Its old news now, but the iconic Dow Jones Sustainability Index released the results of its latest annual review in September, and not without some controversy.
As has happened every year since the creation of the index in 1999, Dow Jones and SAM have identified those that made the grade and had been added to the list and those that had failed and were being dropped from the indexes. Earlier in 2010, BP was dropped from the indexes in response to the Deepwater Horizon oil spill and prior incidents such as the explosion and worker deaths at the company's Texas City refinery in 2005 and failures on the Trans-Alaska pipeline in 2006. So far not so controversial.
However, puzzlingly, to replace BP, in September DJSI chose to add Haliburton to the list. That is the same Haliburton that was BP's partner on the Deepwater Horizon drill rig. With responsibilities still being sorted out for the oil spill disaster the decision certainly called into question DJSI's sustainability credentials.
For example, John Collins Rudholf, writing in NYTimes Green blog .....
"Halliburton was chosen after a “thorough analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation, supply chain standards and labor practices,” Dow Jones said in a statement."
"Some market observers found the selection puzzling, however. Halliburton, after all, was deeply involved in the BP drilling operation that ultimately caused an estimated 4.4 million barrels of oil to spill into the Gulf of Mexico. The company remains under investigation by the Justice Department for its role in the disaster, and could still face civil or even criminal sanctions."
Writing at Social Funds website, Robert Kropp went even further, questioning how DJSI came to include a variety of companies with questionable public histories ......
"The largest companies deleted were Toyota, Royal Dutch Shell and UniCredit. Toyota, of course, has received considerable media attention this year because of multiple product quality defects in its automobiles, while Shell -- currently listed as the world's second-largest corporation in Fortune Magazines Global 500 -- is responsible, along with ExxonMobil, for much of the estimated 546 million barrels of oil that have spilled in the Niger Delta over the last 50 years.
The question of why companies with such poor environmental records would be included in a sustainability index in the first place was highlighted earlier this year, when BP was removed from the DJSI World following the Gulf of Mexico oil spill. Index rules allow for elimination of companies from the DJSI following extraordinary events."
The DJSI seem to be relatively transparent, providing relatively detailed descriptions of their methadologies. They follow a best-in-class approach and include sustainability leaders from each industry on a global and regional level respectively. The annual review of the DJSI family is based on a thorough analysis of corporate economic, environmental and social performance, assessing issues such as corporate governance, risk management, branding, climate change mitigation,supply chain standards and labor practices. It accounts for general as well as industry specific sustainability criteria for each of the 57 sectors defined according to the Industry Classification Benchmark (ICB).
|
Dimension |
Criteria |
Weighting (%) |
|
Economic |
Codes of Conduct / Compliance / Corruption & Bribery |
6.0 |
|
|
Corporate Governance |
6.0 |
|
|
Risk & Crisis Management |
6.0 |
|
|
Industry Specific Criteria |
Depends on industry |
|
Environment |
Environmental Reporting* |
3.0 |
|
|
Industry Specific Criteria |
Depends on industry |
|
Social |
Corporate Citizenship/ Philanthropy |
3.0 |
|
|
Labour Practice Indicators |
5.0 |
|
|
Human Capital Development |
5.5 |
|
|
Social Reporting* |
3.0 |
|
|
Talent Attraction & Retention |
5.5 |
|
|
Industry Specific Criteria |
Depends on industry |
However, as Halliburton's inclusion demonstrates some of the decisions are at best counter-intuitive and may even suggest a lack of real rigor - perhaps even lack of understanding about what "sustainability" entails.
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