INSTITUTIONAL DYNAMICS OF CORPORATE SOCIAL RESPONSIBILITY STANDARDIZATION:
A MULTILEVEL PERSPECTIVE ON THE ESG RATING FIELD
Emma Avetisyan*
SKEMA Business School
Campus Sophia – Antipolis
60, Rue Dostoïevski – BP 085
06902 Sophia- Antipolis Cedex, France
Tel.:+33 (0)4 93 95 46 29
Jean-Pascal Gond
HEC Montréal
Édifice Côte-Sainte-Catherine
3000, chemin de la Côte-Sainte-Catherine
Montréal (Québec), Canada H3T 2A7
Tel.: 514 340-7029
Fax: + 1 514 340-5635
jean-pascal.gond@hec.ca
EGOS 2012 Sub-theme 15: Multiplicity and Plurality in the World of Standards –
Convenors: Frank den Hond, Marie-Laure Djelic, Kristina Tamm Hallström
Keywords: Corporate Social Responsibility, ESG rating agencies, Standardization Dynamics,
Institutional Change, Multilevel Analysis
* Corresponding author
1
INSTITUTIONAL DYNAMICS OF CORPORATE SOCIAL RESPONSIBILITY STANDARDIZATION:
A MULTILEVEL PERSPECTIVE ON THE ESG RATING FIELD
Corporate Social Responsibility (CSR) has recently emerged as an organizational field
aiming at regulating corporate behavior across variety of institutional arenas (Aguilera et al.,
2007; Campbell, 2007; Gond, Kang, and Moon, 2011; Matten and Moon, 2008). Central to
this process is the development of CSR standards that make the ambiguous notion of CSR
calculable and manageable, laying the ground of a global “CSR infrastructure” (Gilbert,
Rasche, and Waddock, 2011; Waddock, 2008). CSR standards support the institutionalization
of CSR practice within corporations through the pressure they exercise via financial markets
(Déjean, Gond & Leca, 2004; Slager, Gond, and Moon, 2010, 2012). CSR standardization
enhances the development of the so-called “markets for virtue” (Vogel, 2005) such as
responsible investment, by providing quantified tools that meet investors’ expectations and
professional standards (Acquier and Aggeri, 2007; Déjean, Gond, and Leca, 2004).
Although organizational standardization is exercised through a variety of processes
(Brunsson and Jacobsson, 2000)—such as the development of an “audit society” (Power,
1997) or the emergence of new rankings or ratings that discipline organizational actors
(Sauder and Espeland, 2009)—little is known about how modes of standardization taking
place at a variety of levels of analysis interplay to shape organizational behavior and push it
toward CSR or sustainability (Aguilera et al., 2007). As a result, the dynamics stimulated by
the potential contradictions of attempts at normalizing CSR behaviors engaged by a variety of
agencies with different expectations at the organizational field, national, regional, and transinternational field levels has been overlooked (Gilbert et al, 2011; Gilbert & Rasche, 2007).
This neglect is especially problematic in the CSR domain which is characterized by a plurality
of meaning and definitions (Carroll, 1999, 2008; Gond & Moon, 2011), that have been shown
to depend heavily from the institutional contexts within which actors operate (Matten and
Moon, 2008), and given that numerous institutions—such as national governments or the
2
European union—seek to “govern” CSR self-regulation (Gond et al., 2011). In addition, the
lack of knowledge about the interplay across standardizations levels prevents the theoretical
consolidation of a much needed “multilevel” that could contribute the micro / macro divide in
CSR theory (Aguinis and Glavas, 2012; Aguilera et al., 2007).
This paper starts addressing these gaps by focusing on the institutional dynamics of
standardization within and around the field of CSR or Environmental, Social and Governance
(ESG) rating.i ESG ratings and indexes can be regarded for at least two reasons. First, some
of them have been accepted by scholars as a standard for CSP measurement (Gond & Crane,
2000). As such, the KLD data set became de facto research standard for measuring CSP in
scholarly research (Sharfman, 1996; Waddock, 2003; Wood, 2000). Second, ESG ratings and
CSR index based on these rating such as the FTSE4GOOD (launched by FTSE) were seen as
a de facto standard within the responsible investment field and was mobilized by corporations
for good CSR practices (Déjean, 2006; Slager et al., 2012). Since the late 1980s, a plethora of
ESG rating agencies have sprung up, developing new rating methodologies to meet the (new)
needs of concerned investors (Avetisyan and Hockerts, 2012; Déjean et al., 2004; Gond,
2006). Because ESG rating agencies operate on the financial markets, they are more likely to
alter corporate behavior than other CSR standards (Slager et al., 2012; Vogel, 2005) and they
may reflect current economic transformations such the broader process of global CSR
standardization (Gilbert et al., 2011). In addition, due to their position in the CSR field at the
interface of corporations, investors, media organizations, and civil society organizations (e.g.,
NGOs or labor unions), these agencies offer a unique window to uncover the current
standardization dynamics at play in the (meso) ESG rating field and the process whereby
social and environmental are progressively translated from global (macro) institutional
spheres of standardization to (micro) intra-organizational corporate practice. Finally, because
these agencies provide competing modes of CSR evaluation, the study of their interplay can
3
advance our understanding of organizational standardization competitive dynamics.
Therefore, we relied on this specific organizational field to shed light on the CSR
standardization dynamics within and across levels of analysis.
Our analysis relies on a set of interviews with experts from several of the main players
in the ESG rating field and their key stakeholders as well as on secondary data. Together
these data allow reconstructing the historical emergence and dynamics of this fieldand
clarifying its organization. Our findings capture the ESG rating field functions as a process
translating a set of social, ethical, environmental and governance issues across levels to the
corporations. Specifically, our analysis points to three core tensions that structure the
dynamics of ESG rating standardization: a tension between global and national processes of
CSR standardization at the macro level; a tension between differentiation and homogenization
of CSR standards within the meso field of ESG rating (inter-organizational); and finally a
tension between tailoring and industrialization of CSR standards that underlie the search for a
sustainable business model at the micro level (organizational). Through a second stage of
analysis, we build on our data to highlight the interplay between these three levels and
describe how each dynamics of CSR standardization contribute to shape the two others. This
allows theorizing how standardizing organizations (ESG rating agencies) balance the tensions
across multiple levels of analysis in their struggle to impose their approach to CSR standards.
In approaching ESG ratings standardization as a multilevel process structured by the
management of a variety of tensions, our paper makes three theoretical contributions to the
study of organizational standardization and CSR. First, we theorize the functioning and
dynamics of an important group of actors in the “CSR calculative infrastructure” (Slager et
al., 2012; Waddock, 2008) in showing how they collectively contribute to shape managerial
attention to specific issues by translating and materializing these issues. In so doing, we
uncover an important aspect of the broader process whereby social, environmental, ethical or
4
governance issues are progressively incorporated within market functioning (Shamir, 2008)
and advance the understanding of CSR standardization (Gilbert et al., 2011). Specifically, we
clarify how standardizing agencies extend and transform their domain of relevancy over time
(Durand and McGuire, 2005).
Second, our findings also highlight the tensions that structure the dynamics of CSR
standardization within a variety of levels of analysis. These tensions explains how and why
ESG issues resist to some extent commensuration and homogenization and point to the
paradoxical need for agencies to maintain their differences for marketing and intraorganizational purpose even though they collectively need to reduce differences in their
stakeholders’ perceptions of their methods and ratings. This conceptualization allows
considering how standardizing organizations balance multiple tensions within and across
levels of analysis.
Third and finally, we provide a framework that clarifies the relationships between CSR
standardization processes across levels of analysis and that can be applied to other field than
ESG rating. This framework brings together various streams of research on intraorganizational, organizational and international standardization dynamics (Brunsson &
Jacobsson, 2000; Djelic & Quack, 2003; Djelic & Sahlin-Andersson, 2006; Tamm Hallström,
2000) and contributes to build a consolidated multilevel CSR theory (Aguinis and Glavas,
2012; Aguilera et al., 2007).
CORPORATE SOCIAL RESPONSIBILITY STANDARDIZATION:
TOWARDS A MULTILEVEL PERSPECTIVE
Organizational Standardization
Standardization has been defined as a growing form of organizational regulation that
involves the construction of rules that define what adopters should (or should not) do
(Brunsson and Jacobson, 2000: 1). Organizational definitions of standards point to standard
design activities—such as calculative or rule-making activities (Ahrne et al., 2007; Déjean et
5
al., 2004; Timmermans and Epstein, 2010), legitimacy-building activities (Durand and
McGuire, 2005; Kerwer, 2005) as well as monitoring activities (Gilbert et al., 2011; Power,
1997) as core elements within standardization dynamics (Slager et al., 2012: 4).
Thus far, organizational studies of standard have been dominated either by a focus on
standard diffusion or considerations related to the process of standard adoption by
organizations (Gilbert et al., 2011: 38). On the one hand, the diffusion perspective on
standards has clarified the factors driving the diffusion of standards at the industry, national or
international levels of analysis (Delmas, 2002; Delmas and Montiel, 2008; Delmas and
Monte-Sancho, 2011). On the other hand, the adoption perspective on standards suggests that
diffusion processes may be superficial as it is subjected to organizational “decoupling”
(Boxenbaum and Jonsson, 2008; Meyer and Rowan, 1977), that is a ceremonial and
superficial adoption. Studies of CSR standards diffusion such as ethical code of conducts or
environmental standards tend to confirm the plausibility of decoupling as an outcome of
standard diffusion (Aravind and Christmann, 2011; Behnam and MacLean, 2011; Boiral,
2003; Weaver, Treviño and Cochran, 1999).
However, organizational capacity to decouple their activities has been shown to depend
heavily on the nature of standard at hand (Fiss and Zajac, 2006), and recent studies of the
influence of rankings on organizational behavior suggest that some standards may have a
lasting influence on organizational practices (Sauder and Espeland, 2009; Slager et al., 2010,
2012). Accordingly, the understanding of the process of standard’s organizational influence
remains to a large extent bounded by our knowledge of the organizational activities that
underlie the production, maintenance and regulative power of standards.
