CSR RATING AGENCIES, THEIR METHODOLOGIES AND THEIR RELIABILITY

Team members

Lavanya .A (08AA21)

Nivetha Grace.R(08AA28)

Sneha N Doss(08AA37)

Sugirtha.S(08AA39)

Swappna dhevi. S(08AA41)

1. CSR RATING - INTRODUCTION:

CSR rating is the assessment of companies on social, environmental and economic issues and it is based on analysis and assessment of corporate ESG performance. CSR rating Forms a link between investors and companies. It also Provides Financial market players with focused information on social and environmental aspects of corporate performance. These are Undertaken by specialist rating agencies.

CSR ratings serve to reduce asymmetrical distribution of information. Ratings serve both as disclosure, since the evaluated company is making data public that stakeholders would otherwise not be able to see and as certification, in that rating institutions certify the truth and trustworthiness of their ratings

Approaches for Rating:Starting with their basic philosophy, the analysed concepts can be divided into the more economically orientated and the more normatively orientated approaches, whereas the transition between these groups is blurred in practice:

Economically orientated concepts are characterised by focusing on those ethical, ecological and social criteria that are highly probable to have a direct or indirect economic effect on the evaluated company. Here it is a matter of the ‘CSR-business case’. Economically orientated approaches are as expected more frequently found in the capital market and with company oriented concepts.In the care of the normatively orientated concepts, the CSR-evaluation criteria represent a value in itself. The compliance with these criteria by the company can have indirect economical consequences. However, this influences neither the choice nor the weighting of the criteria. Normative approaches are especially common in the area of consumer-orientated concepts.

Sources for CSR Rating Information Rating Agencies, In house Research Teams, Providers of securities indices, NGOs, The Media and Public authorities and The Management .

1.1 Role of rating agencies:

Ratings of corporations’ environmental activities and capabilities influence billions of dollars of “socially responsible” investments as well as some consumers, activists, and potential employees. Rating agencies seek to make corporations’ environmental effects more transparent. These rating agencies can examine firms’ past environmental performance and environmental management activities. In addition, they can also consider a firm’s future outlook, such as by analyzing their environmental management plans and investments that purport to enhance future environmental performance. Just as credit ratings “enhance transparency and efficiency in debt capital markets by reducing the information asymmetry between borrowers and lenders,” social ratings aim to provide social investors accurate information that makes transparent the extent to which firms’ behaviours are socially responsible.

Few instances:Poor social and environmental ratings can harm a company’s performance and reputation. For example, Kinder, Lydenberg, Domini Research & Analytics (KLD) dropped Coca-Cola Co.,from its Broad Market Social Index in July 2006 because of concerns about the company’s labor and environmental practices in the developing world. As a result, TIAA-CREF, the largest U.S.retirement fund, subsequently sold more than 50 million shares of Coca-Cola Co. stock. Critics of the company also seized on KLD’s action as support for their longstanding complaints against Coca-Cola Co.

1.2. Trends in CSR ratings:

There is an explosive growth in the ratings of CSR in recent years. These ratings turned to be of vital importance and this makes to appoint in-house specialists and teams to monitor and communicate their social performance. The two trends that reinforce the rising visibility of CSR are:

Social investment funds- Mutual funds are growing at a very rapid rate. So these are made up exclusively for companies that pass various social screens. The methodologies have also increased to assess the social performance.

Social regulations- Both national regulations and international agreement has made it mandatory for the business to be socially responsible and environmental friendly and further make the CSR ratings important.

The rating has become messy today due to the proliferation of players carrying out evaluations and large number of criteria used for judging the social responsibility. Only a few international agencies dominate the market whereas there are a large number of small players who have gained fame through media. The agencies mostly are specialized and they make early efforts to assess the extent to which the companies are “Socially responsible” and give a more focused analysis of business risks associated with the production activities, service sectors and management practices.

