Corporate sustainability standards : a comparison of two sustainability indices

Abstract: Increased stakeholder pressure on companies to aim for more than profit maximization has resulted in adoption of corporate sustainability practices by companies. In response to the accountability pressures, companies have increased their reporting efforts to communicate financial and non-financial information. Efforts to communicate corporate positions on sustainable development are made in annual reports as well as by external organizations, in ranking systems. While sustainability indices and ratings are gaining increased recognition, neither the scientific community nor the business community have agreed on standards for corporate sustainability or assessment of sustainable development. However, under these conditions of uncertainty and undefined concepts, sustainability indices prosper. They create own methodologies to assess companies performance, present reports emphasizing on accuracy of measurements, earn trust of investors and exercise influence on companies’ behavior. At this point when sustainability indices play such an important role in corporate sustainability assessment, the call for an explanation how corporate sustainability standards are affected by sustainability indices arises. This study addresses this gap by the analysis of two sustainability indices, DJSI and FTSE4Good, and comparison of their methodology on a list of criteria. The criteria that were used for the comparison are values of corporate sustainability indices hold, influence they cause on different groups of stakeholders, and indicators they imply to assess companies. On the next stage comparison was done according to such categories as objectives indices have, techniques they apply, sources of information they use, and requirements for inclusion they state. The analysis and comparison of two sustainability indices in accordance to the chosen criteria reveal that there are more commonalities than differences in indices’ corporate sustainability assessment and several additional commonalities arose in the course of the analysis. Both, DJSI and FTSE4Good demonstrate their adherence to similar values of sustainable development on a corporate level, have influence on the same stakeholders and state almost identical requirements for the companies to be considered for the inclusion. The similarity between indices is the adoption of industry-specific weighting when a company is compared to its peers within the same industry. Discussing the question of methodologies both DJSI and FTSE4Good put effort on regular reviews and improvement of it. Finally, DJSI and FTSE4Good emphasize on the voluntary adoption of their corporate sustainability standards. In the questions of indicators and objectives the indices do not match completely but only at certain points. Differences were found in only two categories such as techniques and sources of information indices use in the assessment process. To sum up, two analysed indices have more similar points in assessment of corporate sustainability, than contradictions. This conclusion suggests that analysed indices have a tendency to establish standardization of the certain aspects of corporate sustainability assessment. Potential future analysis of the other influential sustainability indices with the application of the same conceptual framework will help to reveal a broader picture of the situation around corporate sustainability standards.