Ethical indices: how do you measure ethics? By Daniel Johnson While ethical indices can sometimes cause confusion, they provide a useful benchmark for companies and stakeholders Corporate ethics can be hard to measure There are over 250 global and local ethical indices schemes, with FTSE4Good and the Dow Jones Sustainability Index (DJSI) two most well known ethical investment indices for UK companies. They provide an index for investors as to what can be considered an “ethical investment”. But how is “ethics” measured? In recent updates to the indices, Johnson & Johnson and Vodafone were among the 41 deleted from the DJSI; there were no deletions from FTSE4Good. These companies lost their places in the DJSI because they are no longer judged to be among the “best in class” in their sectors. Deletion from the index can be a reflection of relative improvement by other companies rather than any necessary deterioration in performance by the company that has been dropped. But Vodafone, the world’s largest mobile phone company, has been in the reputational spotlight over the past year as it has tried to fend off accusations that it has avoided paying taxes in the UK. Compilers of ethical indices do not comment as to why some companies are included and others are not, and this often leads to criticism. The recent addition of Bank of America to the DJSI has generated a fair amount of controversy among nongovernmental organisations such