1.3. General Methodology for CSR Rating:

To develop a CSR assessment and rating most of the agencies follow a three step process which includes:

Collection and compiling various available external information about the company Send a detailed questionnaire to the company. Interviewing key informants internally and externally.

Reports are then prepared and commercialised to interested parties like consumers, investors and rated companies. Sales of these reports generate the principal revenue for these rating agencies. Additional revenues come from customized studies undertaken on behalf of clients.

Criteria for evaluation

These are the criteria used for evaluating CSR ratings.

Workplace safety Environment friendly Product safety and impact International operation and human rights Community relation Corporate governance Companies should not involve in tobacco, alcoholic beverages, weapon and genetically modified

foods and animal testing.

1.4 Criticism

It remains unclear whether social ratings are actually providing transparency that helps stakeholders identify environmentally responsible companies. The investors and other stakeholders who rely on them to identify desirable target companies might be misallocating resources. Studies have examined whether CSR metrics predict financial performance, with a variety of result. Those studies finding little correlation between CSR metrics and financial performance may understate the relationship between actual CSR and financial performance. The CSR metrics are noisy indicators of true CSR activities. At the same time, those studies finding a positive correlation between CSR metrics and financial performance may overstate the relationship between actual CSR and financial performance if customers or other stakeholders are misled by the erroneous CSR metrics.

2. RATING AGENCIES

2.1 INTERNATIONAL RATING AGENCIES:

2.1.1 VIGEO

Vigeo follows six domains of analysis. They are:

Human Rights- The fundamentals of the human rights are portrayed. Freedom of association, collective bargaining, fight against discrimination, forced and child labor are the other factors included in human rights domain.

Human Resources- Social dialogue, working conditions, health and safety conditions, career management, promotion of employability and quality of remuneration systems are the factors of human resources.

Environment- Protecting the work environment in the manufacturing process and how the products are distributed and the wastes are disposed in an environmental friendly ways fall under this category.

Business Behavior- It deals with maintaining relations with the clients and contractors in a good way. And also encompasses the activities carried on for prevention of corruption and anti-competitive practices.

Corporate Governance- Board of directors, stake holder’s rights, executive remuneration, audits and internal control mechanisms fall under this particular domain for the rating purposes.

Community Involvement- Activities that involves promoting social, local and economic development are classified here. What are all the impacts that the company has created on the society through its products and services and contribution to general interest causes are included here.

Framework

The framework aims to assess the relevance of the policies, coherence of implementation and effectiveness of the results.

Policies and Objectives- There should be a level of visibility of the CSR objectives within the organizations’ goals along with the content and transmission which match with corporate goals where there is clarity and effectiveness of management powers dedicated to fulfil the CSR objectives.

Implementation- The processes which formalizes the procedures, the tangibility and adequacy of resources, internal and external mechanisms, reporting tangibility and adequacy of scope of CSR objectives are the factors considered for implementation purposes.

Results- The absolute values in relation to the sector are set as indicators. The shareholder’s views about the managerial commitments, considerations and responsiveness toward controversies, degree of transparency and co-operation towards stakeholders are evaluated.

2.1.2 OEKOM RESEARCH AG (MUNICH, GERMANY)

Rating is based on the ‘Frankfurt-Hohenheim Guidelines’ (FHG). A set of criteria which were developed by the German professors Hoffmann, Ott and Scherhorn in 1993. It comprises more than 800 criteria in the areas of culture, nature and social issue.

It distinguishes rating process between potentials research and corporate responsibility research. Potentials research is the assessment of ‘sustainability pioneers’, identifies small and medium sized companies, whose products and services contribute exceptionally to sustainable development for visionary investment.

Corporate responsibility research is where 'sustainability leaders’ are assessed, analyses international large and mid cap companies from all the important industries evaluating the responsibility of companies towards people influenced by the company's activities and represents the responsibility towards society and culture.

