Corporate Sustainability Measurement and Assessment of Czech Manufacturing Companies Using a Composite Indicator

Abstract

This paper discusses the measurement and assessment of corporate sustainability by a composite indicator. The aim of the paper is a construction of a composite indicator "Index corporate sustainability” (I_CS). A tool for measuring and assessing corporate sustainability is an appropriately designed model called the “Sustainable Environmental, Social, Governance and Economic Model (SEESG Model)". The composite indicator I_CS integrates 5 financial (economic) and 14 non-financial, environmental, social and corporate governance (ESG) performance indicators Iji, which are determined in a stepwise fashion from a basic set of performance indicators using the principal component analysis (PCA) modelling. The composite indicator I_CS is one of possible ways to create a tool for measuring and assessing corporate sustainability that allows assessment of companies by a set of financial and non-financial indicators in various areas of their performance, thus enabling a detailed analysis and determination of the impact of various performance areas and factors in complex corporate performance. An important characteristic of the composite indicator is the possibility to easily make comparisons and rankings of companies in a particular sector, and estimate whether they are heading towards sustainability. The use of benchmarking for company-to-company comparisons makes it possible to interpret summary information and to quantify differences in the performance of individual companies using graphic visualization. For this reason, I_CS can be offered as a consistent and flexible benchmarking for owners, managers and investors. Using this indicator, they can incorporate sustainability into their decision-making processes, and achieve economic growth and ensure protection of the environment and social values.

DOI: http://dx.doi.org/10.5755/j01.ee.28.1.15323