Recent research addresses this shortcoming by focusing on how organizations produce
standards rather than on the impact or outcome of standardization processes. These studies
have clarified the relational nature of standards-making by focusing on the active co-
6
construction of standards by “standardizing” and “standardized” organizations (Seidl, 2007)
or by analyzing the multi-stakeholder processes driving their construction and dynamics
(Tamm Hallström, 2000; Fransen and Kolk, 2007). For instance, Etzion and Ferraro (2010)
show how groups involved in the establishment of Global Reporting Initiative (GRI) standard
have purposefully built analogies to enhance the legitimacy of their standards through
successive transformations. Slager et al. (2012) completed this investigation of the activities
underlying the building of a standard in analyzing the construction of the FTSE4Good index
as a form of “institutional work” involving continuous activities. These authors show how the
combination of these micro-level activities progressively enhances the regulative power of the
standards over the regulated organizations.
Their contributions to the dynamics of standardization nothwistanding, prior studies of
the organizational production of standards are restricted by their focus on a single process of
standard construction (e.g. GRI, ISO 26 0000, or FTSE4Good) that generates several
concerns. First, such an approach tends to restrain the focus of analysis on a focal
organization and its key stakeholders neglecting the interplay of the process of standard
production with concurrent process taking place at other level of analysis. In particular the
competitive dynamics underlying the organizational production of standards tend to be tuned
down in these studies. Second, this approach neglects the potential interdependencies
between standards that may play a crucial role in the broader process of CSR
commodification by enhancing standards’ interoperability (Acquier and Aggieri, 2007;
Henderson and Clark, 1990). Third and finally, such a research design prevents the
theorization of processes that cut across standardization processes levels of analysis,
preventing the development of a multilevel process of standardization. However, several
scholars have pointed to the need for a consolidated understanding of CSR across levels of
analysis (Aguilera et al., 2007; Aguinis and Glavas, 2012; Gond et al., 2010).
7
In this study, our aim is to shed light on the standard competitive dynamics and
interplay by providing a multilevel understanding of how a variety of standardization
dynamics interplay in the CSR domain. We specify some of the core dimensions of such a
multilevel perspective.
A Multilevel Perspective on Corporate Social Responsibility Standardization
Although it is nowadays admitted organizations evolve in a “world of standards”
(Brunsson and Jacobsson, 2000), nowhere is this affirmation clearer that in the domains of
social, ethical, governance and environmental issues (Waddock, 2008). Over the last twenty
years, trends such as globalization and deregulation have created governance gaps (Ruggie,
2003; Scherer and Palazzo, 2011) that have been partially addressed by the development at
the international level of a “soft law” that took the form of “international accountability
standards” (Gilbert et al., 2011). These standards create a new mode of governance that has
been described as “transnational regulation” (Djelic and Sahlin-Andersson, 2006: 3-4). They
not only encompass CSR reporting guidelines (aforementioned GRI), ethical principles
(United Nations Global Compact) but also environmental issues (ISO 14 001), when they do
not take “organizations” as a whole as their focus of standardization for CSR (ISO 26 000)
(Tamm-Hallström, 2008).
However, CSR and governance standardization processes are not bounded to global or
transnational processes, they also emerge at the industrial level through the production of
dedicated codes of conducts and standards (King and Lenox, 2000), and at the national
level— with initiatives from government to regulate the sphere of CSR—as for instance the
French law on New Economic Regulation from 2001 (Berthoin-Antal and Sobczak, 2007).
Similarly to pressures leading to social changes through CSR (Aguilera et al., 2007),
processes of CSR standardization have multiple origins and are deployed across the
8
transnational / global levels, inter-organizational / industrial levels and organizational or intraorganizational levels.
The proliferation of CSR standards across levels of analysis creates issues and threats
that correspond to gaps in our knowledge of CSR standardization dynamics. A first concern
relies to the multiplicity of potential contradictory demands from a wide range of CSR
standards and how organizations cope with potentially contradictory demands as expressed
through CSR standards (Gilbert et al., 2011). This issue is of a special importance for
standardizing organizations that have to catch-up with the standardizing efforts deployed
across levels in order to maintain both their legitimacy and technical relevancy.
A second issue relates to the competitive dynamics that surrounds the production of
CSR standards from a certain type. Prior studies have mainly focused on successful standards
(e.g., Déjean et al., 2004; Etzion and Ferraro, 2010) neglecting the competitive dynamics
inherent to fields within which multiple CSR standards co-exist. As a result the field-level
dynamics of CSR standard production remained under-studied.
A third concern relates to the cross-levels relationship across standards and the problem
of standards inter-operability. Although Acquier and Aggeri (2007) suggest that these
dimensions may be central to the success of standardizing processes in the CSR domain in
allowing the co-construction of standards’ legitimacy and technical feasibility, the
relationship between distinct processes of CSR standardization has been so far overlooked.
In this paper, we start focus on these three blind spots of the CSR standardization
dynamics by focusing on the following research questions:
Research Question 1: How are CSR standardization dynamics structured within macro
(transnational), meso (inter-organizational) and micro (intraorganizational) levels?
Research Question 2: How do CSR standardization dynamics interplay across the macro
(transnational), meso (inter-organizational) and micro (intraorganizational) levels?
9
To address these questions, we focus on the case of ESG rating agencies that have
emerged over the last 20 years as an important category of players in the growing field of
CSR and have structured the development of the responsible industry in several countries.
METHOD AND DATA
Research Design
Although quantitative analyses are commonly used to conduct multilevel analysis,
qualitative studies may also be appropriate to uncover overlooked bridges across levels of
analysis (Chan, 1998; Hitt et al., 2007). In the context of this research, our main level of
analysis is the organizational field of ESG rating agencies. This field encompasses the
agencies themselves as well as all their stakeholders such as their customers (investors who
buy their ratings or analysis), corporations that provide them with data, experts who help them
defining their methods (Igalens and Gond, 2005). Because of the nature of their activities,
these agencies are directly or indirectly affected related to broader macro and transnational
field of CSR standardization that produce new CSR standards such as reporting standards
(e.g., GRI) or standards for managing CSR processes. Analyzing the functioning of these
agencies also allows uncovering the micro-dynamics that structure their internal processes of
standard production in relation to their stakeholders that will constitute the micro level of
analysis in the context of this empirical research.
Because our main research interest lies in the functioning of ESG rating as a field, we
adopted a multi-case study research design (Eisenhardt, 1989; Yin, 2003). Relying on
evidence from multiple cases allows for triangulating data, a process that enhances qualitative
analyses validity and robustness (Yin, 2003). The cases have been sampled theoretically
based on two main criteria. The first criterion is the historical significance of these agencies
in the ESG field and in their institutional context. Several cases pioneered the activity of ESG
10
rating in their country context—KLD in the US, Eiris in the UK, Arese/Vigeo in France—and
has a significant influence on the development of the RI field.
These second criterion consisted in maximizing the diversity of ESG agencies
functioning (Eisenhardt and Graebner, 2007), so that we can evaluate differences in how they
react and are influenced by the macro and micro levels dynamics. We focused on six ESG
rating agencies that are representative of the diversity of approaches to ESG rating in the USA
and Europe (KLD, Eiris, Vigeo, BMJ-Ratings, SAM, Innovest). These agencies have
distinctive features in terms of universe of companies rated, information collection methods,
methodologies for data analysis and processing, criteria of evaluation. The importance which
agencies give to different services within their offer indicates differently their activity: rating
agency (Vigeo, BMJ Ratings), research organization (KLD, Innovest, Eiris), asset
management company (SAM). Their juridical status varies from the non-profit association to
the limited company passing by research institute and fund manager. Also, the research
undertaken by these agencies is addressed to several clients such as investors, companies,
associations, communities, regions, governments etc. We hold that the variety of stakeholders
to whom the research is addressed as well as the origins of these agencies give birth to
different strategic positions and often explain the criteria used in the analyses. Table 1
provides a brief description of each agency along a set of criteria.
---------------------------------------------INSERT TABLE 1 ABOUT HERE
---------------------------------------------The case studies can provide intricate details and understanding when “how” and “why”
questions are being posed and are suitable to explore uncovered empirical relationships (Yin,
2003). Also Lee (1999: 43) argues that qualitative research is appropriate when
contextualization, vivid description under study is important. Contextualization is central tour
inquiry as we aim at clarifying the “embeddedness” (Granovetter, 1985) of individual ESG
11
agencies micro-level dynamics within the ESG rating field, as well as the embeddedness of
this field within the broader macro context of CSR standardization.
Data collection
Interviews. To capture the view point of a variety of stakeholders in the ESG rating
field that constitutes our main unit of analysis, we adopted a multi-perspective approach by
interviewing three categories of informants: key individuals of ESG rating agencies, SRI
experts, and CSR managers of international companies rated agencies. Our interview grid
includes questions that covered topics related to the micro-dynamics (methodological changes
and factors driving the analysis of new ESG issues) as well as macro-dynamics (influence and
role of macro CSR standards on their practice). In so doing, we could explore the interplay
across levels of analysis, even though our core empirical lens was the ESG rating field.
Given the purpose of our study, we focused on informants who could provide us with
evidence in regard to the methodological developments and the strategy and history of the
organization. We therefore interviewees members of CSR rating agencies who occupied high
level positions, such as (co-)founders of rating agencies and Responsible Investment indexes,
CEOs and vice-presidents, directors of methodology, directors of research, heads of SRI
development and senior RI Analysts. In addition, we also interviewed former staff of these
agencies to capture the dynamics of field changes when the agencies were being created.
Further, the interviews with RI experts and CSR managers of companies helped us to clarify
some aspects of the interplay between the ESG rating field (meso level), CSR standardization
(macro level). In addition, this second category of interviewees could help identify and/or
validate field-level perceptions of key differences among individual rating agencies (micro
level). Table 2 presents the profile of the interviewees who were chosen following this
sampling process. All the interviews were taped and transcribed.
---------------------------------------------INSERT TABLE 2 ABOUT HERE
12
---------------------------------------------Secondary data. The factuality of the first-hand information obtained from the
interviews was verified and complemented with secondary data from a variety of sources.
