March 05, 2004
Welcome to the Jungle: CSR Questionnaire Incompatibility Hampers Applicability
by William Baue
A Nordic Partnership report finds wide variance in questions posed in corporate social
responsibility surveys, calling into question their comparability and applicability.
The primary source of corporate social responsibility (CSR) information, a lifeblood of socially
responsible investing (SRI), is the companies themselves. CSR data is gathered by SRI research
firms via questionnaires and surveys. These data collecting tools thus play an integral role in
SRI, helping form the foundation for assessment of investment-worthy companies based on their
social and environmental performance.
However, a report released late last month by
the Nordic Partnership, a
collaboration of Nordic corporations and the World Wide Fund for Nature (WWF) that promotes sustainability, finds a high degree of
variability in questions posed on these surveys. The report, entitled
Investment Stewardship: Actors and Methods for Socially and Environmentally Responsible
Investments, suggests that this variability makes it hard to compare the results of
questionnaires, and hence of SRI evaluations.
"This study compared questionnaires used to
evaluate companies' social and environmental performance and found that whereas the subject matters
were similar, the actual questions differed substantially," writes report author Emma Sjöström, a
PhD candidate at the Stockholm School of
Economics. "This means that even though there is consensus on what areas are most crucial, the
questions for investigating them vary widely."
Variance in questions leads to variance in
answers, which in turn makes apples-to-apples comparisons of performance more difficult.
"This poses a comparability issue, since the results will likely differ between
evaluators, and products based on different questionnaires are not comparable, even if the same
company is evaluated," states Ms. Sjöström in the report (see related SocialFunds.com article for
more on this phenomenon.)
Ms. Sjöström examined 13 questionnaires on environmental and
social policy and practice sent to Nordea (ticker: NDIA.CO), Novo Nordisk (NVO), and Danisco
number of questions per survey ranged from seven to eighty-eight, "which is one of the reasons for
the inconsistencies," according to the report.
The report did find significant overlap in
the questions. Nine of the questions on environmental issues were the same in four or more of the
questionnaires, and five of the questions on social issues showed up in four or more of the
questionnaires. There were also unique issues: for example, two of the questionnaires posed
questions on private security and one of them asked about marketing ethics.
number of questionnaires companies are expected to answer can create another problem known as
"survey fatigue," whereby companies' "enthusiasm is sometimes in inverse relation to the amount of
questionnaires they are faced with." Companies that cannot respond to all questionnaires due to
resource constraints risk receiving unfavorable evaluations for the "lack of transparency," even if
their social and environmental performance is exemplary, according to the report.
companies are however not fatigued by the questionnaires, but rather perceive them as a help in
understanding how they might approach the sustainability matter in their internal work," stated the
Another confounding aspect of the various surveys is the presence of open-ended
questions, which allow SRI research firms to differentiate their assessments with individualized
interpretations. While most of the questions on surveys are "closed," with fixed alternatives such
as "yes" or "no" or multiple choice, open-ended questions add to the degree of subjectivity, and
Besides comparability problems, the report identifies transparency
"Today, there is no independent reviewer of data submitted by companies," reads
the report. "If evaluators do not verify the data, investors may base decisions on false grounds."
The transparency and comparability problems add up to an applicability problem, according
to the report.
"[I]f results are hard to compare and the underlying methods not known,
users may not find [assessments based on questionnaires] particularly applicable as evaluation
The solution may lie in the development of standards, though Ms. Sjöström cautions
that even this recommendation requires a caveat.
"Whereas it may not necessarily be
beneficial to streamline criteria that are values-based (in the name of freedom of thought),
standardization of methods and criteria is likely to help investors and other stakeholders to
navigate in what is now often perceived as something as a jungle," opined Ms. Sjöström.
Michael Brinch-Pedersen, managing director of the Nordic Partnership, extrapolates the broader
implications of standardization.
"It's clear that SRI has the potential to become a more
efficient driver for sustainability," said Mr. Brinch-Pedersen. "However, the present lack of
standards in the area indicates that a more clear direction is needed, perhaps led by public
pensions funds, in order to mainstream SRI."
"At the Nordic Partnership, we are currently
looking at further opportunities in this area," he concluded.