Does AA1000 Assurance Have an Effect on Perceived Sustainability Performance?

Does AA1000 Assurance Have an Effect on Perceived Sustainability Performance?

average overall CSRHub rating for companies that used AA1000 in 2019 further exceeded the average rating for all rated companies

Tuesday, September 21, 2021 - 1:00pm

CAMPAIGN: CSRHub Research

CONTENT: Blog

Many companies spend time and money trying to make sure that the ESG data they report has been properly collected and communicated.

One system that supports this is the AA1000 Assurance standard.

AccountAbility publishes, distributes and administers the standard. The licensed assurance providers have the license to apply the standard to their clients.

CSRHub recently reviewed a list of entities who during 2019 had some or all of their ESG data assured using the AA1000 approach.

Three hundred and thirteen of these companies, associations, and not-for-profit entities had entries in CSRHub’s rating system. One hundred and ninety-five of them were fully-rated through the 2018-2021 period.

The chart below shows the average overall ratings for these one hundred and ninety-five companies from May 2019 to May 2021.Assured data from 2019 would usually have become available during the first half of 2020. By May of 2021, the average rating for the companies that had assured their data had risen several points.

Before the assurance cycle, the average rating for these companies was already well above the average for all of the companies we track. This increase in separation put the AA1000AS-assured companies into an elite group. ESG ratings have a strong central tendency. A shift in rating from 55 to 58 would boost a company from the 70th percentile to the 80th percentile. An improvement in overall rating generally stems from a slight improvement in Governance scores, a more significant improvement in Environmental scores, and bigger gains in our two Social scores—Employees and Community.

Companies that used AA1000AS also saw a rise in the average number of sources who followed them—from 19.8 sources to 23.5 sources. We have examined the statistics behind these changes and estimate that there are less than 0.01% odds that they are merely due to chance. Companies that included the AA1000 assurance in their sustainability programs gained points in all of the areas that CSRHub tracks, and displayed increased interest in their messaging surrounding their sustainability activities.

The decision to leverage any kind of assurance standard on ESG data reporting generally comes from within an organization’s C-Suite. Sustainability professionals from organizations of all shapes and sizes have shown a strong preference for the AA1000AS Assurance Standard, as it holds the organization accountable for adherence to the AccountAbility Principles as a precursor to data verification.

Our data suggests that organizations who are willing to spend the time and resources required for an external assurer to review their company’s performance positively impacts how expert ESG ratings sources independently view and appraise them.

Bahar Gidwani is CTO and Co-founder of CSRHub. He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

About CSRHub

CSRHub offers one of the world’s broadest and most consistent set of Environment, Social, and Governance (ESG) ratings, covering 20,000 companies. Its Big Data algorithm combines millions of data points on ESG performance from hundreds of sources, including leading ESG analyst raters, to produce consensus scores on all aspects of corporate social responsibility and sustainability. CSRHub ratings can be used to drive corporate, investor and consumer decisions. For more information, visit www.CSRHub.com. CSRHub is a B Corporation.