First, we collected press articles, the data provided in official websites of these ESG rating
agencies, as well as prior reports on this field, such as the “Rate the Raters report”, the report
produced by Novethic reports, or the Guide to Sustainability Analysis Organizations,
published by ORSE/ADEME in 2007. Second, we consulted prior academic studies of the
ESG or Responsible Investment fields in the different national or institutional contexts under
study (e.g., Arjaliès, 2010; Déjean et al., 2004, 2012; Giamporcaro, 2006; Gond, 2006;
Pénalva, 2010; Igalens and Gond, 2005; Vogel, 2005). These two sources of secondary data
helped to illuminate the dynamics of multilevel standardization over time, opening the room
for analyzing respective reasons of that dynamics and the interplay across the levels.
Data analysis
Our analysis combined several techniques to make sense of the process data we
collected and to build an understanding of the ESG field dynamics in relation to CSR
standardization and intra-organizational micro-dynamics (Miles and Huberman, 1994;
Langley, 1999). In a first stage of data analysis we focused the key tensions that structured
the process of standard construction by each agency (micro level), within the ESG field (meso
level) and at the broader level of CSR standardization (macro level). Building on these
findings, we could identify a core tension that explained of the process of standard
development and competition. The description of each tension provides the basis of our firstorder findings.
A second stage of data analysis consisted in re-analyzing our data by considering
explicitly the interactions between the three tensions we identified. This stage allowed us to
uncover how technical and legitimacy dimensions were intertwined in the interplay of the
13
three levels of standardization. The outcome of this second, higher order level of coding
constitutes our second-order findings.
For both stages of data analysis, we used the qualitative analysis software QSR NVivo®
as a tool to assist with the coding process and to identify the structuring tensions in the ESG
rating field. Codes and sub-codes were created with some later refinements as the new
important issues emerged. This software is useful particularly as it allows retrieving the
properties of each coding category (nodes) in the process of comparing the a-priori construct
definition with the empirical data. Secondly it gives immediate access from the coded text to
the full interview transcript allowing the researcher to go back and forth, to ensure the data is
always kept in context (Miles and Huberman, 1994).
FIRST-ORDER FINDINGS:
STRUCTURING TENSIONS ACROSS STANDARDIZATION PROCESSES IN THE ESG FIELD
Macro level dynamics: The Global-Local Tension in CSR Standardization
Governments and intergovernmental organisations are fostering CSR and ensuring
corporate accountability by launching several standards, laws and regulations on this topic at
both national and international levels (Gilbert et al., 2011; Waddock, 2008). Since then they
are actively fulfilling different functions in the dynamics of CSR standardization. First, the
macro-level, standards act as macro contracts and provide repertoires of norms that define
what organizations are responsible Gilbert and Rasche (2007). Standardized ethics initiatives
such as the UN Global Compact, SA 8000, GRI and the ISO 26000 are regarded as promising
approaches that complement efforts by legislation to better address social and environmental
issues. Second, they help to standardize the information disclosed by corporations. Third,
standards refine the methodology of ratings agencies and the way they assess the CSR.
Scalet and Kelly (2009) suggest that either market will decide which of these agencies
becomes the standard or calls a need to press for more uniformity through global standards.
However, by creating homogeneity in the field standards make the competition more severe at
14
CSR rating field level as now the agencies need to find sources of differentiation in their
marketing strategy, discourse and other aspects in order to convince clients in their
uniqueness.
At macro level we identified the tension of global vs national standardization processes.
Global standards more commonly refer to UN declaration and conventions, EU Council
directives and decisions, OECD guidelines, ISO26000, ILO convention and other recognized
texts published mainly by intergovernmental organisations. In terms of reporting, the GRI
remains the breakthrough standard that agencies would refer to when replying to consultations
on reporting in international integrated reporting communities and platform. The standards
come from different areas, but constitute altogether a global infrastructure. Although
globalization have massively shaped the field of CSR these global regulations have never
been a major driver for CSR rating agencies having more international scale, because they are
dealing with multinational companies operating in many countries. This in its turn makes
impossible to keep an overview on the regulative state of all those countries. As none of the
international standards, codes and guidelines are mandatory (Cuesta Gonzalez and Valor
Martinez, 2004), none of them include enforcement mechanisms, which allow CSR rating
agencies a room for flexibility in adapting their business strategy to these standards. The
initiatives carried out under the Global Compact reflect that the UN has opted for a facilitative
rather than an enforcement role (Whitehouse, 2003) and it faces great difficulties in
convincing some developing countries that the standard is not ‘‘meddling or paternalistic’’
and that it may help to attract foreign direct investment (Aaronson and Reeves, 2002).
Likewise, OECD guidelines apply only to OECD countries and it is not clear how nonOECD Members could apply this standard, which is seen as an important limitation
(Aaronson and Reeves, 2002). It has also been argued that codes may not respond to actual
15
societal demands (Leighton et al., 2002). Thus, the research and ranking methodology of
agencies have also to reflect emergent CSR topics embedded in local laws and regulations.
“We certainly integrated the main principles of OECD, ILO norms and some ISO9001 and
ISO14001 principles in our model. It doesn’t mean that we wanted to have a global product,
but we needed to cover all the big international CSR principles. Given that we operate only in
France and the high application of ISO norms we had to integrate that as well. In line with
labels, council, laws of Grenelle and all the events which take place in France we adapt our
methodology” (Responsible of Finance, banks, high educational institutions and insurance
sectors, assocation and foundations)
Meanwhile if the CSR rating agency focuses too much on local regulations, there is a
risk that the method will become idiosyncratic and it can’t meet clients’ increasing
expectations. When investors asked Arèse (Vigeo nowadays) to provide them with the same
environmental data for European universe as for France, this caused a big problem. In France
Arèse was getting unique environmental data from Ministry of Environment which was not
available in other European countries. Thus they were not able to deliver identical data for
other countries and had to find another way to assess that information.
Both local and global standards provide support in terms of technical aspects and
legitimacy. Technical dimension of standards help CSR ratings agencies to assess what
should be assessed. It refers to the measurability and calculability of issues which are
suggested in national and international standards. Partnerships between CSR rating agencies
and established institutions and standard setters such as OECD, UNEP, ISO is a sign of
legitimacy, which give agencies an international exposure and add credibility to their ranking.
Partnerships between CSR rating agencies and established institutions and standard setters
such as OECD, UNEP, ISO are another sign of legitimacy, which give agencies an
international exposure and add credibility to their ranking.
One strategy to balance the tensions is to have a minimum level standard. However, this
can compromise the legitimacy of the applied criteria as it will be perceived as too week by
some stakeholders of the field. Another strategy is to integrate and apply all the best norms
16
with the risk that companies might not be able to understand it and respond the
questionnaires.
When rating a company CSR rating agencies first make sure to comply with national
government reporting requirements and industry specific texts. The advanced integration of
sustainable development in EU regulatory approach to environment and society resulted the
initiation of several national legislations making sustainability reporting compulsory for some
companies in certain cases (Delbard, 2008). In Denmark, the parliament has adopted Green
Accounts Act (1995) which calls companies to be more active and sensible for the
environment protection by obliging them to publish environmental report. This report should
cover information about company emissions, the link between different policies and
environmental objectives, concrete achieved results, consumption of natural resources etc.
Two years after the parliament of Netherlands revised the law on environmental management
by introducing a new article on environmental reporting. Finally in 2001, the French
government generated the law relative to the New Economic Regulations (NER). The article
116 of the law compels listed companies to disclose social and environmental data in their
annual reports. Similar initiatives were seen in Belgium (Social Statement, 1996), Sweden
(1991 Code of the Environment.), Germany (Bilanzrechtsreformgesetz, 2004) for certain
categories of companies, depending on size or sector of activity. Mandatory reporting
presents several advantages such as the creation of standardized and comparable measures
that enable benchmarking and best practices (Hess, 2007; Hess and Dunfee, 2007). Figure 1
reflects the main cross reference list of national and international regulations and guidelines
used by CSR rating agencies.
---------------------------------------------INSERT FIGURE 1 ABOUT HERE
----------------------------------------------
17
Meso level Dynamics: The Homogenization-Differentiation Tension in the ESG Rating
Agencies Competition
In this part we are looking at the inter-organizational dynamics and the processes
whereby the ESG rating agencies field has been structured. Over the past decades ESG rating
field moved from niche or side market into mainstream market of traditional asset managers,
given their increase interest in SRI and the predominance of CSR concept in all domains.
While credit rating is built on algorithms which is more or less the same, extra-financial
notation is based on questionings which are heterogeneous. Unlike financial ratings extrafinancial notation is a field where new subjects emerge continuously. It also quantifies more
subjective elements than financial notation and needs more time to be accepted in the market.
ESG evaluation also takes into account the expectations which may appear under the form of
weak signals that a good agency should be able to capture quickly. Those signals develop and
become mainstream within the time.
According to the study of Avetisyan and Ferrary (2012) the emergence and evolution of
CSR rating agencies as new institutions result from the convergence of interest of different
stakeholders of the CSR field. On one hand the appearance of CSR rating agencies and their
further development is often seen as a part of the SRI movement, as initially those
organizations mostly worked for socially responsible investors who were gradually cutting
investment in companies engaged in sectors or practices considered irresponsible, and
privileging the investments in companies respecting social and environmental issues as they
saw that the economy based solely on speculation is not sustainable. In the context of their
limited capacity for handling viable information on companies’ CSP, the ranking of the firm
by a specialized agency that lies at the center of an issue based field can help investors to
select the most ethical or responsible companies for their portfolio. On the other hand
multinational companies were often being accused of having conflicts concerning human
18
rights and environmental issues with their operations in developing countries. They needed a
special tool to assess their social and environmental performance, with the objective of
improving their actions in CSR and enhancing the reputation in the eyes of investors and the
public at large (Avetisyan and Ferrary, 2012). Obviously rating agencies contributed to make
companies more aware of their responsibilities, and influenced the way companies were
reporting on the sustainability. The influence was more visible on the medium level CSR
engaged companies as well on the laggard companies that could benefit from a structured
approach to sustainability. Since the beginning of the millennium companies have started to
valorize this notation as they saw the advantage of providing ESG information. Given the
evolution of CSR regulation which obliged companies in certain countries to report about
their environmental and social impacts, they transformed the constraint of being rated into an
opportunity to communicate their results to different stakeholders.
