and stakeholder value than low sustainability companies. An increasing number of companies have enthusiastically implemented sustainability practices, to illustrate, you may hear them emphasize on corporate governance, tax strategy, operational eco-efficiency, or labor practice. In order to qualify this approach, leading companies use sustainability benchmarks as tools to indicate how the companies reflect sustainability considerations on their portfolios.
Dow Jones Sustainability Indices or DJSI are a family of top rated and the best-known sustainability benchmarks that track the world’s leading companies in terms of economic, social, and environmental criteria. The family was the first global sustainability benchmark since 1999.
Each year, publicly traded companies from 61 industries in 47 countries are invited to participate in RobecoSAM Corporate Sustainability Assessment (CSA). Based on total sustainability score, the top 10% most sustainability market cap per industry are selected for inclusion in the DJSI World ranking. Additionally, top 20% and 30% are selected for the regional and country-specific sustainability indices.
The renowned example of the DJSI listed company in Thailand is Siam Commercial Bank (SCB) who has been selected as a member of the Dow Jones Sustainability Indices 2018 and 2019 in the financial category of the World Index and Emerging Markets Index groups. This reflects the organization performance that meets international standards.
The good thing about DJSI and other sustainability benchmarks is that they bring many advantages in terms of market valuation and company performance. Here are the reasons why your company should consider sustainability benchmarks in your portfolio:
It attracts more investors
A growing number of investors have recognized that sustainable business practices are critical to generating long-term shareholder value. Moreover, investing in highly sustainable companies would reflect sustainability convictions in their investment portfolios. The sustainability benchmarks help communicate with the investors that your interests in the company are long-term in a much more convincing way. A recent study in 2019 shows that companies on the list of DJSI draw more positive impacts on financial analysts and investors. Global stock markets, including SET in Thailand, encourage their publicly traded companies to participate in sustainability indices, including the DJSI indices family. Furthermore, participating in a sustainability benchmark builds up the company’s reputation as a global sustainability leader amongst stakeholders and the public.
It does improve corporate performance
Besides building awareness of sustainability throughout the organization, the Corporate Sustainability Assessment (CSA) can identify gaps and make improvement to achieving better implementation of the corporate sustainability strategies. The CSA contains industry-specific questionnaire focusing on financially relevant economic, environmental, and social criteria, resulting in a more comprehensive reflection of the company’s strength and weakness. During the CSA process, a sustainability baseline has to be established to identify the current state of the company’s performance relative to peer companies. It allows us to compare the company against its own peers and focus on areas to learn from the top-performing companies to improve its own performance.
It is a dynamic indicator of what your company should care about
Sustainability performance is a long-term approach. It has to be continuously monitored throughout the years after obtaining the benchmark. Every year, sustainability criteria are updated to capture emerging sustainability trends. In order to be included in DJSI in consecutive years, the company’s sustainability performance has to be steadily improved to meet the criteria and to be superior to the peer companies.
SCB has shown a good example of engaging stakeholders; namely customers, employees, shareholders, regulators, as well as society and environment. The SCB sustainability framework offers a great numbers of activities to create value for stakeholders, some of which are offering financial solutions that meet customer needs and communicating and building trust for all groups of stakeholders. While other engagement contribute to the society: promoting financial inclusion for Thai people from all strata of society, improving financial literacy as well as establishing employee development program.
The example mentioned does not only apply to big companies, small companies should pay good attention to this trend. Given that sustainability becomes an increasingly quoted subject at regional and international level, starting to see why you could adopt sustainability policies might be a good start for a long-term growth and performance of your business.
