Benchmarking and rating

Assess and compare practice and performance to inform stakeholders and drive accountability

Last updated: July 3, 2023

Description

Benchmarks and ratings are assessments and rankings of organisations’ sustainability practice and performance, relative to each other or against sustainability thresholds. While benchmarking can be carried out by organisations themselves, it is primarily conducted by external parties that collect and standardise data from a range of organisations. Such external benchmarks and ratings can provide helpful additional inputs to organisations’ own impact management processes.1 They are also important to organisations’ stakeholders, such as investors or clients, who may rely on them for their own decision-making processes and/or to hold organisations accountable.

The scope, audience, underlying methodology and providers of benchmarks and ratings can vary and are outlined in the following sections.

Audiences

A range of audiences can use ratings and benchmarks, including:

• Organisations themselves, to inform and adjust impact management strategy and practice;
• Investors, to inform and adjust investment decisions;
• Consumers, to inform and adjust consumption choices;
• Civil society, to direct public attention, support and partnership efforts; and
• Policymakers and governments, to inform policy and regulation.

Providers

Many ratings providers are for-profit businesses, all or part of their results are made available for a fee, or they may combine a for-free product offering with other activities (such as consultancy or advisory services, or events and media offerings). Other benchmark providers are set up as non-profits and rely on donations or grants.

Scope

Benchmarks and ratings may focus on comparing organisations’ practice (i.e. impact management processes) or performance (i.e. outcomes and impact), or a combination of the two.

In the case of commercial ratings, many providers focus primarily on rating organisations’ sustainability risks and risk management processes, rather than their impacts and impact management processes (although some information on impacts may be included).

Benchmarks and ratings may consider a specific sustainability topic (e.g. climate change) or multiple sustainability topics, and may consider all or part of an organisation’s activity; or, in the case of financial institutions, all or part of its portfolio.

Users of benchmarks and ratings should carefully consider the scope of different benchmarks and ratings, given the variability between these and the conclusions that can or cannot be reached, depending on their scope.

Methodology and data collection

Each benchmark or rating provider devises its own methodology. This involves determining:

• the specific sustainability topics covered;
• the data points, indicators and metrics to consider;
• a scoring system for each data point (this may or may not refer back to societal or ecological thresholds and/or the views of affected stakeholders); and
• a weighting system to aggregate across data points, in order to establish each company’s position in the ranking or benchmark.

Benchmarking and rating providers should openly publish their methodologies, given their potential to significantly influence organisations’ practices and policies. They should also subject their methodologies for public consultation to ensure that organisations themselves and/or their stakeholders can weigh in on their development.

Most benchmark and ratings providers rely, at least partially, on publicly available information (such as financial and sustainability reports) on the companies they assess. Some providers also distribute a questionnaire and/conduct interviews in order to access more data. Their reliance on publicly available information highlights the importance for organisations to adhere to clear reporting and disclosure standards,2 as well as the relevance of third-party verification and assurance.3

When considering the scope of the information, users of benchmarks and ratings should carefully consider methodologies before drawing conclusions, given the differences between methodologies and the important assumptions that accompany them.

When using benchmarks or ratings that compare different organisations’ performance, users should be careful not to confuse good relative performance with sustainability performance itself. For some impact topics, good relative performance may be synonymous with sustainable practices and performance. But in other cases, some organisations may have unsustainable practices and performance despite having good relative performance, because a large part of the sector may be operating below sustainability thresholds.

Also, benchmark and rating providers whose methodologies aggregate data across different impact topics should be transparent about the methodological choices and assumptions made. This is because the condition of each population group or component of the natural environment needs to be maintained above their own specific threshold, in other words: the good condition of one cannot compensate the bad condition of another. Disaggregation of aggregated scores should therefore be made possible to users, so that they can compare organisations’ practice and performance relative to specific topics.

Resources

Public good benchmarks and benchmark providers

Topic-specific ratings

Sector/system specific ratings