CSRHub Blog Research on ESG metrics and comments on sustainability best practice

More Stranded Assets

[fa icon="calendar'] Apr 12, 2017 10:30:29 AM / by Bahar Gidwani

Much attention has been paid to the concept that global warming will cause a dramatic drop in the value of carbon
reserves.  A major shift towards non-carbon-based energy and non-carbon feedstocks for chemical processes could “strand” assets tied to oil drilling, coal mining, and fracking activities.  Various groups have tried to quantify the downside risk to energy companies, if the response to climate change occurs.

However, there are other assets that climate change could strand.  And, there are other sustainability trends that could result in stranding other types of assets.  Both corporate managers and investors should probably examine these risks, too.

Other Climate-Related Stranding

Most scientists tie the current widespread pattern of water shortages drought.jpgand droughts to climate change.  They believe that deforestation due to tree harvesting, conversion of forest to farmland, and stress on forests from increased temperatures is reducing flow of water into aquifers and streams.  The continued growth of the world’s population and rising use of water for the production of goods (e.g., the electronics, fabrics, and steel industries are all heavy water users) or food (both for irrigation and in beverages), are making things worse.

One societal response to this issue has been pressure to reduce use of water and to reuse water.  However another response could be for communities to constrain or even expel water-intensive industries from their locality.  A new bottling plant or a solar panel factory may create jobs.  But local politicians will hear screams from their constituents if they run out of drinking water.

Based on this logic, it is easy to imagine a gradual progression where existing water-using facilities become less economic.  Communities could cut off water supplies to irrigated agricultural lands—something that has already occurred in central California as the result of that state’s extended drought.  Companies that have factories or farmland on their books that could be affected by these changes may need to adjust their value downward, if they cannot find a way to mitigate the risks posed by further climate change.

Other Sustainability Trends to Watch

A number of other sustainability-related trends could produce asset stranding.  child labor sm.jpgFor instance, both the US and the UK have implemented rules regarding the use of “conflict minerals.”  These rules per se reduce the value of mines that cannot meet these standards—and reduce the GDP and financial future of the countries where these mines are located.  Rules on child labor and forced labor could eventually reduce much of the cost advantage previously held by clothing factories, fish farms, and electronics groups in less-developed countries.

Many of the world’s largest companies are adopting stringent sustainability standards for their suppliers.  They are asking for details on how supplier employees are hired and paid, what health and safety processes are in place, and how suppliers handle ethics and corruptions issues.  Losing a major customer could put a supplier company out of business—effectively stranding the assets it has accumulated.

Next Steps

Both corporate managers and investors care about risk and seek ways to manage it.  Companies that fully understand the risks posed by sustainability-related trends should be able to devise strategies to mitigate this risk.  If companies disclose their strategies, investors may use this information to adjust their risk assessment for these companies.  (However, there is a chance that investors could adjust their risk assessment upwards instead of downwards, if they had not previously understood that the company and its peers faced a new risk.)

Each identified risk may also generate opportunities for growth and new products.  We have seen this process already in the energy business, which has spawned areas such as smart grid technology, battery technology, and wind power.  Pressure to find new sources of water has driven a renewed interest in desalinization and in safely injecting waste water into aquifers.  Concerns about conflict minerals and labor issues have driven customer companies to find new sources of supply for the materials they need.  There may also be an opportunity for the financial industry to invest in projects that aid these adaptations and for the insurance industry to offer policies that explicitly protect companies (and investors) from sustainability-related risks.

We believe companies need to take a longer term and strategic look at the risks associated with asset stranding.  They can no longer wait to take action after one of their factories collapses or their water taps run dry.

Photos courtesy of Tyler Bell and Maurizio Castanzo via Flickr cc.

 


Bahar Gidwani

Bahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 17,000 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 525 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

  

 

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How to Improve Your CSR Score – New e-Book Series

[fa icon="calendar'] Apr 6, 2017 10:12:08 AM / by CSRHub Blogging

CSRHub 3p How to Improve Your CSR Score e-Book seriesCSRHub is pleased to announce a new initiative with our long-time friends, Triple Pundit, a global media platform covering the intersection of people, planet and profit. CSRHub is publishing the first e-Book in a new e-Book series, How to Improve Your CSR Score, sponsored by Triple Pundit.