Avetisyan and Hockerts (2012) state that CSR rating agencies provide ranking services,
corporate research, compliance and consulting services analogous to those provided by
financial research service firms with a focus on ESG criteria based on the analysis of public
documents; company’s financial, environmental, social, sustainability reports; specific
questionnaires; meetings with the heads of companies and other information sources (e.g.
governmental databases, press releases). Thus, in terms of functionality they transfer and
translate global social and environmental concerns into a language which is understandable by
investors, corporation and other interested stakeholders. This is a form of standardization as
they make those concerns measurable, calculable/quantifiable. They can fill standardization
functions of process management and contribute, to insure management companies the
acquisition of a cognitive legitimacy (Scott, 1991, Meyer and Scott, 1977).
Many rating agencies started as a background as an NGO or foundation with a clear
social mission to review the companies on ethical and social criteria and also norms. The
19
majority of the research undertaken tended in the UK, North America and even in some
European agencies was focused on people often with faith based views or who had other
values on labour, environment, human rights… wishing to see ‘sin’ companies excluded from
their funds. Those were individuals investing mainly in very first retail mutual funds in the
UK and Pax World in the US. There were people who were working for religious institutions,
certain NGOs, charity companies for whom investing in such companies seems to be going
against their values. So it was a quite normative and contractualist approach in the beginning
with a vision of social responsibility, which was based on exclusion related to certain products
or services. With regards to the negative screening they started more from an ethical point of
view and went more to global normative view which was summarized for companies in UN
Global Compact. This was a clear tendency on alcohol, tobacco, and all the sin sectors to the
international agreed values and norms. Agencies worked together with asset managers that
were committed to social and ethical screening. An example of a player that remains in that
tradition is Eiris, which is still a foundation and still has clear ethical roots. Very soon,
following market demand which changed from ethical screening, negative screening to
positive screening these early funds began to also look for more positive responding to the
challenges of the day. This positioning is illustrated by SAM which is selling the research
with a “best in class” approach. Vigeo in France and Oekom in Germany also took this
approach. The majority of agencies decided to add more industry specific approach and was
looking more on the materiality of the criteria. With this respect they would privilege site
visits from sending the questionnaires.
“When we started our approach was ‘with SRI information we have additional information
which allow us to take better involved investment decision compared to others’. In the
beginning it was efficient to check whether they had environmental reporting or SRI
reporting or responsible people, whether a company was just monitoring performance by
mental issues according to environmental criteria. However, it all changed. The focus was
more on the criteria that had a strategic impact and on certain issues like ‘what does climate
change mean for the automotive industry, or what does transparence mean for evaluation
20
service industry, or what is a good corporate governance. This was the case with SAM”. (Cofounder of DJSI, SAM)
The initial funds were also soon concerned about broader issues and were engaged to
see change about pollution, corporate involvement, environment etc. The pension funds and
other asset owners recognized that there were elements of risk management in strategy. More
advanced CSR rating agencies began to focus efforts on understanding how they can respond
to risk that their clients faced- climate change, water, biodiversity, bribery, labour etc.
Another clear trend of this period was the move from broad based ESG rating agencies
covering all potential issues to rating agencies with more specific topics. As such TruCost is
fully focused on environmental data, and RepRisk on reputational risk. Meanwhile the focus
was more on the strategic impact and on certain issues such as ‘what does climate change
mean for the automotive industry’ or ‘what good corporate governance is’. The governance
domain also came to be a separate angle for ESG assessment after Enron scandal.
“Before the year 2000 the questions were more focused on environment and social
dimensions. Over the last ten years there are a lot of questions on governance and on the
application of Global Compact principle.” (Chief Sustainability Officer, Essilor International)
Meanwhile, the environmental criteria became more quantified over time, which drove
materiality with regard to environmental issues. In the beginning of the years 2000, KLD was
very environmentally oriented as it was trying to conform to Stockholm conference
constraints: economy and environment against economy or environment. Within time ESG
ratings became more data oriented and standardized in terms of provided information to asset
managers. That’s partly because data got better, more companies produced data, but also
Asset Managers require information in such forms that can be easily digestible. It can be in a
form of scores or some kind of quantitative figure, where they can adjust portfolios and
framework with regard to sustainable information. Some agencies provide more sophisticated
21
research and try to dig deeper and have more interactions with companies, rather than relying
solely on publicly available data.
“We were designing our very own KPIs that were based on highly intuitive research that was
coming out of the people who had a deep semi-conducting industry background. I was pulling
this people and guiding them to understand where we were doing critical thinking. We call
that sustainability because we were saying we were going to predict stock drops. We were
doing short pictures and we have designed very esoteric model using Forensic accounting
technology, using screens to identify issues. It was very sophisticated. You have to remember
that BP looked great on paper according to the SRI industry experts. Most of the SRI industry
except for the Innovest had rated BP at the AAA at that the time of the accident. We did not.
We were putting out notes to our clients warning them of the dangers associated with this
company”.
The core tension that contributes to shape standardization dynamics at meso level is a
tension between imitation and differentiation. This tension is well theorized by Deephouse
(1999) who developed an integrative theory of strategic balance that syntheses the
contradictory insights from the resource based view and institutional theory by considering
both the need for differentiation and the need for conformity. How do CSR rating agencies
find a position in a field? How does each agency face trade-offs between imitation and
differentiation and strike the strategic balance between these two tensions? Hereunder, we
address these tensions deriving from our data from firm-level findings.
An abiding question that stands in organization research is what makes organizations
similar to each other. Organizations need a societal mandate or legitimacy, to operate and this
is gained by conforming to societal expectations, because to violate them would make the
organization illegitimate (Meyer and Rowan, 1977). As a result, organizations often act in
ways that are not necessarily ‘rational’ but are consistent with the ‘rules, norms and ideologies
of the wider society’ (Meyer and Rowan, 1983:84), preferring not to suffer penalty for noncompliance. Moreover, the more organizations conform to these myths the more deeply
institutionalized they become. By being the same, a firm benefits, because it is recognized as
legitimate, ceteris paribus (DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Pfeffer and
Salanchik 1977). Thus a certain level of homogenization of evaluation methodology of CSR
22
rating agencies is a sign of the seriousness, properness and robustness of the conducted
research. A CSR rating agency which is similar to other CSR rating agencies avoids
legitimacy challenge that hinders resource acquisitions, ceteris paribus (Deephouse, 1990).
At the meso level, copying/imitating methodologies partially or entirely can be seen as a
sign of a standardization of CSR evaluation. Although agencies have several partnerships
between each other all the agencies of our study were seeing others copying their
methodology. By accepting that copying evaluation methodology from one agency to another
destroys completely copyright instant, Eiris considers copying elements of their methodology
also as sign of their credibility within the field. Likewise, Vigeo considers this issue not as a
threat but as a consecration of their choices and recognition of the relevance of their
methodology as a standard for ESG assessment.
“Of course we have seen others copying our methodology. Meanwhile, we are glad as our
ambition since the beginning was to promote a standard. Our approach of CSR definition and
our topics of evaluation are largely diffused. It’s very important and we need to lead to a
standard”. (Director of Methodology and Institutional Relations, Vigeo)
“Everybody was copying us. Everybody is still copying us. Now when I read ratings products
from other rating agencies - it’s all the same thing just in different ways. What makes me mad
is that they try to be the same but it’s very poorly done, not analytical, not sophisticated”.
(Former Director of Research, Innovest)
DiMaggio and Powell (1983:150-154) proposed that organizations become increasingly
similar, because institutionalized ideas pressure them to adopt similar structures and forms.
They explained processes of homogenization and institutionalization by three mechanisms of
isomorphic institutional change: coercive, mimetic and normative pressures. Coercive occurs
when a powerful organization such as state imposes rules and practices on organization,
mimetic arises from uncertainty and normative occurs from a moral duty. Thus, the
institutions of each country or region are the forces that put pressure on firms to adopt similar
CSR constructions to those adopted by other societies in the same context (Boxenbaum,
2006). When this concept is extended into the field of CSR ratings, the national and
23
international regulations as well as stakeholders’ expectations can push agencies to adopt
similar ranking methodologies. Besides, the degree of the overall homogeneity of the method
and the compliance to certain CSR norms help rating agencies to be perceived as legitimate
actors of emerging field where the widespread of new practices may be problematic.
However, Scott (2008: 160) states that although all organizations within a given
institutional field or sector are subjected to the effects of institutional processes within the
context, all do not experience them in the same way or respond in the same manner.
Differences in methodologies do exist because of the function that CSR has within different
societies. This variety of indices and rating agencies also responds to national specificities,
social and statutory practices (for each country or region having adapted socially responsible
investment). Independently from cultural influences, the importance and weightings of criteria
reflect the conception of social responsibility of each ranking organism, the way they
represent “good” social and environmental performance of a domain. It is possible that
differences in ratings are due to raters’ strategic choices to satisfy the demands of their
different stakeholders. For example, when social raters use screens against tobacco or other
categories of firms, that screen is useful to investors who wish to avoid profits from these
sectors.
“All the rating agencies started from the same background. They are using international
standards such as GC, ILO, universal declaration of human rights, other conventions of EC
of OECD etc. to develop rating models. Then of course models are different, because some
rating agencies are interested in environment, others in corporate governance. Even if the
rating models are similar the outputs are quite different on the base of what you want to
produce”. (SRI Analyst, Vigeo)
Meanwhile, CSR rating agencies need to be distinctive to be attractive and able to sell
their products. While conforming to the strategies of others limits the performance of the firm
and increases failure rates (Baum and Singh, 1994; Hannan et al., 1990), rational
differentiation reduces competition and increases performance (Deephouse, 1999). The social
rating varies significantly from one agency to another, according to universe of analyses
24
(which is formed in five ways: traditional stock index, geographical area, business sector,
innovative companies in a very precise domain, products or brands of regular consumption in
a particular geographical zone), information collect methods (positive and negative screening)
and sources (company, stakeholders and third part observers), methodologies of analysis, the
criteria of evaluation which characterize the processes of companies’ ranking. According to
the Guide of Sustainability Organizations although all rating agencies try to measure the CSP
the importance which agencies give to this or that service within their offer indicate
differently its activity: rating agency (Vigeo), Research institute (EIRIS, ODE), Consulting
agency (PIRC), Asset Manager (SAM). Thus the juridical status of sustainability rating
agencies varies from the non-profit association to the limited company passing by research
institute and fund manager. It can impact the activity of the agency, which can change its
status during the history. The guide of Sustainability Analysis Organizations suggests three
“cultures of origin” while leaving this list open: associative environment, religious
foundation, financial environment. Here it is important to retain that these various origins
give birth to different positions and they often explain the criteria used in the analyses.
