November 24, 2008
2008 Accountability Rating Finds More Companies Willing to Address Social and Environmental Challenges
by Robert Kropp
Annual measure of corporate accountability finds telecoms developing effective CSR vision, while
oil & gas sector suffers due to operational performance.
If the web sites of most of the world's major corporations are to be taken at face value, global
warming will soon be a thing of the past, corporate stakeholders find the doors of executive
offices always open to them, and sustainability and transparency are as important to the corporate
value system as profitability.
One annual study has made a practice of rating
corporate performance in areas of interest to sustainability investors by analyzing information
mostly found on corporate web sites. The Accountability Rating 2008 is compiled by CSRNetwork, a consultancy firm, and AccountAbility, an nonprofit
organization that promotes sustainable development. The Accountability Rating, described on the web
site as "a tool for measuring the extent to which companies have built responsible practices into
the way they do business and their impact on the economies, societies and environments in which
they operate," is applied to the 100 largest companies in the Fortune Global 500, which is
comprised of the 500 largest corporations in the world.
In addition to being published on
its own web site, the Rating is published in Fortune Magazine as well.
year's rating, Vodafone, last year’s number five, regained the top spot from BP, which dropped to
number nine. General Electric placed second, followed by HSBC, France Telecom, and HBOS. Nine of
the top 10 companies are headquartered in Europe.
SocialFunds spoke with Todd Cort, Senior
Consultant for CSRNetwork, about the Accountability Rating.
"Our study derives its
findings from information in the public domain, primarily the corporate web sites themselves," said
Cort. "We do not send questionnaires to companies. Therefore, those companies that express through
their web sites a commitment to transparency will be rated higher."
Cort continued, "It's
possible that a company with first-rate systems and operational performance will score poorly
because of a web site that is not useful in sharing important information with stakeholders. But in
general, what we have found is transparency on the web sites has gone up. Most companies now have
larger web sites that contain more sustainability reports."
Four domains of analysis are
employed in the rating's current iteration. Governance and management, in which management systems,
standard procedures, incentives and performance targets relating to extra-financial issues are
measured; strategic intent; and engagement, in which dialogue with stakeholders, publication of
social and environmental performance, and credibility are measured, are the three domains returned
from previous ratings. A fourth domain, operational performance, was added this year.
said, "The domain of strategy measures if the direction of a company is linked to sustainability.
It measures the difference between a company making money and doing good, and making money by doing
Operational performance, the domain that was added this year, measures whether
companies report important metrics in a variety of social and environmental impact areas, and if
that and other areas of their performance improve from year to year. In a departure from the
ranking's reliance on corporate web sites for the majority of its information, the domain surveys
media reports on companies to determine if any controversies in the past twelve months might
adversely affect performance.
With three companies in the top ten, the telecommunications
sector is clearly looking to seize the opportunities that would come from bringing large numbers of
people into the information age.
"Computer, telecom, and IT companies have discovered a
religion," said Cort. "They realize that they have the power to make an enormous impact. The
corporate vision of these companies now includes the realization that network technology can change
society, including developing countries."
In previous iterations of the rating, oil and
gas companies performed well, largely because of their strong showing in corporate systems. When
operational performance was added as a domain this year, the overall performance of those companies
"When oil prices have declined, oil and gas companies back away from previously
stated commitment to renewable energy," said Cort.
On the other hand, utilities were the
highest-scoring sector in the rating, which was attributed to the regulatory scrutiny that the
Financial companies scored relatively well in the rating, but a strong
performance does not necessarily ensure that they have managed to protect themselves against the
financial crisis. A case in point is HSBC, the UK-based holding company that ranked fifth in the
rating, but that set aside $4.3 billion to cover bad loans at its American unit in the third
quarter of 2008. On the other hand, Bank of America, which was rated 70th and scored about thirty
points lower than HSBC, had a risk management system in place that identified risky mortgage
securities and removed them from its portfolio.
Of the seeming inconsistency, Cort said,
"The rating did pick up some aspects of risks that financial companies were facing, but too few of
those aspects are seen in the scores."
As the global economy continues to decline,
CSRNetwork and Accountability expect that those companies that have more proactively identified
risks will tend to weather the downturn more effectively. In addition, some of the most pressing
social and environmental challenges may well lead to profitable solutions for companies that
Regional Accountability Ratings are also produced for Bulgaria, Greece,
Hungary, Italy, Korea, Portugal, Russia and Turkey.