An updated version of the Tomorrow’s Value Rating will be a shining example of the radical change needed in ratings if they are to be trusted as reliable guides to corporate sustainability, says Todd Cort, CEO of Two Tomorrows (North America) 

There are 200 billion stars in our galaxy alone. Sometimes it feels like there are almost as many ratings of corporate responsibility, the vast majority of which fall into one of two categories – those most people have never heard of and those that most people agree do not effectively measure sustainability.

This sorry situation undermines the value of ratings to companies and their stakeholders. But as Oscar Wilde once said: “We are all in the gutter, but some of us are looking at the stars.” It is no longer enough to participate in the evolution of global sustainability ratings. It is time for a revolution.

Let’s start with value. A rating should provide insight into the long-term economic (read: investment) value of a company. A rating should also instil confidence (or concern) that a company has the wherewithal to do the right thing and avoid causing detrimental harm to people and the environment. To assess that kind of value requires real insight, understanding and experience in business and sustainability processes. The analyst must also be able to see through the inevitable bias in corporate reports and other public disclosure. So the first step in the revolution: have the experts conduct the assessments.

This sounds obvious, but you’d be surprised how many ratings are conducted on the basis of a tick-box approach, processed by individuals with little or no practical experience of working with companies on sustainability issues. For the new version of the Tomorrow’s Value Rating we will be launching later this year, every one of our team of researchers has at least 10 years’ experience in the field. 

It is clear that value and insight cannot be generated through a series of yes/no questions. That is akin to suggesting risk and investment value can be distilled into a scientific and reproducible equation. Who cares if a company has an environmental policy? Policies or certified management systems or the ability to track data are meaningless in isolation if the goal is to assess whether a company is a good bet. Sure, a responsible company needs to tick these kinds of boxes, but that is the absolute base of the value pyramid. 

So, the second part of the revolution: get rid of the yes/no, tick-box assessment criteria and develop insightful criteria that take the basics of management as a starting point not the bar of achievement. The new Tomorrow’s Value Rating criteria will be challenging and seek to discover whether companies can achieve the promise of long-term performance that sustainability can deliver. 

The third and final key aspect of the revolution in ratings: transparency. We’re certainly not the first to suggest transparency in ratings, but we will be a leading example of this commitment with the Tomorrow’s Value Rating. On this website, we will be publishing revised assessment questions, criteria for scoring (i.e. what gets a high/low score), research team credentials, revenue model and any potential conflicts of interest – plus of course the rating results. In this spirit, we will be looking for honest feedback from our stakeholders on our criteria and, eventually, the results. 

Transparency provides an additional benefit – it means ratings can be a way to engage and improve, as opposed to a tool for praising or shaming. While we will continue to assess only publicly available information (based on our fundamental belief that transparency is a prerequisite to sustainability performance), we will reach out to the companies before and after the rating to make sure we have all the appropriate information and to provide insight on the conclusions. 

The assessment process for this year’s Tomorrow’s Value Rating is under way with results due in October. To use another great quote, you should: “Set your course by the stars, not by the lights of every passing ship”. I invite anyone interested in the value of ratings or the challenge of assessing the value of corporate sustainability to join in the revolution by contacting us or keeping an eye on the Tomorrow’s Value Rating.