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Many Corporate Sustainability Ratings ‘Not Financially Viable’

In the future, corporate sustainability ratings need to be financially viable, forward-looking and transparent, according to the fourth and final phase of a research program into such ratings, published by SustainAbility.

In the final phase of Rate the Raters, SustainAbility argues that today many ratings are not financially viable and thus cannot invest adequate resources to improve and evolve.

Ratings also need to be predictive and forward looking. It is more important to know how a company is positioned to compete in the future rather than how it fared in the past, the white paper argues.

And transparency is also key for successful future rating systems, according to the white paper. Those ratings that reveal methodologies and results will build trust and stimulate further demand, Rate the Raters says.

While the number of ratings may continue to rise in the near term, SustainAbility believes that the number will soon begin to decline – those that thrive in the future will be those that work hardest to improve the quality of their ratings and seek to increase the amount they disclose, according to the think tank.

The first phase of Rate the Raters explored key trends and changes in ratings over the last decade. Phase two inventoried over 100 ratings globally and phase three conducted in-depth evaluations to better understand how they work in practice. That phase concluded that most sustainability ratings fall short on transparency and lack sufficient quality controls.

The findings of phase three were examined and challenged by Bill Baue, interactive CSR media consultant at Addison, in an Environmental Leader column.

A report last month by the National Association for Environmental Management (NAEM) said that the increasing number of sustainability surveys is eating up company time without providing a clear value proposition for the participating companies.

For more information on SustainAbility research, watch their video briefing or download the full phase four white paper.

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