, providing insight on what the section is asking and probing about structures and processes a company has that may apply to the section We provide ongoing support for owners of priority sections as the owners develop their response
Management of submission We develop the first draft of the submission based on last year’s submission and publicly available information We meet with internal stakeholders to discuss individual questions to enhance responses We revise responses based on internal meetings and new or updated documentation
The entire DJSI process runs over several months
Turn around time of the submission is about two months March
Where we are now
April
DJSI Survey released – April 7
May
June
DJSI Survey Due – June 2
September
DJSI Results Released – September 8
Give us a ring For further information please contact: Corporate Citizenship www.corporate-citizenship.com Peter Truesdale Associate Director
Megan De Young Director, United States
Corporate Citizenship 5th Floor, Holborn Gate 330 High Holborn London WC1V 7QG United Kingdom
Corporate Citizenship 241 Centre Street 4th Floor New York, NY 10013 United States
T: +44 (0)20 7861 1631 E: peter.truesdale@ corporate-citizenship.com
T: +1 212 226 3702 E: megan.deyoung@ corporate-citizenship.com