The assessment of corporate social responsibility: The construction of an industry ranking and identification of potential for improvement

This paper proposes an innovative composite indicator to evaluate Corporate Social Responsibility (CSR). The methodology proposed involves two stages. The first stage specifies an optimization model, based on Directional Distance Functions, to obtain a relative measure of CSR at the firm level that can guide performance improvements. This model allows distinguishing the firms with best practices from those with potential for improvement and can suggest targets for future achievements. In the second stage, a goal programming model is proposed to identify a common set of weights for the key performance indicators, enabling the evaluation of all firms on common grounds. These weights are used to construct an industry ranking, which is based on the distance of firms to a common frontier of technology that respects the trade-offs determined for the industry. An illustrative application of the method proposed is presented at the end of the paper. The indicators considered in the evaluation were selected according to international standards and guidelines applicable to mining firms. All dimensions of the Triple Bottom Line (economic, environmental and social) were taken into account. The results and their managerial implications are discussed with the objective of promoting the awareness of CSR levels in the mining activity, supporting the sustainable development of industrial activities.