In the competitive atmosphere of sustainability ratings and rankings, it is easy to get lost in the race to earn the highest scores and be an industry leader.
While the Dow Jones Sustainability Index (DJSI) provides scores and industry rankings, the actual process of responding can provide tremendous benefits to companies — even for those that do not get listed on one of DJSI’s leadership indices. The DJSI questionnaire is a dynamic and effective tool for companies to manage sustainability and thus financial performance.
BrownFlynn has identified six compelling reasons to respond to the DJSI questionnaire.
1. Measure what matters
DJSI’s comprehensive questionnaire integrates economic, governance, social and environmental topics that drive long-term financial performance.
RobecoSAM AG, the organization that develops and analyzes the Corporate Sustainability Assessment (DJSI questionnaire), identifies questions and criteria that are materially relevant to a variety of companies, and provide the link between a company’s sustainability performance and its ability to succeed over the long term. RobecoSAM evaluates criteria annually to verify the link to financial performance.
Because certain sustainability practices become embedded into core business practices and no longer drive financial performance, questions evolve to better anticipate financial performance. For example, the 2015 questionnaire removed questions on corporate governance policy and audit conflict of interest and added or updated questions on executive compensation and management ownership requirements.
2. Use industry-specific metrics
Each industry sector receives a questionnaire focused on the sustainability topics most relevant to the success of companies within that industry. With more than 50 percent of the criteria focused on industry-specific risks and opportunities that contribute to a company’s long-term success, respondents have a roadmap for where to improve or drive their sustainability efforts going forward.
3. Promote strategic conversations
The DJSI questionnaire promotes internal collaboration. The process starts conversations, and therefore networking across silos that otherwise may not have occurred. Respondents must seek cross-functional and cross-divisional input to effectively complete the questionnaire.
Rather than viewing this simply as a data-gathering exercise, sustainability practitioners can leverage the questionnaire as an opportunity to exchange ideas across business units and departments, potentially sparking innovation through this sustainability management process.
“Responding to the DJSI and other stakeholder requests requires efficient processes and rigorous tracking of data and information,” said Art Gibson, vice president of environment, health and safety and sustainability at Baxter International Inc. “The data collection and review process we engage in as part of DJSI's annual evaluation provide an opportunity to engage leaders and experts across our company, drive change and foster improved performance in our sustainability program.” Baxter is one of 15 companies to have been included in the DJSI each year since the launch of the index.
4. Receive a performance scorecard
All companies that respond to the DJSI questionnaire receive a Company Benchmarking Scorecard. This scorecard covers all criteria assessed and shows the company's sustainability performance compared to the industry average and the industry's best-in-class company on a global basis. Many companies use it as a valuable internal management tool, determining improvement areas in their sustainability initiatives.
5. Strive for continuous improvement
Because DJSI takes a best-in-class approach, the bar for sustainability performance rises each year; as a result, participating companies are encouraged to improve performance. The questionnaire evolves annually asking forward-looking questions to identify leading practices and thereby leading companies.
6. Earn access to capital
Shares of companies listed on one or more Dow Jones Sustainability Indices are recommended for sustainability investing, opening the door to the rapidly growing socially responsible investment (SRI) market. US SIF (The Forum for Sustainable and Responsible Investment)estimates that SRI/ESG-oriented investment assets accounted for $6.57 trillion (nearly 18 percent) of professionally managed assets in the United States in 2014, an astonishing 76 percent increase over 2012 levels.
Christopher Greenwald, head of sustainability investing research at RobecoSAM, said, “We see the DJSI as a primary means to help companies better understand the business value of their sustainability initiatives. Through greater awareness of the link between sustainability performance and business success, we believe that the DJSI has and will continue to play an important role in directing capital and increasing investments in sustainability by companies and investors.”
Responding to the DJSI questionnaire is no small task. Completing it can require the time and effort of many people. While there is not a one-size-fits-all approach to DJSI responses, BrownFlynn recommends considering the following questions before responding. If you can answer "yes" to these questions, you will place your company on the trajectory towards success.
Are you prepared to spend the necessary time to complete the questionnaire?
Start early and plan ahead, prioritizing sections on which to focus your efforts. Consider the highest weighted areas of the scoring methodology. Use last year’s scorecard and identify the obvious areas of opportunity, quick wins and priorities for your organization and determine who in your company can help.
Are you prepared to convey the business case for DJSI internally?
It is important to have executive buy-in about the significance of DJSI and how it contributes to your overall corporate strategy. Once the proper executives understand its importance, involving the appropriate parties and writing an effective DJSI response becomes much easier.
David Tulauskas, director of sustainability at General Motors Company, found that “helping people understand the value created by responding to DJSI generated the internal support we needed. But, don’t assume once is enough. By explaining the business case for DJSI every year, we’ve seen engagement and support from key subject matter experts increase year over year.”
Have you considered how to minimize the data collection effort?
Reporting fatigue is a concern for companies publishing sustainability reports and responding to DJSI, CDP and other ratings and rankings questionnaires.
Marcos Mancini, director of sustainable banking at Grupo Financiero Banorte (Spanish) (the third largest financial institution in Mexico, listed on DJSI Emerging Markets in 2014), suggests trying to minimize the data collection effort for your colleagues by combining content gathering for DJSI with other reporting data needs, if possible. “Once you’ve managed to understand the intricacies of the DJSI metrics, it’s more of a human process than a technical process,” he said. “People have to go a long way to get information, so make it as easy as possible for them.”
A sustainability data management system, such as CSRware, also can help with collection of information across reporting platforms.
Do you have the context you need to translate data into an effective DJSI response?
Schedule meetings with key subject matter experts to discuss the DJSI questions, identify gaps and data sources and create the necessary context to respond. Think about how the information you’re gathering pertains to the question — and how the question is trying to assess your company’s future success, and the connections between sustainability and traditional corporate governance.
By addressing each of these questions, your company will be better prepared to gain value from the DJSI process. This leads to improved management of sustainability organizationally, enabling your company to make a more positive impact now and well into the future.
Jessica Urdangarin and Brittany VanderBeek