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March 13, 2003
New UK Index Rates Corporate Social Responsibility Performance
    by William Baue

UK-based Business in the Community launches its Corporate Responsibility Index, which benchmarks corporate social responsibility performance.


In London yesterday, the Corporate Responsibility Index was launched by Business in the Community (BITC), a U.K. consortium of 700 companies devoted to improving their positive impact on society. The index, which is the first of its kind, benchmarks the corporate social responsibility (CSR) performance of companies. This year's index includes 122 companies that volunteered to be assessed.

The index rates a company on its CSR strategies and how well it has integrated those strategies into its overall business operations. The index also rates company management practices that impact the community, environment, marketplace, and workplace.

"[W]e've got an index which is comprehensive, accessible in terms of what we measure, and. . . the benchmarking exercise will provide a service to investors as well," said David Varney, chair of BITC. Mr. Varney is also chair of mm02, an indexed telecommunications company.

"The companies that do corporate responsibility and do it well . . . perform better economically, have a better sense of innovation, and they're more in touch with the communities in which they live," said Mr. Varney.

Instead of publicly disclosing companies' individual scores, the index lists companies alphabetically within five groups, or quintiles. First quintile companies earned scores over 82 percent, and fifth quintile companies all scored under 52 percent. The rest fell somewhere in the middle. The average score was 67.87 percent, which falls into the third quintile.

Companies in the top quintile included BP (ticker: BP), Dow (DOW), Shell (RD), and Unilever (UN). Dow topped the chemical sector with a score of 90.14 percent. The index rated Dow highly on its corporate strategy and environmental performance. Areas of improvement for Dow included formal community-based objectives and targets for board members.

"We are proud of our accomplishments to date but realize we still have much to do to reach the Triple Bottom Line objectives of economic prosperity, environmental stewardship, and corporate social responsibility," said Scott Noesen, Dow's director of sustainable development.

Companies ranked in the fifth quintile, such as the construction and building materials company RMC (RMC.L) and media companies British Sky Broadcasting (BSY.L) and Reuters (RTR.L), expressed disappointment over their ratings. RMC noted that it reported on its international operations, as BITC's questionnaire requested, while other companies in its sector reported only on their UK operations, according to RMC group environmental director Noel Morrin.

Reuters received a "C" in management practice on the environment, which means that the company is beginning to measure progress.

"Reuters is an information company, and as such, CSR measures concerning the environment, health hazards, or global warming are not particularly relevant to us," said Yvonne Diaz, Reuters's director of public relations. "It's absolutely unfair to rank us in areas that are not really relevant to us at all."

Reuters received "A's" in management practice in the community, in the marketplace, and in the workplace, which means that the company is measuring and reporting progress in these areas. Ms. Diaz pointed out that Reuters has trained approximately 3,200 non-staff journalists in about 87 countries. Many of those countries do not have freedom of speech. Reuters also ranked highly for its generous charitable donations, such as its sponsorship of fellowship programs at Oxford and Cardison in the U.K., Stanford and Missouri in the U.S., and Bordeaux in France, Ms. Diaz added.

"For the survey to be taken more seriously, it really has to allow for some flexibility for companies to be measured on things that are relevant to our business," Ms. Diaz told SocialFunds.com.

BITC did allow companies the flexibility to choose seven of the eight social and environmental impact areas to report on. Reuters chose not to report on the impact area of global warming.

BITC expects the index to serve as a tool for companies to compare their performance to best practice, as well as a tool for investor analysis. Toward this end, BITC is developing links with the National Association of Pension Funds and the Association of British Insurers as well as investment fund managers and financial analysts to encourage the use of the index for benchmarking.

 

 
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