Rating categories

There are social cultural rating and environmental rating. Social, cultural and environmental impacts of industries differ from each other and depending on the relevance each industry is classified in a sustainability matrix. These ratings are allotted different weights. These three dimensions are further sub divided into six areas of assessment. In each area of assessment different information is evaluated (e.g. dimension: Social Cultural Rating; area of assessment: employee relations; information evaluated: equal opportunities).

Assessment considers the environmental impact of the products and services and on the environmental impact of the production. Both aspects are ranked small, medium or high, resulting in a 3x3 matrix. Social rating evaluates the responsibility of companies towards people influenced by the company's activities. Cultural rating represents the responsibility towards society and culture. The overall analysis is graded on a twelve-point scale from A+ to D- . A+ where the company acts in a particularly progressive manner. D- where few or no positive environmental, social and cultural activities worth noting were identified.

2.1.3. KEMPEN CAPITAL MANAGEMENT (SCOTLAND)

It analyses the companies under three main categories.

• Environmental performance- It encompasses the environmental policy, environmental management system, certification of the environmental management system, communication with stakeholders (environmental reporting), auditing of the environmental performance, environmental impact of production processes or services, environmental impact of products and services.

• Social performance- General personnel management, career and personal development programs, non-discriminatory and diversification policy, employee representation, health and safety on the job, communication with stakeholders(social reporting), social policy in risk-countries (human rights, conditions of employment, etc.) are all the factors considered here.

• Business ethics- Presence of a code of conduct, elements in the code of conduct and responsibility and monitoring of the code of conduct are assessed under this category.

In every assessment category, the assessment of each criterion is defined by a unique weighting.

2.1.4. ASIAN SUSTAINABILITY RATING

The Asian sustainability rating mechanism, launched in October 2009. The rating initially covered 20 companies in ten different markets namely Australia, China, Hong Kong, India, Japan, Malaysia, Pakistan, Philippines, Singapore and Thailand. The markets are identified based on the market capitalization. It is proposed that during the year 2010 it will include 3 more.

ASR is a simple open source benchmarking tool for use both by the Asian companies and their stakeholders.

Each company is rated on the basis of 51 indicators grouped into six categories•    Governance, Codes, and Policies, •    CSR Strategy and Communication, •    Marketplace and Supply Chain, •    Workplace and People, •    Environment, •    Community and Development.

These are the basic elements of sustainability that each company should address though disclosure. The scoring is a point system with points granted purely on the basis of disclosure.

• 2 points awarded for comprehensive disclosure

• 1 point for partial disclosure

• 0 for non-disclosure.

Currently the indicators do not carry any weights although some issues could be more critical to certain sectors than the rest.

In 2009 the rating was reviewed only on an annual basis. In 2010 more frequent reviews are planned. It will enable an up to date monitoring of the improvements being made by the companies in their sustainability practices.

The Indicators

The following table lists the category of indicators and the number of indicators under each along with total section score.

Indicator Section Number of Indicators Maximum Section Score

Governance, Codes, and Policies 12 24

CSR Strategy and Communication 11 22

Marketplace and Supply Chain 5 10

Workplace and People 10 20

Environment 8 16

Community and Development 5 10

Total Indicators 51 102

Government, Codes and policies

This section assesses the key company policies and code of conduct in relation to CSR. It includes indicators like corporate governance, risk management, anti corruption labor and human rights.

CSR Strategy and Communication

Under this section the indicators assess the company’s CSR strategies and how these are communicate to the stakeholders. Does the firm use internationally recognized reporting guideline or promotes stakeholder engagement programs? Does it provide sufficient CSR training and awareness?

Market Place and Supply Chain

The indicators in this section assess the supply, delivery and distribution of products and services and customer focused activities. This includes the areas of health and safety management, supply chain standards and supplier engagement

Workplace and People

The indicators like health, staff training hours, employee satisfaction, formal complaints etc are used to evaluate how the firm treats its employees.

