CSR and ESG Section Six Moves to a Focus on ‘Impact’

Since it was launched 15 years ago, the World’s Most Ethical Companies process has been modified to both improve the process, and to reflect the evolution of ethics and compliance – new issues, roles, and responsibilities. This year we have updated Section Six of the Ethics Quotient survey. The following is an overview of these changes.

Section Six: From CSR and ESG to “Impact Assessment and Reporting”

Section Six is designed around understanding how companies assess and address the risks and opportunities relating to environmental sustainability and social responsibility. Typically, Ethisphere has seen these efforts branded as being part of “corporate social responsibility” (CSR) or “Environmental, Social, and Governance” (ESG) programs. This year, we are moving to an increased focus on the trend we are seeing with companies paying more attention to their ‘impacts’ on the environment, people, and society. To reflect this change, we have changed the title to: Impact Assessment and Reporting.

When we mention “Impact” or “Impacts” in this revised Section of the EQ Survey we’re talking about areas linked to CSR or ESG where a company has the opportunity to evaluate how it affects the people, processes, and environment with which they interact. We’ve noticed that companies are becoming more sophisticated about defining and reporting on the challenges arising from their Impacts, outlining the changes they would like to see, and formulating the actions they can take to realize their goals and outcomes toward making these changes happen.

We have taken a critical look at how we could re-structure questions and responses to get a better sense of how companies are addressing their Impacts. This revision of Section Six introduces questions and responses that focus on various evaluation frameworks companies are increasingly using to help them evaluate and respond to CSR and ESG concerns. Ethisphere also wants to see how companies are reacting to increased expectations that companies report out about their initiatives, transparency, and goals, driven by the public conversation around CSR and ESG involving investors, employees, and other stakeholders in companies.

We have also introduced a few new terms for this year’s survey:

  • “Social and Community Impacts” refers to the subset of Impacts relating to community involvement, philanthropy, stakeholder engagement, and workplace well-being.
  • “Environmental Impacts” refers to the subset of Impacts relating to energy use, depletion or recycling of resources, emissions, waste, and environmental sustainability or stewardship.
  • “Material Issues” refers to factors or issues of importance to an organization’s function, mission, and/or initiatives, often through discussion with an organization’s stakeholders. Material Issues are often relevant to the sector or industry in which an organization operates and can potentially have direct consequences in the financial and/or operational performance of an organization both in terms of risks and opportunities.

Section Six Overview

The Section starts out by asking about the assessment of and/or reporting on various Impact areas. It asks how companies set Impact-related goals and objectives, and who is involved in the process of assessing Impacts. There are new questions around how companies approach stakeholder engagements and evaluation of Material Issues.

The Section includes a new evaluation of the reporting process for Impact-related items. Our questions have changed slightly to better capture modern reporting practices on interactive websites, continual updates of facts and figures, and methods for assurance or audit of reported information. We are now asking more questions around common frameworks, such as the UN Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD).

We now ask more in-depth questions around linking Impact-related concerns into risk management processes and statements around human rights, leading practices that WME Honorees have begun developing and implementing more often in recent years. With greater adoption of the COSO ERM framework and Key Risk Indicators (KRIs), Ethisphere wants to better understand how companies are using these important tools to enhance their ability to react to risks which fall outside of the typical enterprise risk management evaluative scope.

Questions around inclusion and mental health have been adjusted this year to better understand and evaluate how companies are tailoring their programs, outreach efforts, and goal setting in these important areas.

Finally, we have included a question which allows companies to explain how their Impact-related efforts and programs have been affected by the COVID-19 pandemic.

Ethics Quotient (EQ) Survey

Ethisphere’s Ethics Quotient® is a proprietary rating system that collects and objectively scores self-reported data in five weighted categories. Questions included in the Ethics Quotient are periodically reviewed and updated based on changing regulations, expectations, and best practices. Supporting documentation is required for consideration as one of the World’s Most Ethical Companies.

If you have any additional questions about the Ethics Quotient questions or process, please email us at:  [email protected].