Methodology

The Sustainability Governance Scorecard© is an impact-research with a motivation to help improve the state of the world by measuring and learning from the peers. It is designed as an improvement tool for the companies to have a more sustainable future.

Sampling

The research mainly focuses on quality of decision making and governance of sustainability issues. The scope encompassed 212 different companies from 10 industries in 7 countries. The companies are trading at key sustainability stock exchanges which are signatories of Sustainable Stock Exchanges Initiative. The companies which have asset size higher than 1 Billion Dollar are selected and diversified by different initiatives and reporting schemes. Selected 10 industries are comparable across countries. Financial and technology companies are not selected due to their regulatory standards may vary by country.

212 Companies Evaluated from 7 Countries & 10 Sectors
Table 26: Distribution of Companies by Initiatives

Evaluation Criteria

The SG Scorecard© identifies and utilizes 390 measurable criteria for sustainability governance. The criteria are either met or not met (0/1). The criteria are defined to assess the governance quality of companies’ sustainability efforts under four main areas:

  • providing guidance,
  • implementation,
  • oversight of the board,
  • continuous learning throughout the cycle.

Each of these areas are assessed with objective criteria, designed through a lens of governance. The key areas SG Scorecard identifies are listed in the following table:

Guidance
Implementation
Oversight
Learning
Board Composition and Diversity (Skill Matrix)
ESG Results
Board Oversight Responsibilities
Resource Allocations for Improvement
Comprehensive Board Guidance on ESG (Policy, KPI, Target)
ESG Results Evaluation (Trend, Benchmark)
Sustainability Governance Structure
ESG Training
Stakeholder Map and Engagement
Supply Chain Coverage and Audit
Internal Control and Independent Audit
ESG Developments (Performance Management, Process Change, Resources Allocated for Improvement)
Materiality and Board Review
Community / Ecosystem / Partnership Results
Link to Executive Compensation
Scope of Training and Developments
Link to Executive Compensation
Results Alignment with SDGs
Board Evaluation
Value Creation Model
Stakeholder Consultation
Strategy Alignment with SDGs
Risk Mitigation
Oversight
Learning
Board Oversight Responsibilities
Resource Allocations for Improvement
Sustainability Governance Structure
ESG Training
Internal Control and Independent Audit
ESG Developments (Performance Management, Process Change, Resources Allocated for Improvement)
Link to Executive Compensation
Scope of Training and Developments
Board Evaluation
Coverage: Across all employee groups, geographies, supply chain and impact of product throughout the life-cycle (ecosystem view)
Depth: Depth of ESG Reporting

Data Collection

The analysis is limited only with the publicly available data. The research utilizes;

  • 2018 Annual Reports,
  • 2018 Sustainability Reports,
  • Governance and Sustainability section of the companies’ Websites.

After the data collection process was finalized, we shared our evaluation of the data with the investment relations departments of Global Sustainability Leaders to provide them an opportunity to review the way we have interpreted their disclosures with respect to the 390 criteria (See: Criteria) for this research.

Evaluation Method

Measurement is conducted by weighted average method. The evaluation includes two dimensions;

  • Breadth of sustainability approach: Criteria which all the company should adopt in order to ensure the sustainability climate in the company are named as breadth criteria. There are 74 breadth criteria. Breadth criteria give clue the question “What?”. It provides information about the approach company adopted in terms of sustainability governance.
  • Depth of sustainability approach: Criteria which show the internalization of the essence of sustainability governance culture are listed as depth criteria. There are 318 depth criteria. Depth criteria give clue the question “How?”. It provides the detailed information about how the company deploy sustainability governance throughout its impact span.

The scorecard is evaluated based on the combination of breadth and depth score and shared by 5 tiers to provide better granularity in order to identify good examples. The list in each tier is distributed alphabetically.

The SG Scorecard does not aim to measure the sustainability performance but seeks the presence of an environment and a climate of sustainability governance where sustainability efforts can flourish. In line with this perspective, the Report is distinguished by sharing best in class examples of various sustainability governance steps which fosters the learning pace among peers.

The research is expected to provide an opportunity for benchmarking and serve as a guideline for creating effective sustainability governance mechanisms, learning from peers, and thereby contributing to deployment of good practices on sustainability.