Environment

It evaluates the level of environmental data such as its environmental management systems, emission data, use of renewable resources etc, the company discloses and the target levels set b the company. And are these also reported to the stakeholders?

Community and Development

The most popular CSR aspect is community initiatives and Asian firms have a rich history of philanthropy. But the rating model takes into considers as to how these initiatives are reported, evidence of such initiatives, monitoring its impact and finding if there is any long term benefit? It tries to identify if such initiatives have quantifiable impacts along with employee involvement.

Data for this purpose so far has only been collected from publicly available sources. These include annual financial reports, CSR reports, Corporate websites, press releases etc.

The usefulness of the ASR rating

To Companies

• review their sustainability disclosure and performance against a set of globally accepted sustainability indicators

• benchmark themselves against their peers and other companies in Asia

To Investors and analysis’s

• screen non-financial risk out of portfolios by identifying poor reporters

• engage with companies to encourage them to adopt better reporting standards

• create benchmarking indices on sustainability performance in Asian markets

• compare sustainability performance across and within markets in the Asian region

To policymakers

• understand where disclosure is lacking against other locations

• track performance after disclosure regulations have been implemented

To civil societies NGOs and Media

• highlight companies with poor disclosure which may indicate significant environmental, social or transparency issues

• report on non-compliance with international and local environmental and social regulations

• understand which sectors and companies may suffer future reputational risk

• track performance on sustainability issues as a KPI of a programme or project

Academies

• assist further comparative studies on environmental, social and governance performance and how it relates to financial performance thus providing the ‘proof’ required for more investors and companies to focus on these issues

• join the project to build capacity on sustainability disclosure within their institutions

A glance of the 2009 rating

Rank Company Stock Exchange Score 2009 (%) GRI1

1ANZ Banking Group Ltd.

Australia 98.0 A+

2BHP Billiton Limited

Australia 95.1 A+

3Tata Csultancy Services Ltd.

India 90.2 A

4Westpac Banking Corporation

Australia 89.2 A+

3Tata Consultancy Services Ltd.

India 90.2 A

• From the list is can be gathered that the Australian companies dominate the list. Followed by India, Japan, China, Hong Kong, Malaysia, the Philippines, Thailand, Singapore and Pakistan. Almost all companies on the list have recognized brands who view disclosure as an important aspect of their reputation. Only two Indian Companies (Tata Consultancy and ITC) make it into the top ten. And the top performers are dominated by the banking and primary industry sectors. Increasing levels of disclosure has been found in the Asian region, but this is still poor compared to that in Europe and North America. In India we find surprisingly high levels of disclosure, particularly from large companies with recognized brands such as Tata and Infosys. Chinese companies are now found to 'leap-frog' their Hong Kong counterparts and Pakistan remains the worst performing country.

Indian’s ASR performance

Disclosure by indicator area (%) India

Governance, Codes, and Policies 74.0

CSR Strategy and Communication 44.5

Marketplace and Supply Chain 34.0

Workplace and People 52.0

Environment 47.8

Community and Development 53.0

Top five Indian companies can be found in the top 30 ASR ranking list. After Australia, Indian companies have the second highest rating for disclosure. India’s companies are found to be most transparent in relation to governance, policies and codes of conduct. They provide more information than most companies on issues relating to community impacts and development. Disclosure on environmental issues is also relatively high

2.2 INDIAN RATING AGENCY:

2.2.1 KARMAYOG:

Karmayog, established in 2004, is a unique organization that connects citizens, civil society groups, corporates, academicians, media and government through online and offline methods.

Rating Methodology:

• List of 1000 largest Indian companies is taken as per Sales figures from the BSE Sensex as in June 2009

• Information on the 1000 companies was collated from the company’s website and Annual Report of 2008-2009

• Impact of the products and processes of the company is taken into account

• CSR initiatives of the company for the current period is studied, including a comparison with previously listed CSR initiatives , as well as rating level assigned in the Karmayog CSR Ratings, 2008.