Innovest was expressing data with financial denominators making them the most relevant
possible. They were helping portfolio managers even to understand how they contributed to
alpha. Once Innovest started using this language and doing ratings that almost sounded as
regular financial analysis they started having big contracts covering all Blue Chip clients.
“We didn’t care whether a company had a policy on anything. In fact I never looked at CSR
reports, ever. We ignored them. That is a giant difference. Companies can go crazy making
their beautiful CSR reports, we never used them. None of our analyses was based on any
reporting.. Dow is an A+ complaint GRI company. That tells you everything”. (Former
director of Research, Innovest)
The financial pressure which is applied on a limited company entails very different
conditions of action as compared to non-profit association.
“Eiris is owned by the Eiris foundation. So it’s wholly owned by not for profit charitable
organization. We operate there as a social enterprise. That gives a big degree of
25
independence, objectivity which is important and we do not provide ratings directly to
companies. We think it is inappropriate”. (Head of SRI Development; Eiris)
While other agencies were opening offices in different countries Eiris had a
distinguishing strategy of setting a network of local partners. Those partners of Eiris Global
Platform were providing them with data, expertise and insights on the local area. Another
distinguishing factor is their recent partnerships with groups in developing countries.
SAM is looking on sustainability from business perspective, trying to see how
sustainability adds value to companies having an investor perspective. SAM has the entire
value chain of sustainability investing, while most of the competitors are just focused on one
or two aspect of this value chain. Besides they get data directly from companies. They are
able to ask questions and get insights that are a bit beyond what can be found in public
sources.
“In the last 10 years SAM has seen actions to develop ESG criteria more connected to the
financial performance, where there is a link between extra-financial criteria and more
traditional business performance metrics. So we developed in the past 5 years several new
criteria such as innovation management in order to understand how well companies are
managing innovation processes within their companies. SAM tries to move behind the
standard metrics that you find in sustainability reports. Our approach is not ethical. We are
not choosing companies because they are better or worse from a moral perspective. We are
trying to choose companies that are better or worse in terms of management practices and the
ability to succeed in a long term”. (Head of Sustainability Application and Operations, SAM)
Applying integrated and managerial approach of social responsibility which consists in
questioning the degree of integration in the strategy and in the system of company
management, Vigeo broke the traditional approach of ranking with exclusion criteria. Vigeo
has evaluated the degree of integration of a number of subjects for a new referential which
included other domains-human rights. They were the first agency to evaluate the degree of
corporate commitment toward the integration of the respect of human rights in their strategy
and activities.
26
The main distinctive feature of BMJRatings is that this agency is the only one purely
focused only on solicitated notation, which also assumes suggestions and recommendations
behind the rating. It is also the only CSR rating company to have a matrix model, which is
stable since the beginning. What has changed is the interior of the palette: the themes have
enriched and shaped and enriched by current national, European and international trends and
the weightings have been adapted accordingly. The philosophy of main research themes is
close to Vigeo.
“Globally we have the same domain of evaluation as Vigeo. The difference lies in the
approach. We have decided to have exclusive positioning in solicitated notation requested by
companies and organizations. This is the main difference. Then we are also different in our
philosophy and way of information treatment. We are more business oriented, less moralistic,
les militant than Vigeo. Thus the criteria, the question lines are the same, but the angle of
attack is different”. (Responsible of Construction Sector; BMJ ratings)
“It uses managerial model and not that of compliance, as used by most of the agencies. This
ex-ante managerial analysis model puts the human intelligence at the center of the company
and not in compliance. They analyze the conditions of CSR policy realizations and not the
results. The huge advantage of the matrix model lies in its ability to be split as Russian dolls.
Each column can be split infinite and consolidated. Inside the box, the color (major, medium
and low) is a conceptual equation which is the level stakeholder expectation on the issue
raised multiplied by the room of manoeuvre (marge de manoeuvre) of the company. The
matrix enables to take into account all the specificities”. (Founder and former CEO, BMJ
Ratings)
Micro level Dynamics: The Tailoring-Industrialization Tension in the Search for a
Sustainable Business Model
Tensions at micro-level are tailoring vs. industrialization. The more agency practices
tailoring by applying customized method for each client (or group of clients) the more costly
it is in terms of Human Resource. This technical business model constraint obliges CSR
rating agencies to recruit knowledgeable analysts of high level. Because of the high level
competition (which contributed to structure the field) CSR rating agencies conducted more
sophisticated research and grouped set of mainstream clients who would need this information
in order to construct other portfolios. As a consequence more and more rating agencies
27
showed tailoring ability by offering customized products and highly adapting their models
into clients’ specific needs.
“Maybe we didn’t have the best business model or maybe we had this dysfunctionality where
we were constantly customizing what we were doing for different clients and it was a mess. It
was a mess, but it was a good mess. We were really trying to think hard about what we were
doing and whether we were really being predictive of something”. (Former director of
Research, Innovest)
“We have this B-Product that is very adapted to investors’ specific needs. We try to have
something flexible that can fit each of our investors, but then we have also some standards to
respect. It’s difficult to undertake analysis on special criteria, because it cost resources, time,
analysts, and is very specific”. (Client Relationship Manager, Eiris)
“SAM is different in that we are an Asset Manager and it allowed to both have more
customized methodology because it’s the methodology we are developing, we are not buying
data from the outside and we were able to move beyond generic Key Performance indicators
and develop leading edge advanced and customized criteria. We are just using the
information in the asset management process and in the assessment for the DJSI conducts.
We don’t sell the information or the data itself, we don’t sell the KPIs. That’s pretty big
difference between us and other rating agencies”. Christopher Greenwald (Head of
Sustainability Application and Operations, SAM)
Given the weakness of the business model, CSR rating agencies need to use the same
methodologies for all clients to realize economies of scale. There is a need to have a
sustainable model which can be achieved only if analysts work on the method which is
stabilized. Another way of achieving a sustainable model and securing financial resources is
the expansion of the scope of the activity. CSR rating agencies have actively expanded their
activity by diversifying offered products and services and adapting existing products to new
markets. They started to cover not only listed and non-listed companies but also public
administrations (cities, districts, regions and states), financial institutions, higher education
institutions, foundations, and associations. Although the main priority of agencies is to
provide information to investors there has been an evolution in providing sectoral and
thematic research, trainings, audit, contribution to sustainability reports and other services to
companies. This massively helped rating agencies to secure the resources. The sectoral
approach helps to reveal and to take into account specificities and challenges of each sector,
which are different, at once because of the scope of activity of a company (subsidiaries and
suppliers in foreign, emergent countries) and its nature. Finally in the last 6 years the industry
of ESG ratings has witnessed an important number of both cross-border and within-border
consolidations as ESG data providers were on the edge struggling to remain profitable and to
28
offer good quality research. As stated in the paper of Avetisyan and Hockerts (2012), the
business model for ESG rating agencies is very weak and that makes very difficult generating
revenues. They describe the main types of consolidations: Regional extension and ESG
market entry strategy. The first type happens when two or more ESG rating agencies decide to
joint their forces. When Vigeo bought Stock at Stake in Belgium and Avanzi in Italy the
group has increased its coverage and made a stronger presence in European ESG market. The
ESG Market entry strategy by bundling of services was when large index providers such as
MSCI, Bloomberg, Thomson and Reuters acquired rating agencies or launched their own
ESG indexes to meet client requirements who wanted complete information about companies’
financial and extra-financial performance. Economies of scale, support from acquiring firm,
cost delocalization and financial stability were seen as the main drivers of consolidation.
From client side motivations observed were the standardization of the field, building
reputation of a global market leader and synergies with the acquiring parent. This
consolidation has carried both positive and negative aspects (e.g. quality loss and price war,
motivation decrease and price war etc.) for each side of industry players (Avetisyan and
Hockerts, 2012).
2. SECOND ORDER FINDINGS: HOW INTERACTIONS ACROSS LEVELS OF CSR
STANDARDIZATION SHAPE THE DYNAMICS OF ESG RATING AGENCIES STANDARDIZATION
2.1. How Macro level Dynamics Influence Meso and Micro level Dynamics
The basics of Unites Nations (UN) Global Compact, OECD guidelines, ISO26000,
European Union (EU) and industry specific initiatives, local laws and regulations appeared to
be the inspiration for creating the methodologies of ESG rating agencies. Depending on the
given research they would make reference to EMAS, PRI, Greenhouse Gas Protocol,
ISO14000 and 9001 families, supply chain issues, the standard for Carbon Disclosure, ILO
convention on labor issues, diversity conventions.
“I think it’s important to ground the research in internationally recognized standards for
investors as a benchmark of quality of issues which are measured, as being completely
independent would be both unrealistic and unhelpful”. (Head of SRI Development; Eiris)
“Yes we certainly look at them and refer to them, but it depends on the topic. It’s certainly
important the certification questions and ILO for labour practice, other indications, the GRI
to just keep track of what is going reported publically or what the companies are being asked
to report publically. Those are important as inputs”. (Head of Sustainability Application and
Operations, SAM)
29
Some clients of rating agencies would even ask rating agencies to provide them with
full list of cross references before any engagement with them.
Given the high recognition of some CSR related standards by field actors of meso level,
new types of CSR rating agencies were created to measure companies’ compliance with those
standards. They are specialized in norm-based screening which enables them to distinguish
for investors the companies which violate international standards. In Norway Investment
Services ESG rating agency ranks companies violation of international standards (e.g. The
Global Compact, the universal declaration of human rights or ILO standards). Similarly, Ethix
reveals company’s violation of human resources based on ILO standards.
For the most of the rating agencies those standards are not considered being at the heart
of their methodology but rather elements which help to enrich and refine it regularly.
