Then the fun begins. Each of the 200 metrics within what Muyot calls the environmental, social, governance and financial "dimensions" is incorporated into one of five key performance indicators (KPIs). The environmental KPIs are energy, water, emissions, waste and risk mitigation. The social KPIs are product responsibility, community, human rights, diversity and opportunity, and employment quality. The governance KPIs are board functions, board structure, compensation, vision and strategy, and shareholder rights.
And, finally, the five KPIs for financial data are fundamentals, profit margins, growth rates, financial strength, and analyst estimates.
Since there a total of 53 environmental and financial metrics compared to 143 social and governance metrics, CRD ultimately weighs each of the financial and environmental metrics higher than each of the social or governance indicators. But in the final tally, all four dimensions are weighted equally.
As such, a company's total sustainable performance score represents a true "integrated" value. Or, to put it another way, a triple bottom line of people, profit and planet.
"We stuck with 200 metrics because we wanted a holistic view," Muyot says. "We've created something as pure as it can be."
By that, he means he has made no judgments. But even quantitative analysis has inherent judgments built in. In an era of increasingly scarce water supplies, for example, water consumption is more material to the profitability and resilience of Coca-Cola than it is for Microsoft. In other words, not making a judgment is indeed making a judgment-that water consumption is equally important with respect to the profitability and resilience (or sustainability) of the two companies.
That said, Muyot's efforts are a huge step forward. "This is the most robust methodology [I've seen,]" writes Elaine Cohen, a sustainability consultant at Beyond Business. "It promises to become the gold standard for assessing and ranking the overall sustainability performance of public companies."
A former investment banker and veteran financial reporter, Ellie Winninghoff's writes a blog at: www.DoGoodCapitalist.com. She can be reached at: [email protected].