Justification  of  Transparency  Criteria

One may question any individual criterion. In section 4.1, I showed that there is at least more than one possible way to go about these elements and that the necessary decision influences the result. The justification of the transparency criteria shall anticipate two kinds of general criticisms. One can question the transparency criteria’s addressees and the selection of criteria.

Colloquially speaking this corresponds to “why is transparency needed at all?” and “why the-se criteria and not others?”.

Possible groups of addressees are the customers, the companies, and the public. In general, axiom 2 states that an SR agency has the obligation to be transparent to a degree sufficient to interpret it. I made this axiom comprehensible by listing stakeholders that are interested in interpreting the SR. I did not justify the individual stakeholder’s claims. The composite indi-cator literature demands full disclosure to the public. However, composite indiindi-cators typically address policy makers and the public. Hence, this argument is not applicable to SRs. In the case of SRs, a formal, consequential derivation of the legitimate addressee of transparency would have to consider the societal role of SRs and their license to operate. A less formal

ar-gument for public disclosure may note that SRs depend on the transparency by companies and should set a good example themselves (Arise, 2012a). In addition, Sadowski, Whitaker, and Ayars argue that transparency creates trust in SRs, which in turn leads to higher adoption by customers (2011). Hence, there may be a business case for transparency to the public.

If one does not agree that the public should be able to interpret an SR, two other addressees can be considered. Naturally, the group of customers has a well justified claim to full trans-parency as they hesitate to finance the SR, if they paid for a number or grade only. They need to be enabled to interpret and apply the SR. Further, the group of rated companies may also have a well justified claim to know how it is evaluated. The currently developed Sustainability Ratings Standard by the Global Initiative for Sustainability Ratings (2013) includes a similar-ly restricted definition of transparency as the first of twelve principles: “A rating should be transparent to those whose decisions are affected by the application of such rating” (p. 9).

Ultimately, I conclude that the interpretation of the results requires transparency. A SR agency should be transparent to all those with well justified claims to interpret the results. The thesis does not identify the group that has such claims to interpret the results beyond doubt. Howev-er, there are strong intuitive arguments in favor of full disclosure to the public. The burden of proof is clearly in the field of those trying to argue against transparency requirements.

The second criticism questions the concrete selection of the transparency criteria. They may seem arbitrary, given the possibility that an SR agency may not even have defined its primary objective internally. Indeed, the justification depends on two assumptions because of this the-sis’ approach.

First, the composite indicator framework needs to be applicable to SRs. In chapter 2 I argued for this assumption. I showed that the composite indicator framework and SRs share key char-acteristics, constituents, and have an equivalent problem setting. Thus, the framework and the methodology are applicable to SRs and I concluded that structure and findings of this research are valid for SRs as well.

Second, one needs to assume that the five steps of this thesis are the relevant and correct steps for the interpretation of a one-dimensional measure. The literature discusses other steps in addition to the five steps. For example, one could include the publication of an uncertainty and sensitivity analysis in the transparency criteria. The results would describe the reliability and robustness of the results. I excluded this and other steps, because they do not influence the

results directly. One may argue for the inclusion of additional transparency criteria. However, they cannot be supported by the attempt to interpret an SR.

An alternative justification is applied in section 4.1. For each criterion, one may ask how an SR can be constructed without its explicit formulation. If the set of transparency criteria is justified, each criterion needs to be necessary for the construction. For example in the absence of an explicit primary objective, there is no decision criterion to choose relevant dimensions.

It is also not possible to derive weights without defining what these weights relate to. In re-verse, this means that the addressee cannot replicate and interpret the SR.

So sum things up, transparency is needed for the interpretation of an SR. The addressees with well justified claims may be contested. The concrete selection of the proposed transparency criteria is based on the applicability of the composite indicators framework and the individual element’s influence on the SR scores.

4.4 Remarks

The transparency criteria represent the end of the theoretical parts of this thesis. The objective was to reflect the construction of SRs based on an established academic background. I identi-fied the composite indicator framework as an applicable approach. The discussion of the con-struction of composite indicators enables many conclusions about SRs. I presented five steps that are crucial for the construction of SRs and I referred to specific circumstances of SRs where applicable. In this chapter, I used these findings to set up transparency criteria. The elements that are required by these criteria are the elements that are used for the construction of an SR. Users of SRs can only interpret the results, if this construction is replicable and comprehensible.

Two facts are important about the transparency criteria. First, compliance with these criteria enables interpretation. I did not identify the group of addressees that is entitled to interpret SRs. I referred to arguments in favor of public disclosure, but I refrained from a single con-clusion. Second, the transparency criteria cover the construction of one-dimensional measure that determines any SR according to my definition. In addition, there may be further argu-ments for an SR agency to be transparent about other areas, too. This is not part of this thesis.