“Our Human Right evaluation domain was reviewed by adding some new criteria to fit
Ruggie’s Guiding Principles on Business and Human Rights issued in 2011”. (Client
Relationship Manager, Eiris)
“We certainly referred to ISO26000 norms. There have been several evolutions in our frame
of referential from the last year in line with ISO26000. We integrated a new criterion on
promoting CSR in the sphere of influence, which is a concept of IS026000 concerning to all
actors with whom company interacts and over whom it has an influence. We also referred to
GRI as these initiatives are very concrete”. (SRI Analyst, Ethifinance)
“We definitely look at regulations. In chemical sector when we saw that REACH regulations
were starting out in Europe we assessed companies’ reaction to implementation of these
regulations. We certainly use GRI research but if it didn’t exist we wouldn’t change what we
were doing ourselves, because we do our research as well.” (Executive Director and Head of
Product Development of ESG Research, MSCI; former president and co-founder of Innovest)
However, in some domains of their research methodologies agencies claim to go
beyond national and international regulations and to get deeper insights in specific themes.
“Our frame of reference is more precise than ISO 26000, which has lighter insights in
hundreds of themes as seen in our referential. You will find all the issues covered by ISO
26000 in our frame of reference. There is no single theme in IS0 26000 which we won’t treat.
It is rather the opposite and it’s normal”. (Responsible of Collectivities and cooperations
sectors; BMJ ratings)
30
Following the appearance of ISO26000, BMJ Ratings did not change its methodology to
include Human Rights as a new domain (as it was presented in ISO26000), but made sure to
fully cover this topic in other domains of its methodology. If in the beginning BMJ would
look more on the challenges of the company and its stakeholders from management point of
view, now the priority is to start with the synthesis of industry specific regulations and local
government reporting requirements.
Eiris uses several specific standards as it has in-house product- convention bunch which
basically analyses the extent to which companies are being allegative in bridging international
norms. This product is used by several Nordic-Canadian and other pension funds who draw
on this recognized approach because of its link to international norms. All French rating
agencies have reviewed their methodology to comply with NER norms as most of their clients
are French, despite their international vocation. French CSR rating agencies pay more
attention to diversity issues, due to two recent laws on diversity. The first decree obliges
French listed companies to have agreements and commitments in terms of employment of
seniors and disabled persons. The second law dated January 2011 includes obligations on
more balanced gender representation on the boards of directors or supervisory boards.
“Now companies in France are obliged to have agreements and commitments in terms of
employment of seniors and disables people, diversity in terms of more balanced gender
representation. We ask our (even international) companies to position towards these issues.
We assess whether the companies have at least analyzed these issues and position themselves
effectively (the way we assess French companies): with action plans and objectives”. (SRI
Analyst, Ethifinance)
2.2. How Meso level Dynamics Influence the Micro and Macro level Dynamics
Regular interactions between meso-micro levels have resulted in materializing several
social and environmental issues by integrating them in ESG assessment criteria. Although the
core of the methodologies never changed, several improvements were constantly done in all
domains. CSR rating agencies are regularly revising the overall methodology to include
31
current social and environmental concerns but also to meet the expectations of various
stakeholders at meso level.
“The particular feature of Vigeo lies in its shareholders’ structure, which includes trade
unions, NGOs, companies, investors, pension funds, asset managers. We needed to have a
definition of Social Responsibility and a measurement method which integrates the
interests of all stakeholders. That's why we opted for an analytical model that is primarily
based on the opposability of objectives and managerial questioning with a view towards
measurement of two elements. We measure the level of company’s engagement in relation to
its objectives. But that's not enough. If our clients were only NGOs or civil society we could
stop here. But our clients are also investors. Thus we interpret the level of commitment which
we measure by complementing with risk management level. So we have developed a
method, which combines both measurement of engagement level and evaluation of risk
control”. (Director of Methodology and Institutional Relations, Vigeo)
For the majority of the agencies the ideas are often coming from internal research
departments (in house data) complemented by insights from companies and other actors such
as industry experts and leading think tanks, consulting groups and academia.
“We changed our criteria constantly and that was important because otherwise we would still
assess whether the company has the environmental reports or not. We needed to change very
strongly the criteria from 1996 and that was the right thing. And how did we do it? We were
talking with stakeholders; we were in discussions with experts. We integrated HR experts and
I remember we closely cooperated with Boston consulting group on certain things. We also
integrated corporate governance experts to improve corporate governance. We discussed
with industry experts – what are the aspects of environmental issues within that industry. We
also discussed with companies – how could we increase our criteria to make sure that we ask
the right question. At the end of course we had the last vote, the last say, because we were
responsible for everything. We had discussion with everyone”. (Co-founder of DJSI, SAM)
“We have a fixed frame of referential for collectivities but we also have discussions with our
clients. For example when assessing French Riviera region we knew we should discuss in
details two issues: tourism and territory. How to take into consideration the issue of tourism
in our referential? Should we include it in economic development and in relations with
economic actors? Should we look at it in criteria where we assess the attractiveness of the
territory? Or should we treat it as a separate criterion? Regarding the territory, on one hand
the French Riviera region is very urbanized in coastal and Rhone sides with a pressure on
natural resources. On the other hand a mountainous part is much less populated and
sometimes needs public services etc. So can we integrate the specificity of the region either in
existing criteria, or in formulating and defining criteria which will make visible the analyses
that we do on these issue? I think we will have consensus that those are issues. They would
probably suggest other issues and we would advance the discussions arguing which issues to
take in the evaluation and which to neglect. Based on which issues we have kept we would
make the offer and then we would discuss”. (Responsible of Collectivities and cooperations
sectors; BMJ ratings)
32
Industry experts would judge how reasonable is the integration of the criterion, how
realistic is it to measure and finally would advice whether a rating agency should rethink over
it again. Also, when rating agencies are dealing with new topics they might be influenced by
NGOs which are very knowledgeable on specific subjects. CSR rating agencies would
sometimes validate the feedback given by Sustainable Development managers of companies
on several topics such as responsible supply chain or supplier’s policy. Companies might also
correct CSR rating agencies when they apply criteria non relevant for the activity of the
company or put a company in a wrong industry.
“X rating agency asked whether we have a policy on Nano technology, whereas we don’t use
Nano particle. They also asked if we had a policy on follow up and respect of patients
records, whereas ophthalmologists or opticians should take care of these records. For me the
most exemplary agency is SAM, because they do satisfaction surveys on their information
systems and the methodology itself. Moreover you are welcome to leave comments on certain
number of issues. For me it’s really a good example of the agency which works with its
stakeholders.” (Chief Sustainability Officer, Essilor International)
As a result of the above mentioned systematic interactions with different stakeholders
and their obvious influence, we found that from social perspectives the concepts of obesity,
harassment, well-being at workplace, psychological risks have lately been treated as separate
themes of assessment with higher weightings. About ten years ago these topics wouldn’t have
any impact, but today they are seen as real social concerns.
“Three years ago the topics such as psychological risk and well being at work were not a
discussion subject. Now we treat these topics as priority both because this context became
regulated and because of pressure from civil society due to stakeholder expectations”.
(Responsible of Finance, banks, high educational institutions and insurance sectors,
assocation and foundations; BMJ ratings)
In the environmental dimension the topics such as water related risk, carbon gas and
biodiversity were split up into much detailed parts and gained higher weightings.
“The topic of biodiversity has slightly evolved. Although this theme exists since 2005, but the
practices and good practices have evolved recently. Now, we would assess company’s efforts
to adjust their independence towards biodiversity as a good practice (faire une
comptabilisation d’indépendance à leur biodiversité comme bonne pratique qu’on va évaluer
on peut le compter aujourd’hui)”. (Research and Development Responsible, BMJ Ratings)
33
“Today for listed companies the information on C02 emission indicators has become
widespread. All companies provide this information. Likewise, the protection of
biodiversity is as important from a normative point of view as reducing CO2 emissions. The
same international texts have been adopted for two different subjects. However, as a result of
current trends and economic interests companies and stakeholders are much interested in
C02, rather than biodiversity issues. We, at Vigeo have reinforced the importance of
biodiversity issues in our methodology” (Director of Methodology and Institutional Relations,
Vigeo)
Also, regarding the governance dimension one ESG rating agency started evaluating
whether Board of Directors integrate the risk of Social Responsibility. The development of
ESG criteria more connected to the financial performance, where there is a link between
extra-financial criteria and more traditional business performance metrics has been seen
within some rating agencies. Meanwhile, SAM introduced a couple of years ago new criteria
on innovation.
“We believe innovation is a key point for sustainability. It is a very difficult criterion to
evaluate. We really tempted at the beginning with the methodology, we took it away because
we thought we were not measuring the right issue. Then, few years ago, during our annual
review we realized that it was time to put some effort and to focus on innovation again. The
criteria have been improved in the last 2-3 years, because we needed to refine them better”.
(Head of Sustainability Services, SAM)
Finally the topic of lobbying which was neglected in early 2000s has become one of the
main challenges of companies’ conflicts of interest evaluation at Vigeo. Similarly, Vigeo
makes efforts to better interpret data on companies operation in tax heaven countries.
“We are now studying the issue of tax haven countries and deciding how to evaluate this
information which we collect anyway. For Vigeo putting money in tax haven countries is a
way to take away resources from the country where the company operates, instead of creating
and developing community value. This behavior should be assessed in a different way, where
companies will report how they justify their presence. The grades will be given accordingly”.
(SRI Analyst, Vigeo Milan)
Although most of the agencies were including rather than excluding specific ESG
criteria in their evaluation domains some issues on transparency in environmental
communication, human rights in certain countries and sponsorship did not represent anymore
key performance indicators. Once a specific social or environmental practice is applied by all
the companies of the industry sector the criterion might lose it importance in weightings as it
does not represent a reasonable risk anymore.
34
“There are different factors which affect the change of our methodology. On one side we look
how companies answer our questions. If we see that we can’t discriminate them anymore
because all the companies have reached what we are expecting then it’s time for us to change
the criteria or to make the conditions tougher, stricter. On the other hand if no company has
what we expect, it’s also may be a sign that we have to change something and that we have to
decide whether it makes a sense to go a step back or how we can expect the company to go
that far. The other reason is when we notice companies do not understand our question and
we have too heterogeneous answers. Last but not least we have always tried to have a
correlation between our criteria and financial performance. And if we see that our questions
are not going into that direction than it’s also a reason for changes”. (Head of Sustainability
Services, SAM)
Instead of assessing whether a company does a sponsorship or not, a rating agency
would rather be interested in evaluating its contribution to economic and social areas of
implementation and commitment of controlling the social impacts of products and services.
