Measuring and publicizing social performance is a potentially
powerful way to influence corporate behavior –
assuming that the ratings are consistently measured and
accurately reflect corporate social impact. Unfortunately,
neither condition holds true in the current profusion of
CSR checklists.
The criteria used in the rankings vary widely. The Dow
Jones Sustainability Index, for example, includes aspects
of economic performance in its evaluation. It weights customer
service almost 50% more heavily than corporate
citizenship. The equally prominent FTSE4Good Index, by
contrast, contains no measures of economic performance
or customer service at all. Even when criteria happen to be
the same, they are invariably weighted differently in the
final scoring.
Beyond the choice of criteria and their weightings lies
the even more perplexing question of how to judge
whether the criteria have been met. Most media, nonprofits,
and investment advisory organizations have too few
resources to audit a universe of complicated global corporate
activities. As a result, they tend to use measures for
which data are readily and inexpensively available, even
though they may not be good proxies for the social or environmental
effects they are intended to reflect. The Dow
Jones Sustainability Index, for example, uses the size of
a company’s board as a measure of community involvement,
even though size and involvement may be entirely
unrelated.1
Finally, even if the measures chosen accurately reflect
social impact, the data are frequently unreliable. Most ratings
rely on surveys whose response rates are statistically
insignificant, as well as on self-reported company data that
have not been verified externally. Companies with the
most to hide are the least likely to respond. The result is
a jumble of largely meaningless rankings, allowing almost
any company to boast that it meets some measure
of social responsibility – and most do.