Dow Jones have demonstrated that Corporate Sustainability is an "investable concept", linking the results to strengthening not just the environment but also the societies and economies of both the developing and developed world.
They say that "Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments". They define a set of criteria and weightings broadly categorised into economic, environmental and social measures to assess the corporate sustainability of an organisation. These assessments are carried out on an ongoing basis and entry into the index is conditional on maintaining performance against these metrics.
The oil company BP plc. was removed from the DJSI on May 31, 2010 due to the extent of the oil-spill catastrophe in the Gulf of Mexico and its foreseeable long-term effects on the environment and the local population. Whilst negative publicity created by such disasters often has an immediate impact on shareholder value, the market and public opinion is often fickle. Its removal from the DJSI however could represent a longer term impact as third party investment portfolios guided by DJSI as an arbiter and focussed on sustainability continue to invest elsewhere.
Such indexes create a more consistent influence on investment behaviour and in turn on the corporate behaviour of public firms, not just informing socially responsible investment decisions but influencing the behaviour of public firms towards Corporate Social Responsibility (CSR). Put simply, this is Carrot and Stick Corporate Social Responsibility and the DJSI is a judge of which tool is most appropriate.
Whilst Dow Jones may have led the way by creating the first sustainability index, this has now become a firmly established part of economic theory and practice.
The FTSE setup the FTSE4Good Index Series, which has been designed to measure the performance of companies that meet globally recognised corporate responsibility standards. Their aim is to make their brand the choice for responsible investment products.
Scaling this up to performance of countries and Government's abilities to meet their environmental goals: Between 1999 and 2006, variations on this thinking have been further developed by the Yale Centre for Environmental Law and Policy with Columbia University's Center for International Earth Science Information Network (CIESIN), and the World Economic Forum resulting in the 2005 Environmental Sustainability Index and subsequent 2008 Environmental Performance Index.
The latest Environmental Performance Index is now available as an interactive website. The 2010 Environmental Performance Index (EPI) ranks 163 countries on 25 performance indicators tracked across ten policy categories covering both environmental public health and ecosystem vitality. These indicators provide a gauge at a national government scale of how close countries are to established environmental policy goals.
Sustainability is moving more and more towards science, business, management, economics and law.
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