Innovest even had an internal materiality risk weighting system to determine how material
new criterion would be. Meanwhile one agency is willing to provide overall default
sustainability ratings, because of increasing demand from neutral ESG Responsible Investors
to have an overall rating. Depending on client’s requirements CSR rating agencies can
integrate specific criterion in their methodology as long as it represents a great value for the
assessed entity. Moreover some criteria suggested by companies can permanently stay in the
methodology.
“A couple of years ago one of our clients asked to take in our methodology a specific
criterion, which we didn’t find relevant at that moment. This year we have generalized this
criterion for all the companies”. (SRI Analyst).
2.3. How Micro level Dynamics Influence the Meso and Macro level Dynamics
According to the study of Avetisyan and Ferrary (2012) rating agencies contributed to
make companies more aware of their responsibilities, and influenced the way some companies
were reporting on the sustainability. These Authors suggest that this influence (at meso level)
was more visible on the medium level CSR engaged companies as well on the laggard
companies that could benefit from a structured approach to sustainability. Since the
beginning of the millennium companies have started to valorize this notation as they saw the
35
advantage of providing ESG information. Given the evolution of CSR regulation which
obliged companies in certain countries to report about their environmental and social impacts,
they transformed the constraint of being rated into an opportunity to communicate their results
to different stakeholders.
“The years 1999-2003 were characterized by increasing interest from the companies towards
ratings. All the companies wanted to become a member of the index and I remember the day
when we launched DJSI list, next day the companies would develop a logo ‘member of DJSI’
like a brand. Many companies put it on the first page on their website”. (Co-founder of DJSI,
SAM)
They created special departments of Sustainable Development, while understanding that
a more holistic and integrated risk management approach can become for companies an
element of their immaterial capital increase and thus could influence their performance.
Moreover, some companies attributed every year special bonus policy for directors of SD
department if they managed to keep the company in certain ESG index lists.
At macro level, French rating agencies actively participated in the elaboration of NER
law and together with international agencies contributed to developing ISO26000 guidelines
and other CSR standards. They often claim to be one step ahead of a curve of standards as
some of those norms came into the field very late.
“We were the authors of the Carbon Disclosure Project for the first five reports. When they
started they didn’t have money at all and we agreed to do it for very cheap. We were very
involved in that. They didn’t have money at all and we agreed cheap. I am very proud of our
help. We do our research for Access to Medicine Index for four-five years, which was
modeled directly after CDP. And now we are doing a research for Access to Nutrition Index,
which is not launched yet.” (Executive Director and Head of Product Development of ESG
Research, MSCI; former president and co-founder of Innovest)
DISCUSSION, IMPLICATIONS AND CONCLUSION
This paper advances the theorization of the institutional dynamics of CSR
standardization by focusing on the case of ESG rating agencies. In analyzing the processes
whereby ESG rating agencies standardize CSR at the macro, meso and micro levels of
analysis, our findings shed a new light on the dynamics explaining how ESG issues are
materialized and translated to market actors, on the tensions that structure each level of
36
analysis, and the interrelationships between standardization processes across levels of
analysis. This section discusses these three categories of insights with more details.
Materialization and translation of ESG issues
In this study we focused on materialization of social and environmental concerns by
focusing on standardization processes across levels of analysis in the field of ESG rating. The
understanding of emerging concerns and the translation of these concerns into measurable and
calculable issues correspond to a form of CSR standardization. Their further integration into
market functioning pushed the field of CSR ratings from being a niche market to a more
mainstream market. When we focus on the standardization of an “unsettled” or “emerging”
field it becomes clear that the participation of various groups of CSR rating field with
complementary visions of CSR assessments is needed for the objectivity and relevance of
measures. The collective contribution of industry experts, lead thinkers, government
regulations and standards, companies and NGOs helped to shape reciprocally shared
understanding of appropriate practice permitting ordered exchanges (Greenwood et al., 2002).
Given that this field is characterized with continuous emergence of new issues and needs
more time to be accepted in the market, the collaboration with recognized CSR entities and
individuals will help to achieving the legitimation within the field. Hence our analysis
provides a consolidated overview of the systemic process whereby the ESG rating field
contribute to attract the attention of corporations and investors on social, ethical, governance,
and environmental issues. This systemic mode of functioning of rating agencies can account
for the rising importance over time agencies of issues such as obesity, harassment, well-being
at workplace, psychological risks and treated those social issues as separate themes of
assessment. Likewise the topics such as related risk, carbon gas and biodiversity gained
higher weightings in environmental dimension.
37
More broadly, our paper extends the findings of Gilbert et al (2011) in showing that
CSR rating agencies complement international accountability standards in consolidating a
new institutional infrastructure for corporate responsibility (Waddock, 2008). We also
showed the contribution of ‘hard laws’ and ‘market players’ in the standardization of CSR
assessment. With this respect, we encourage other researchers in their efforts to explore
separately the degree of influence of the above mentioned structures and their change over
time. We suggest a comparative study of ‘hard’ and ‘soft’ laws and their influence on
different CSR evaluation domains. Such cross-domain research will shed light on
understanding the ‘nationalisation’ and the relevance of ‘cultural’ aspects in certain domains.
Multilevel Analysis of CSR Ratings Standardization
Our study pointed three core tensions which structure the dynamics of ESG rating
standardization. At macro level we explored the tension between global and national
processes of CSR standardization. While understanding the importance of both types of
standards for the legitimacy of offered products and services we explained how companies
managed this tension. Although the value of global CSR standards is nowadays well
recognized (Gilbert et al, 2011; Gilbert and Rasche 2010, Etzion and Ferraro, 2010), these
standards remain too general for being directly applied in the managerial context of specific
countries. In providing assessment tools that conciliate national and transnational standards,
agencies facilitate the translation of ESG issues to corporate actors by making them perceived
as relevant and manageable both locally and globally. However, the development of
idiosyncratic national standards creates a risk of making the ESG rating method too dependent
from the local context, and the diversity of global standards creates some forms of ambiguity
that ESG agencies have to manage.
A second tension between differentiation and homogenization of CSR standards points
to the management of the “strategic balance” (Deephouse, 1999) between differentiation and
38
conformity by ESG rating agencies. While a similarity of ESG ratings to other rating
agencies avoids legitimacy challenge by demonstrating the consistency of judgment of these
different experts who face the liability of newness in their organizational field, it may reduce
competition and the possibility of marketing differentiation. On the other hand, the rational
differentiation of each rating agency to capture more clients and attract the attention of more
stakeholders may jeopardize the seriousness of each actor if for instance the ratings of a
similar stock become too different. This tension shapes the competitive of the ESG rating
field and has to be managed by each agency, either through consolidation strategy that
mechanically reduce this tension by suppressing competition, or through specialization on
specific ESG issues (e.g., environmental vs. social aspects that makes agencies perceived as
complementary to each other).
Finally, a tension between tailoring and industrialization of CSR standards at the micro
organizational level showed the advantages of having “one fit” model for all clients versus
customized approach toward each client of group of clients for marketing and technical and
cost management purposes. Each agency struggles to establish a model of assessment that,
one hand, is specific enough to accommodate the peculiarities of each sector and the
expectations of each client (tailoring of ratings, focused rating studies for specific customers),
and, on the other hand, enhances commensuration between stocks to cover the broader
financial universe possible and allows savings work time by being as much standardized as
possible. The building of a sustainable business model for an agency consists in striking this
balance appropriately at its own level.
The three above mentioned tensions helped understanding how standardizing
organizations balance manage the expectations of their stakeholders within each level of
analysis and contributed to compete the existing literature on dynamic of interplays between
39
micro-level activities (Slager and al, 2012) and the role of macro-level standards and their
implication at micro level (Gilbert et al, 2010).
Building a consolidated multilevel CSR theory
An interesting contribution of the paper lies in its explanation of standardization
processes across levels of analysis. Our findings suggest that the three dynamics described
before interplay, each intra-level dynamics of standardization influencing the two other. The
global-local tension that structures CSR standard building (macro level) shapes the (meso
level) competitive dynamics whereas the each agency aims at influencing the transnational
and national processes of CSR standard making with the aim of keeping the control and being
up-to-date about the emerging standards. The (micro-level) struggle for building a sustainable
business model at the directly frames the (meso level) competitive positioning of agencies as
well as the agencies capacity to balance the differentiation-homogenizing tension. These
cross-levels relationships can all be interpreted either through a technical or a legitimacy
perspective, each level by mobilized by ESG rating either to enhance its legitimacy (or the
legitimacy of the rated issues) or to support its method of assessment and of evaluation of
CSR performance.
To our knowledge, and despite recurrent calls for multilevel studies in CSR (e.g.,
Aguilera et al., 2007), there have been neither studies neither exploring the standardization of
an emerging field through multilevel analysis nor highlighting the tensions across those
different levels in the CSR domain (Aguinis and Glavas, 2012). The present extension of the
study of CSR standardization processes through a multilevel perspective lays the ground for
the building of a consolidated multilevel CSR theory.
40
REFERENCES
Aaronson, S. A. & Reeves, J. 2002. The European response to public demands for global
corporate responsibility. Working paper presented to the European Commission in
response to the Green Paper. Promoting a European framework for the development of
the corporate social responsibility.
Acquier, F. & Aggeri, F. 2007. The development of a CSR industry: Legitimacy and
feasibility as two pillars of the institutionalization process. Managing Corporate
Responsibility in Action: Talking, Doing and Measuring. In: F. Hond, F. Bakker and
P. Neergaard. Aldershot (Eds), Ashgate Publishing (pp. 145‐166).
Aguinis, H. & Glavas, A. 2012. What we know and don't know about corporate social
responsibility: A review and research agenda. Journal of Management,
Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. 2007. Putting the back in
corporate social responsibility: a multilevel theory of social change in organizations.
Academy of Management Review, 32(3): 836-863.
Avetisyan, E. & Ferrary, M. 2012. Dynamics of stakeholders’ implications in the
institutionalization of CSR Field in France and in the United States. Paper accepted to
be presented at Annual Academy of Management Conference in Boston, 3-7 August
2012.
Avetisyan, E. & Hockerts, K. 2012. Consolidation of ESG rating industry: Motivations and
impacts. Paper accepted to be presented at Annual Academy of Management
Conference in Boston, 3-7 August 2012.