• Companies are rated from Level 0 to Level 5 (Level 5 being the highest)

• Rating is based on Sufficient, Necessary and Negative Criteria for different levels

• All companies were informed of the assigned rating and requested to respond with further information, if necessary

• The Karmayog CSR Rating of any company is open to review whenever new information is provided by the company

Results of the Karmayog CSR Ratings of the 1000 largest Indian companies

Table showing the results of the Karmayog CSR Ratings of the 1000 largest Indian companies

Karmayog CSR Rating 2008 Number

of Companies

Percentage of companies

Level 5 0 0%

Level 4 10 1%

Level 3 45 5%

Level 2 220 22%

Level 1 231 23%

Level 0 (Lowest) 494 49%

Total 1000 100%

Rating criteria:

A) Minimum Necessary Criteria

Necessary parameters that make a company eligible for a particular rating level:

Necessary Criteria Explanation Rating Level

If undertaking any CSR Activity Where any kind of social, developmental or community work is done

Level 1

If CSR is linked to reducing the negative impacts of company’s own products or processes

CSR activities that aim to improve processes and products of the company.

Level 2

If CSR initiatives are for the local community

CSR activities that are focused on those who are affected directly by the company

Level 3

If CSR is embedded in the business operations

CSR activities form a part of the daily business activities of the company.

Level 4

If innovative ideas and practices are developed for CSR

CSR activities enable sustainable and replicable solutions to problems faced by society.

Level 5

B) Sufficient Criteria for Minimum Rating

If the company is doing this, they automatically get this rating at least

Sufficient Criteria What this means Rating Level

Company fulfilling the basic needs of societye.g. manufacture of food

The products and services of the company are useful and benefits society

Level 1

Unique CSR activity which would not otherwise happene.g. Developing a mapping and tracking software for adoption in India

The CSR activity being undertaken by the company is not being done by government, NGOs, etc.

Level 1

Company reducing negative impact of otherse.g. A company that makes water purification & waste recycling systems

The company’s products or services provide solutions to mitigate harm caused by actions of companies, their products, etc.

Level 1

Company adopting the GRI Framework for CSR reporting

The company is committed to measuring and reporting its CSR initiatives as per a voluntary globally accepted framework.

Level 2

Company’s annual expenditure on CSR = 0.2% of sales

The company is committed to a minimum expenditure on CSR annually, and thus considers CSR as an integral part of its business

Level 3

C) Negative Criteria that usually determine the maximum possible Rating

Companies in this category will not normally get a higher rating than the one shown

Negative Criteria Reason Rating Level

Companies that make liquor, tobacco, genetically modified crops

These products are not needed by society, and cause harm to people and the environment. The CSR to do is to stop making these products.

Level 0

Companies that violate laws/rules/regulations

CSR is not limited just to how a company spends its money, but also to how it makes that money in the first place

Level 1

Companies engaged in high impact processes

Processes that severely damage the environment require extraordinary efforts by the company to reduce and repair the damage, and require greater contributions to benefit society

Level 1

Observations from the Study and Ratings

1. 509 out of 1000 companies (51%) are doing CSR.

2. 21 of the 1000 (2%) companies publish a separate Sustainability Report.

3. 30 (3%) of the 1000 companies have reported the amount spent on CSR

4. 107 out of 1000 (11%) companies are doing CSR through their own trust or foundation

5. All PSU’s undertake a basic minimum level of CSR based on mandatory regulations (e.g. relating to employment, target groups of beneficiaries, etc.)

6. Many individual companies under a group report the same CSR activities across the group

7. Several companies repeat the exact same information every year for CSR with no fresh records of the current year’s CSR, showing their low commitment to CSR.

