Grey Markov Models for Predicting the Social Sustainability Performances of Firms

Considering the three dimensions of sustainability, viz. economic, environmental, and social, the social dimensions of sustainability are getting lesser attention by firms and the same can be evinced from the sustainability ratings of firms, particularly in developing economies. Social sustainability is measured over several dimensions, where Thomson Reuters uses an integrated framework using four major indicators: the shareholders score, the community score, the product responsibility score, and the human rights score to measure and evaluate the social sustainability performances of firms. These four indicators are measured based on a number of company level indicators, as observed from the reported information of firms. We consider for this study, the Environmental, Social, and Governance (ESG) ratings of 10 Indian firms that are constantly evaluated for their social sustainability performances, for the past nine years in the reports of Thomson Reuters. We have formulated a periodic prediction model for the social sustainability performances of firms based on a basic grey prediction model (GM (1, 1)) and a moving probability Markov based error prediction model. It is observed from the results of the case evaluation that Indian firms have to mend or amend their strategies to improving their focus on social sustainability. Although, some of the firms show trivial increasing performance trends for these indicators, many of them follow declining trends. Focusing on the theory of Utilitarianism, we conclude that any improvements in socially responsible activities of firms can result in social good; along with the gain of sustainable competitive advantages for them.