METHODOLOGY

The Corporate Sustainability Rankings reflect company adherence to sustainability practices, integration of these practices into business operations, impact on the environment and society, governance models, and effectiveness of established frameworks, policies, and procedures.

Sustainability performance of companies is evaluated on the scale from 1 (low performance) to 100 (high performance), where 100 represents a full commitment towards best sustainability practices and the strongest positive impact of its business activities on environment and society.


The agency assigns and monitors two ranks for each ranked company. The first rank (CSRg) reflects a ranked company’s position relative to the whole portfolio of the agency's ranked entities, the second rank (CSRi) reflects its position relative to other ranked companies in its industry. The list of industries includes consumer & retail, energy, food & beverages, healthcare, Industry & transport, information technologies, materials & mining, real estate, telecom & media, and utilities.


CSRs are assigned and monitored based on publicly available information and could be adjusted for solicited ranks, for which a company participates in the evaluation process and analysts have access to non-public data and management disclosures. Publicly available information includes financial disclosures, annual reports, sustainability reports, and other ESG-related data sheets disclosed under different generally accepted standards.


The rankings scales, both global and industry specific, are dynamic, meaning that change in the assessment of any company, or addition of a new company to the pool of ranked companies could result in recalibration of the whole portfolio.


The agency analyses four indicators when assigns and monitors CSRs, three of which are quantitative and one is qualitative. Quantitative indicators include (i) environmental impact, (ii) social impact, and (iii) governance; assessment of the each of these indicators is based on scoring models. The qualitative indicator (sustainability profile) is based on analytical judgment. For each indicator, the agency assigns a score on the 1-100 scale, and the score reflects assessment relative to other companies in the pool. By default, the agency assigns 25 % to each of the four indicators when deriving the final CSRs, however, the weights could be adjusted upwards or downwards to reflect higher / lower influence of a particular indicator on the final rank.

Environmental Impact (EI, 1-100 dynamic scale)
When assessing the environmental impact, we focus on five sub-indicators, for each we calculate relevant ratios as described below. We use last available data; when data are not available, we assign the lowest score of 1. The resulting EI score is calculated based on 20 % weight assigned to each of the sub-indicators below.

1. Carbon emissions. The agency calculates the total emissions (CO2 tons), including scope 1, 2, and 3, that a company reports relative to its revenue in US Dollars, the higher score is assigned to companies with lower CO2 / Revenue ratios.

2. Energy consumption. Calculated as the total energy used in the reporting year to the revenue, the lower ratio means that the company is more energy-efficient and results in a higher score. We measure energy consumption in kWh and convert data into kWh when reported differently.

3. Energy mix. We calculate the share of renewable energy in the total energy used, with its higher share leading to a higher score.

4. Water consumption. Calculated as total water consumed adjusted to water reused (in tons) relative to revenue. A lower ratio results in a higher score.

5. Waste management. We divide total waste (in tons) net of recycled waste (if reported) by revenue. A lower ratio results in a higher score.

Social impact (SI, 1-100 dynamic scale)
When assessing the social impact we focus on four sub-indicators, for each we calculate relevant ratios as described below. We use last available data; when data are not available, we assign the lowest score of 1. The resulting EI score is calculated based on 25 % weight assigned to each of the sub-indicators below.

1. CEO pay ratio. Calculated as the ratio of the CEO’s total annual compensation to the median annual income of a full-time equivalent employee (FTE). For both numerator and denominator, we use the total compensation including salary, bonuses, and other benefits. A lower ratio results in a higher score.

2. Gender pay ratio. The median compensation of a male employee to the median compensation of a female employee, based on the FTE numbers. The 100 score is assigned to companies with the ratio of 1, a deviation from 1 results in a lower score. For companies that do not the median compensation of a male and female employees, we assign the score of 1.

3. Employee turnover. Percentage of total annual turnover (all job changes, including dismissal, retirement, job transition, or death), calculated as the number of cases to the number of employees in the beginning of the reporting period. New hires should not affect the ratio. A higher score is assigned to companies with lower turnover.

