Responsibility means different things to different people. There is no such thing as a “perfect” company that gets everything right. So where do you draw the line? How can we justify our criteria and process? We set out some of the common problems when trying to apply standards in this way below.
We’re always happy to take feedback on any part of our criteria or process. Please get in touch.
PROBLEM: How can you say which is the most important factor, environmental, social or industry/ customer?
SOLUTION: All of these areas are important.
We are more interested in what a provider does with its customers’ money than its own internal environmental and social policies, although these are taken into account.
In our view, it is not enough to focus on just one area, such as customer service. Equally, a firm that scores highly for environmental impact but pays lower than average rates would be marked lower for customer impact.
We use a simple “Low/ medium/ high” rating system for impact factors. Sometimes the rating will be neutral, where the factor is not relevant to the company activity, or negative, where the firm’s activities have a negative impact in that category.
Where there seems to be competing impact in different areas, we adopt a qualitative approach and would rely on our experienced panel for its view.
PROBLEM: It is almost impossible to apply one standard set of criteria to all financial services companies, which are all different sizes, from challenger banks just starting out to multi-billion pound, listed companies with strict reporting rules. They also all carry out different activities. How can you compare firms of such different size and scope?
SOLUTION: Strictly applying the same requirements to all firms risks alienating some because of their size, their company status or their age. We have divided firms into groups according to size and activity and then considered the most relevant factors based on a firm’s category. Not all considerations are relevant, for example, a start-up investment platform may have had negligible environmental impact, positive or negative, because it is so new.
We take into account stated intentions and aims where there is little past history to assess but require some evidence that work is being carried out towards meeting these aims.
Importantly, we also take into account the performance of a firm’s closest industry peers by looking at publicly available information. This means if a provider performs better than its closest rivals on the criteria, it could still be eligible for a Good Egg, even if there is still work to do in absolute terms.
PROBLEM: The level of information available from firms also varies, with privately owned companies not having to disclose as much information as those that are owned publicly, by shareholders. How can you compare when the level of information is so different?
SOLUTION: We don’t think it’s fair to penalise those providers who do not routinely publish information publicly but we do expect that firms committed to wider good document this on their website, marketing and annual reports and also that they are forthcoming during our application process.
NB. We do not oblige firms to disclose any market sensitive information, anything that would put the firm at a competitive disadvantage, or anything that is not directly relevant to the criteria as part of our process.
PROBLEM: A provider might score highly on its own use of resources and give a lot of money to charity, then invest customers’ money into arms and oil. How do you weigh up the impact of the company and its staff with the impact of the capital invested by the provider?
As stated above, we believe that what a provider does with its customers’ money – ie. what it invests in, has a wider overall impact than its own internal environmental and social policies, although these are taken into account.
So, for example, providers with as many women as men on the board and those that have signed up to pay employees the Living Wage will receive credit for these measures, which we would class as having a positive impact internally.
However, if a large percentage of the firm’s investments are in emerging market companies that do not report on the welfare of workers or their workers pay, then the positive internal policies of the firm would not be enough to prevent it being downgraded overall.
Problem: Absolute figures might look good for some large firms, but the relative numbers tell a different story, ie. what if the company could do a lot more to help but is choosing not to?
Solution: “Net positive impact” is what we are looking for. This means taking into account a firm’s negative and positive impact. For example, some energy companies invest a lot more than smaller companies in renewable energy in absolute terms, but the positive impact of this is cancelled out by their greater investment in fossil fuels.
In practice, this means a smaller firm that invests less in renewables in absolute terms but nothing at all in fossil fuels could be granted a kitemark, but the larger firm that invests more absolutely in renewables might not (although impact in other areas would also come into play). We consider the % invested in positive v negative a more accurate indicator of impact.
If a provider is a subsidiary of a parent company, we take into account both the attributes of the subsidiary and the parent company when making a decision.
Problem: It can be difficult to agree on what constitutes being responsible or ethical.
Solution: Too true. Ethics are subjective. However, there are common concerns, even if it is difficult to agree on priorities.
Please note: the Good Egg applies to a provider and not to individual products. Please see the licence terms for more information on how the Egg can be used in marketing material.