10. Common areas in which CSR initiatives are undertaken include Education, Healthcare and Rural development

11. Many companies spread their CSR funds thinly across many activities, thus reducing the effectiveness and seriousness of their initiatives

Mandatory Recommendations

• Minimum annual CSR expenditure• CSR Reporting• Adoption of industry guidelines for improving processes• CSR linked to the skills of a company  • CSR linked to the location of a company

Non Mandatory Recommendations

• CSR philosophy to be defined• Ensure responsibility of suppliers• Create inclusive employment• Link CSR initiatives to government’s development plans• Involve employees in CSR • CSR activity to improve the industry sector• Expand Reach to benefit society• Support areas and issues that are neglected

Industry Sector Analysis:

It presents a picture of an entire industry, CSR initiatives undertaken by companies in that industry and examples of companies doing good CSR. The sector analysis helps to frame norms and guidelines for different processes across the entire sector as well as develop and encourage sector specific CSR activities. The 1000 companies were grouped into 35 industry sectors and analyzed.

Example of an industry sector with poor CSR: the Construction sector

57 of the 1000 companies are part of the construction industry 61% of the companies are doing no CSR work. 80% of the companies are below Level 2 2 companies which are at Level 3 are DLF and GMR Infrastructure Total Sales of the 57 companies’ amounts to Rs.65000 crores. If 0.2% of sales is spent on CSR (as per Karmayog’s recommendation), then annual CSR

expenditure would amount to Rs.130 crores.

Example of an industry sector with good CSR: the Banking sector

40 out of 1000 companies are in the banking industry (this does not include financial institutions) 57% of these companies are doing CSR

60% of the companies are working in the area of Rural development There are 6 Level 3 companies: (Andhra Bank, Canara Bank, ICICI Bank, PNB, Union Bank of

India, Yes Bank) Mandatory regulations on CSR for PSU banks makes this sector high performance The total Sales of 40 companies is Rs.2,60,000 cr. If 0.2% of sales is spent on CSR (as per Karmayog’s recommendation), then annual CSR

expenditure would amount to Rs.520 crores

CSR by group companies:

1. No. of Groups in this study

Of the 1000 companies studied there are 30 groups with individual companies ranging from 2 to 24

2. Largest Groups

The 5 largest groups (by sales) in this study are: Tata Group, Aditya Birla Group, Mahindra Group, Reliance (ADAG), and Essar Group

3. Same CSR reported

Most of the companies under the group report the same CSR activities across the group

4. Philanthropy

Some group companies contribute money to the group Foundation/Trust as a part of their CSR

5. CSR Expenditure

Individual companies do not mention the amount spent by the company; instead the group expenditure is listed

6. Group Foundation

The common Foundation of the group undertakes all the CSR activities, as a result of which CSR is often not connected to the processes & core competence of the individual companies

7.Benefits of CSR as a groupThere are several benefits of having a Group of companies doing CSR together:

- the group can develop tools for its individual companies to measure the impact of their CSR activities

- Individual companies can improve their CSR initiatives relative to each other, thus eventually raising the CSR of the entire group

- Best practices can be shared and applied across all group companies (similar to all companies in an industy sector)

Recommendation:

While there are synergies and various managerial reasons for companies to do CSR activities at a group level, it is necessary for each company to undertake its own CSR activities (linked to its processes and skills), while also contributing to the group’s CSR work.

3. WHAT CAN FIRMS DO TO IMPROVE THEIR RATING?

By corporate social responsibility we mean the overall impact of corporations on society at large. It extends beyond the interests of shareholders to the interests and needs of diverse stakeholders. It includes environmental, social and governance (ESG) issues. The number of independent research firms that rate publicly listed companies' ESG performance has been growing globally. Firms must be proactive in managing their CSR ratings. Below are seven best practices that will help firms not only improve its CSR ratings, but also gain more respect from stakeholders:

1. Understand each dimension of the CSR ranking

There are no absolute standards for CSR but there is a growing consensus regarding the sections that should be examined. But emerging rating agencies use even more fine-grained, proprietary criteria, such as the number of women on the board.