4. Gender diversity. The score is calculated based on two sub-scores with 50 % weight each. The first sub-score is derived from the ratio of the total number of female employees, where the number of female employees is less than 50 % of the company's total headcount, to the total number of male employees across the organisation (or the male-to-female ratio, where male employees are in the minority). The second sub-score considers the same, but on the senior management level (if that is not available, then we do our own estimates based on gender composition of the board of directors and management board). We assign 100 to companies with the 100 % ratio, while deviation from that ratio results in a lower score.

Governance (G, 1-100 dynamic scale)
1. Board diversity. We assign the score of 100 to companies, whose balance between male and female directors is closest to fifty-fifty, a deviation from that results in a lower score.

2. Board independence. A higher share of independent members in the board of directors results in a higher score.

3. Financial transparency. We assess frequency, completeness, and quality of financial reporting (under IFRS, local GAAP, or US GAAP). The score of 1 is assigned to companies that do not disclose periodical financial reports. For companies that produce only annual reports, but whose disclosures are limited (i.e. only balance sheets and profit and loss statements are published), we usually assign the maximum score of 20, while public disclosure of a full set of accounts on annual basis usually corresponds with the score of 60. Under our base case for companies that disclose financial statements semi-annually the score of 60 is assigned; however, that score could be adjusted down to 40 if reporting disclosures are weak. For companies disclosing quarterly reports, we assign a score in the 80-100 range based on our view of their adherence to best industry practices and quality of reporting. Qualified audit opinion usually negatively affects financial transparency score and could result in higher scores if qualifications are viewed by the analysts as material, leading to potential misrepresentation of financial information.

4. Sustainability reporting. We assign the score based on our analytical judgment of a company's practices of sustainability reporting relatively to those of its peers. The higher score is usually assigned to companies that publish sustainability reports (at least annually) or provide a reasonable level of sustainability data in its annual report. Implementation of one of the standards or frameworks for disclosure of sustainability data (GRI, CDP, SASB, IIRC, or UNGC) is positive, as well as an external assurance or a third-party verification confirmation. Delays in sustainability data disclosure have a negative impact on the assessment.

Sustainability Profile (SP, 1-100 fixed scale)
Sustainability profile score represents a qualitative judgement of a company’s sustainability performance and reflects assessment of its adherence to best international practices and commitment to global sustainability targets. The score is assigned based on the following factors:
- Availability of sustainability polices on procurement, investment, climate change, human rights, gender equality, remuneration, integrity and inclusion, community development, and donations
- Clearly defined strategy towards mid-term and long-term sustainability targets, including those for ratios that we analyse when assessing environmental and social impact factors, and track record of execution under the strategy
- Adopted sustainability policies when operating with customers, clients, and other stakeholders
- Reported contribution or commitment to the 17 Sustainable Development Goals of the United Nations. The analytical judgment also includes feasibility assessment of the reported commitment
- Correlation of senior executives (including board of directors) remuneration with sustainability development goals
- Commitment to a net zero goal and a clear path towards achieving this goal
- Sustainability awards from highly reputable agencies and authorities.


Parent-Subsidiary Assessment
The agency assigns CSRs based on the standalone profiles of ranked companies; however, in the event of limited availability of sustainability data for a standalone company, we may, in some exceptional cases, assign ranks based on data a parent company. This could apply when analysts have a qualified opinion that sustainability practices of a subsidiary company are aligned with those of a parent company. Under the base case, this approach can be used when:
- A parent company and its subsidiary operate in same or related sectors of economy
- A parent company consolidates reporting of its subsidiary in its public accounts
- A parent company has a reasonable oversight over operations of its subsidiary
- A subsidiary is deeply integrated into its parent company and has limited operational independence

CSRs Snapshot
The CSR snapshot illustrates how the agency derives the final rank.
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