Behnam, M., & MacLean, T. L. 2011. Where Is the accountability in international
accountability standards?: A decoupling perspective. Business Ethics Quarterly, 21(1):
45-72.
Boxenbaum, E. 2006. Corporate social responsibility as institutional hybrids. Journal of
Business Strategies, 23(1): 45–63.
Boxenbaum, E. & Jonsson, S. 2008. Isomorphism, diffusion and decoupling. In
Organizational institutionalism (Eds, Greenwood, R., Oliver, C., Suddaby, R., Sahlin,
K.). Sage Publishing
Brunsson, N. & Jacobsson, B. (Eds.) 2000. A World of Standards. Oxford, Oxford
University Press.
Campbell, J. L. 2007. Why would corporations behave in responsible ways? An institutional
theory of corporate social responsibility. Academy of Management Review, 32(3): 946–
967.
41
Carroll, A.B. 2008: A history of corporate social responsibility – concepts and practices.
In A. Crane, A. Mc Williams, D. Matten, J. Moon and D.S. Siegel (Eds.) The Oxford
Handbook of Corporate Social Responsibility, Oxford University Press.
Carroll, A. B. 1999. Corporate social responsibility: Evolution of a definitional construct.
Business and Society, 38: 268–295.
Chatterji, A. K., Levine D.I. & Toffel, M. W. 2009. How well do social ratings actually
measure corporate social responsibility? Journal of Economics & Management
Strategy, 18(1): 125-169.
Déjean, F., Gond J.-P., & Leca, B. 2004. Measuring the unmeasured: An institutional
entrepreneur strategy in an emerging industry. Human Relations, 57: 741-764.
Déjean F. 2005. L’Investissement Socialement Responsable – Etude du Cas Français. Paris:
Vuibert.
Delbard, O. 2008. CSR legislation in France and the European Regulatory Paradox: An
analysis of EU CSR policy and sustainability reporting practice. Corporate
Governance, 8(4): 397-405.
DiMaggio, P., & Powell, W. 1983. The iron cage revisited: Institutional isomorphism and
collective rationality in organizational fields.American Sociological Review, 48:147160.
Djelic,M.-L. & Sahlin-Andersson,K. (Eds.), Transnational Governance. Institutional
Dynamics of Regulation. Cambridge: Cambridge University Press.
Durand, R. & McGuire, J. 2005. legitimating agencies in the face of selection: The case of
AACSB. Organization Studies, 26(2): 165-196.
Eisenhardt, K. 1989. Building theories from case study research. Academy of Management
Review, 14(4): 532– 550.
Etzion, D. & Ferraro, F. 2010. The Role of Analogy in the institutionalization of
Sustainability Reporting. Organization Science, 21 (5): 1092-1107
Gond, J.-P. 2006. Du Concept de Performance Sociétale de l’Entreprise. Fondements
Théoriques, Construction Sociale, Impact Financier. Unpublished PhD Dissertation.
University Toulouse I – Sciences Sociales.
Gond, J.-P., Kang, N. & Moon, J. 2011. The government of self-regulation: On the
comparative dynamics of corporate social responsibility. Economy and Society, 40(4):
640-671.
42
Hess, D.2007. Social reporting and new governance regulation: The prospects of achieving
corporate accountability through transparency. Business Ethics Quarterly, 17: 453-76.
Hess, D., & Dunfee, T.W. 2007. The Kasky-Nike threat to corporate social reporting:
Implementing a standard of optimal truthful disclosure as a solution. Business Ethics
Quarterly, 17(1): 5-32.
Cuesta Gonzalez, M. & Valor Martinez, C. 2004. Fostering corporate social responsibility
through public initiative: From the EU to the Spanish case. Journal of Business
Ethics, 55(3):273-293
Gilbert, D.U., & Rasche, A. 2007. Opportunities and problems of standardized ethics
initiatives – a Stakeholder theory perspective. Journal of Business Ethics, 82 (3): 448461.
Gilbert, D. U., Rasche, A., & Waddock, S. 2011. Accountability in a global economy: The
emergence of international accountability standards. Business Ethics Quarterly, 21(1):
23-44.
Igalens, J. and Gond, J. P. 2005. Measuring corporate social performance in France: A critical
and empirical analysis of ARESE data, Journal of Business Ethics, 56: 131–148.
Langley, A. 1999. Strategies for theorizing from process data. Academy of Management
Review, 24(4): 691–710.
Lee, T.W. 1999. Using qualitative methods in organizational research. Thousand Oaks,
CA:Sage.
Leighton, M., Roht-Arriaza, N. & Zarszky, L.2002. Beyond deeds. Case studies and new
policy agenda for corporate accountability (Natural Heritage Institute-Nautilus
Institute for Security and Sustainable Development-Human Rights Advocates,
California).
Louche, C. 2004. Ethical Investment. Processes and Mechanisms of Institutionalisation in
the Netherlands, 1990–2002. PhD Dissertation. (Erasmus University Rotterdam).
Matten, D. & Moon, J. 2008. ‘Implicit’ and ‘Explicit’ CSR: A conceptual framework for
understanding CSR in Europe. Academy of Management Review, 33(2): 404-424.
Meyer, J.W., & Rowan B. 1977. Institutionalized organizations: Formal Structure as myth and
Ceremony. American Journal of Sociology, 83: 340-363.
Meyer, J. W., & Rowan, B. 1983. Institutionalized organizations: Formal structure as myth
and
43
ceremony. In W. Meyer, B. Rowan, & T. E. Deal (Eds.), Organizational environments
ritual and rationality (pp. 21–44). Beverly Hills, CA: Sage Publications
Miles, M. & Huberman, A. M. 1994. Qualitative data analysis: An expanded sourcebook.
Second Edition. Thousand Oaks, CA: Sage.
Pettigrew, A. 1990. Longitudinal field research on change: Theory and practice. Organization
Science, 1(3): 267-292.
Pettigrew, A. 1997. What is a processual analysis? Scandinavian Journal of Management,
13(4): 337–348.
Pfeffer, J. & Salancik, G. 1978. The External Control of Organizations, (Harper and Row,
NY).
Power, M. 1997. The Audit Society. Oxford: Oxford University Press
Sauder, M. & Espeland, W. 2009. The discipline of rankings: Tight coupling and
organizational change. American Sociological Review, 74(1): 63-82.
Scalet, S. & Kelly, T.F. 2010. CSR rating agencies: What is their global impact? Journal of
Business Ethics , 94:69–88
Scott W. R. 2008. Institutions and Organizations. Third Edition, Sage Publications.
Shamir, R. 2008. The age of responsibilization: On market-embedded morality. Economy and
Society, 37(1): 1-19.
Sharfman, M. 1996. The construct validity of the Kinder, Lydenberg & Domini social
performance ratings data. Journal of Business Ethics, 15: 287–296.
Slager, C., Gond, J.‐P. & Moon, J. 2010. What gets measured gets managed? The impact of
SRI indices on responsible corporate behaviour. Best Papers and Proceedings of the
Academy of Management, Montreal, CA.
Slager, R., Gond, J.-P. & Moon, J. 2012. Standardization as institutional work: The
regulatory power of a responsible investment standard. Organization Studies
(forthcoming).
Tamm Hallström, K. 2000. Organizing the process of standardization. In: N. Brunsson and B.
Jacobsson (Eds.), World of Standards (pp. 85-99). Oxford: Oxford University Press.
Vogel, D. 2005. The Market for Virtue. The Potential and Limits of Corporate Social
Responsibility. Washigton: Brookings institution Press
Waddock, S. & Graves, S. B. 2000. Beyond Built to Last…stakeholder relations in ‘Built to
Last’ Companies. Business and Society Review , 105: 393-418
44
Waddock, S. 2008. Building a new institutional infrastructure for corporate responsibility.
Academy of Management Perspectives, 22(3): 87-108.
Whitehouse, L. 2003. Corporate social responsibility as citizenship and compliance:
Initiatives on the domestic, European and global level. Journal of Corporate
Citizenship, 11: 85–98.
Yin, R. 2003. Case Study Research. (2nd ed.). Thousand Oaks, CA: Sage Publishing.
45
46
TABLE 1. Interviewee list and details
Interviews
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
LEVEL 1: ESG RATING AGENCIES
Interviewee
Country
Type
BMJ Ratings Informant 1 (current staff)
France
Face to
BMJ Ratings Informant 2 (current staff)
France
face/phone
BMJ Ratings Informant 3 (current staff)
France
Face to face
BMJ Ratings Informant 4 (current staff)
France
Face to face
BMJ Ratings Informant 5 (current staff)
France
Face to face
BMJ Ratings Informant 6 (former staff)
France
Face to face
Vigeo Group Informant 1 (current staff)
France
Face to face
Vigeo Group Informant 2(current staff)
Italy
Phone
SAM Informant 1 (current staff)
Switzerland
Phone
SAM Informant 2 (current staff)
Switzerland
Phone
SAM Informant 3 (former staff)
England
Phone
SAM Informant 4 (former staff)
Switzerland
Phone
Eiris Informant 1 (current staff)
England
Phone
Eiris Informant 2 (current staff)
France
Phone
Eiris Informant 3 (former staff)
England
Face to face
Innovest Informant 1 (former staff)
USA
Innovest Informant 2 (former staff)
USA
Phone
TruCost Informant 1 (current staff)
USA
Phone
MSCI Informant 1
USA
Phone
CSR/SRI Expert 1
Netherlands
Phone
CSR/SRI Expert 2
Netherlands
Phone
CSR/SRI Expert 3
France
Phone
CSR/SRI Expert 4
France
Phone
Company Sustainable Manager
France
Face to face
Company Corporate Affairs & Sustainability VP
USA
Phone
Company Environment and Sustainability Dir.
USA
Phone
Length
60min.
60min.
42 min.
60min.
40 min
60min.
43 min.
54 min.
45 min.
40 min.
62 min.
35 min.
45 min.
67 min.
54 min.
33 min.
34 min.
50 min
45 min.
50 min.
50 min.
47
i
The term ESG ratings agencies was introduced in the study of Avetisyan and Hockerts (2012) as an umbrella to
refer to a number of similar terms such as Corporate Social Responsibility (CSR) rating agencies, SRI rating
agencies, or sustainable asset management companies.
48