2. Understand the weights of each CSR dimension that applies to your firm

Every dimension considered is not equal. Its relative importance, or weight, differs by industry. For example according to Jantzi's rating in Canada, the category of human rights (which includes labor rights and conditions at supplier factories) carries a weight of 28% in retailing, but is not included at all in banking.

3. Do good, but do no harm

Independent rating agencies collect information not only regarding the firm's positive activities reported in their CSR reports, but they also look deep for the activities that are perilous to society, such as human rights abuses and environmental failures. Firms should not only publicize their good, but also manage your risks and prevent the downside.

4. Know your CSR peer group

As there is no standard set of dimensions to evaluate CSR performance, rating is usually based on the peer group performance. Thus by tracking their performance the firm can monitor its own CSR ratings. So it should be the firm’s priority to meet the CSR performance of your peers.

5. Show leadership among your peers by learning from non-peers

Rising to the top of the CSR rankings, implies not just following one’s peers, but leading them. The best place to learn is not from the peer group alone, but outside it. Often the most innovative ideas can be borrowed from them and may do exceptionally well across some criteria.

6. Be specific and transparent

Every firm will have a skeleton meaning a downside. CSR standards are not static as stakeholders and investors constantly ask for more. Therefore it is important to report accurately and honestly, using hard data rather than just motherhood statements.

7. Develop a long-term CSR strategy and be patient

Firms should keep their eye on the vision and the outcome of their strategies. CSR is not merely a public relations activity; it needs to be a strategic priority that weaves throughout the entire organization. Only then can you mitigate the risks and see new opportunities.

4. RELIABILITY OF THE RATING MECHANISMS:

Rating institutions usually share communication and information transfer processes with the companies they evaluate. Without doubt, such cooperation makes good sense from a quality perspective, with respect to the information that is needed for a CSR evaluation. However, the current market structure for CSR ratings is characterized by sustainability and CSR paradigms that vary from one institution to another and there is a broad diversity of methods and survey criteria, a cooperation dilemma becomes apparent. For economic reasons, companies will not be able to provide all research and rating institutions with the information they need. Since the market for CSR ratings has taken only a few steps toward standardization so far, companies will seek to implement a process of selecting and concentrating on

certain rating institutions if they are not already doing so, thus improving the reliability of the their company’s rating.

The challenge facing CSR ratings

The aim of corporate ratings which are as integrative as possible is to improve the identification and understanding of the corporate risks, as well as the aspects boosting corporate value. CSR rating is a relatively recent development. The market is very dynamic, free of government regulation, and characterized by many small agencies falling back on very different methods and with a huge range of motives.

Strengthening CSR ratings’ reliability:

Dialogue- Companies should seek dialogue with rating agencies and vice versa thus fulfilling mutual expectations.

Transparency- Companies should maintain transparency in basic assumptions, criteria, analysis steps and weighting.

Diversity versus standardization - Rating providers position themselves in the market on the basis of their methodology and the focus of their research and analysis. However, wherever possible standardization should be emphasized.

Quality- If the quality of the methodology used for rating and professionalism of the staff/managers is maintained, then reliability automatically comes into picture

Simplification and acceleration of work processes- The rating process consists of many different steps which place considerable and diverse practical challenges on the staff, thus increasing the time spent and making the job cost intensive. Steps should be taken to improve the flow of information and efficiency of the work processes.

Keeping barriers between rating and consulting services- Many CSR rating agencies also work as management consultants. These functions can be so interlinked that they jeopardise or threaten to jeopardize the independence and objectivity of the rating activities. Steps should be taken to establish a barrier between the two.

REFERENCE:

www.asria.org

www.karmayog.org

www.econsence.de

www.reputationinstitute.com

www.global-ethic-now.de

www.vigeo.com

www.gnsbizforum.com

www.csr-asia.com

www.csrinfo.org

www.asiansr.com