DJSI Assessment Criteria Explained

What the DJSI Index Is and Its Role in Global ESG Benchmarking

Incepted at a time when sustainability was considered a niche pursuit, the DJSI or Dow Jones Sustainability Indices is perceived as an exceptional yardstick in sustainability assessments. Co-founded by S&P Global and RobecoSAM in 1999, the DJSI index evaluates businesses on their sustainability performance based on an array of ESG factors.

• Environment: carbon emissions, resource management, renewable energy usage

• Social: fair pay, employee welfare, diversity, human rights, community relations

• Governance: financial transparency, anti-corruption initiatives, regulatory compliance

As the world moves closer to attaining carbon neutrality, sustainability is what lends credibility and competitiveness to companies. A study by the Boston Consulting Group & MIT can attest to that. It demonstrates how 90% of executives consider sustainability crucial for a successful corporate strategy. The DJSI index serves as a decision-making tool for investors and stakeholders to spot global sustainability leaders implementing such strategies in various industry sectors.

How the DJSI Assessment Process Works for Companies

The assessment process is carried out by the co-founding companies of S&P Global and RobecoSAM. Here’s how it works:

Step 1: Selection & CSA (Corporate Sustainability Assessment)

The selection of constituents for the DJSI index is based on an invitation index that includes top firms across the world. Companies within this “invited universe” are to fill out detailed questionnaires on their sustainability activities.

The focus of the questionnaire is on environment and social practices, company culture, and economic transparency within each company.

Step 2: Data Analysis and Verification

Shared numbers by companies are verified and analysed for performance. Submitted company reports and corporate strategies are reviewed. An MSA (Media and Stakeholder Analysis) is carried out to determine ESG risk incidents as well.

Step 3: Weighted Scoring

Based on the weightage attached to each ESG criterion, DJSI scores are calculated for each company. Ethical exclusion measures are applied in an industry-specific manner to level the playing field.

Step 4: Industry-Based Rankings

The divisor methodology used in all equity indices of S&P Global is used to construct the index. Top performers are listed on the DJSI index, which is also annually reviewed to reflect the latest sustainability leaders across the world.

Key Criteria Used to Evaluate Companies in the DJSI Index

Sustainability criteria are an evolving component in how DJSI score is calculated. However, typical key measures can be outlined as follows:

1. Environmental

Under this dimension, the impact of a company’s activities on the environment is assessed.

• Greenhouse gas emissions and resource management

• Integration into the circular economy 

• Impact on biodiversity and conservation strategies

• Compliance with environmental guidelines and regional policies

• Climate strategy and renewable energy practices

2. Social

The social dimension evaluates the company culture and internal welfare practices of a company.

• Fair wages and employee well-being

• Implementation of health and safety protocols

• Standards for the data privacy of customers and employees

• Diversity and inclusion

3. Economic

Under the economic dimension, governance issues within the company are looked at.

• Independence and structure of the board

• Anti-corruption policies and ethical practices

• Financial transparency and risk management approaches

• Executive compensation and corporate governance practices

How DJSI Score Is Calculated Across Environmental, Social, and Governance Factors 

The detailed DJSI score methodology for ESG dimensions is not always revealed, but typically, it comprises the following:

• CSA & SAM data collection 

• Score calculation based on ESG weightage

• Treatment of missing data

• Normalisation of scores

• Media & stakeholder analysis

The methodology is overseen by a dedicated committee and reviewed from time to time to meet evolving sustainability needs. 

How the DJSI Ranking Reflects Corporate Sustainability Performance

Companies that feature in the top 10% of the DJSI index enjoy a competitive advantage and attract more investors, enhancing company value in the long run.

Here’s how the DJSI score of a company reflects its sustainability performance:

Comprehensive ESG Assessment

The DJSI index is constructed based on a stringent methodology that constitutes the ESG factors outlined above. A structured assessment lends detailed insights into the risk and crisis management activities undertaken by a company to meet DJSI benchmarks.

Transparency & Disclosure

The DJSI ranking demonstrates a company's commitment to transparency and accountability. It lends recognition for full disclosure of ESG reports, company policies, and sustainability performance. Clear communication attracts investors and customers, bolstering the financial health of the company.

Monitoring & Improvement

The DJSI index is reviewed annually to adjust changes or reorder rankings based on the corporate sustainability performance of companies. This has a ripple effect on companies, where they endeavour to track and monitor their sustainability performance to retain their DJSI score. Strategies are refined, and sustainability targets are readjusted to align with evolving measures.

Common Challenges in Improving DJSI Scores

Businesses that aim to secure a top spot in the upcoming DJSI index need to tackle the following challenges effectively:

• Data Traceability

Accurate data reporting becomes a challenge in the absence of supply chain monitoring. Opt for automation in reporting processes or platforms that deploy AI for data management.

• Lack of Disclosure

Lack of transparency and disclosure of ESG reports adversely impacts company value and reputation, thus affecting DJSI scores. Obtain expert guidance and incorporate automation to ensure proper compliance and bridge gaps in data. 

• Inadequate Weightage of Stakeholders

Lack of investor, employee, and customer feedback hampers a company’s ability to make sustainability decisions. In contrast, engaging all stakeholders and acquiring diverse insights can help set the right goals.

DJSI consultants at Oren help businesses adopt well-aligned ESG initiatives to enhance scores. A team of sustainability reporting experts ensures that gaps are resolved before the assessment and benchmarks are met to gear you toward sustainability leadership.

Best Practices to Strengthen Performance for DJSI Assessment

Adopt these best practices to enhance your DJSI score and perform better on the CSA:

• Analyse updated CSA criterion and detect gaps in existing reports

• Use global frameworks to ensure transparency

• Set ESG targets aligned with stakeholder feedback

• Involve DJSI consultants for end-to-end support

• Regularly monitor and standardise EGS performance across your business

• Lay emphasis on a sustainability-first approach in operational activities

Key Takeaways on the DJSI Index and Assessment Criteria

• Developed in 1999, the Dow Jones Sustainability Index evaluates businesses across the ESG dimensions to identify sustainability leaders.

• The methodology for determining DJSI scores constitutes a Corporate Sustainability Assessment in the form of a detailed questionnaire.

• Transparency and disclosure are verified and monitored to determine rankings.

• Rankings are updated annually, while sustainability performance is tracked throughout the year for component changes.