As the world’s largest sustainability business intelligence database, CSRHub is in a unique position to understand corporate social responsibility (CSR) ratings. We have studied each of our 525 data sources’ metrics, and our system automatically identifies which sustainability reporting investments add the most value, pinpoints areas of lagging or leading performance, and produces benchmarks against other companies. In How to Improve Your CSR Score, CSRHub will try to share some of the “secret sauce” its co-founders, Cynthia Figge and Bahar Gidwani, have developed through their combined 30+ years of experience with sustainability metrics.

 

 

Here is a taste of Book 1 of the series,

Understand the Ratings Landscape:

“In the movie Butch Cassidy and the Sundance Kid, as the oUnderstand the Ratings Landscape 2-1.jpgutlaws are relentlessly pursued by the sheriff and his posse, Paul Newman (Butch) occasionally stops to ask, “Who are those guys?” The ratings landscape may feel like this – unknown sources that doggedly track you down. The ratings landscape can be confusing and seem unfair—unless you happen to be out in front.  In this e-Book series, How to Improve Your CSR Score, we’ll share our experience to help you better manage your rating stakeholders, improve your performance, tell your CSR story, and improve your CSR score.”

Download the first e-Book of the series, Understand the Ratings Landscape. Bookmark this page and check back often, as we will list all of the e-Books in the series on this page.

TriplePundit, a Certified B-Corporation, is a global media platform covering the intersection of people, planet and profit. We believe business can be a force for good. With over 10 million unique annual page views, we cover topics ranging from global water and energy challenges to social justice and economic equality, sustainable food to corporate social responsibility, and much more!

TriplePundit’s mission is to further the conversation on the Triple Bottom Line in business.  

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 17,000 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 525 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

 

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CSR: How Fortune 500 Companies Measure Up

[fa icon="calendar'] Mar 29, 2017 9:46:28 AM / by CSRHub Blogging

Guest article by Vice President of Editorial Content, Kelly Seiz of Skytop Strategies

As previously published on Skytop Strategies

fortune500top10_csrhubrate-1.jpg

It is well documented that CSR practices are both an emerging and rapidly expanding set of standards for 21st century corporations. As $30 to $40 trillion shifts hands from the current generation to the upcoming millennials over the next few decades, there are markedly different standards that companies must uphold to gain traction in the evolving investor and consumer market.

A recent study finds that 69% of high-net millennials place greater worth in putting their money toward companies that show a high level of corporate social responsibility (CSR), even if they might sacrifice their return for the greater good. As a result of this growing trend, there is a greater variety in the options available—the number of SRI funds that apply a high level of CSR have exploded in one year from 200 in 2013 to over 900 in 2014 alone—over a 300% increase.

While Fortune 500 companies are ranked by their annual revenue, Skytop Strategies analyzed their CSR ratings using CSRHub to see how they measure up in terms of corporate social responsibility.

The companies listed on CSRHub are rated using a database of socially responsible investing research firms, indexes, publications, ranking systems, NGOs, crowd sources and government agencies. Five hundred data sources’ elements are aggregated, mapped to 12 subcategories, normalized, and weighted by a patented algorithm, to give ratings for the four following categories and averaged out to give an overall CSR rating.

  • The Community category covers the company’s commitment and effectiveness within the local, national and global community in which it does business, including products, human rights and supply chain, and giving back and philanthropy.
  • The Employees category includes disclosure of policies, programs, and performance in diversity, labor relations and labor rights, compensation, benefits, and employee training, health and safety.
  • The Environment category covers a company's interactions with the environment at large, including use of natural resources, energy and climate change, environmental policies and reporting, and a company’s impact on the Earth’s ecosystems.
  • The Governance category covers disclosure of policies and procedures, board independence and diversity, executive compensation, attention to stakeholder concerns, and evaluation of a company’s culture of ethical leadership and compliance.

We evaluated the highest and lowest rating companies by their overall CSR score and delved into the ratings to discover why they ranked as the best and worst when it comes to corporate social responsibility.

Top Ranking Fortune 500 Companies.jpg 

Nationwide Financial Services Inc. ranked highest in both the Community and Environmental categories. The company has a long history in community engagement practices, including over 60 years of partnership with The American Red Cross and the Columbus Children’s Hospital. Their employees donate a total of nearly 16,000 units of blood annually, and Nationwide Financial Services provided a $100,000 Donation to Red Cross Annual Disaster Giving Program for Hurricane Matthew Relief. Nationwide has also partnered with Feeding America and donated 20 million meals over the course of 14 years.

In shareholder relations, ESG (environment, social, and corporate governance) and CSR efforts have proved to be valuable both in terms of brand value and company reputation. With over 33% growth in SRI investing over the past two years (SRI investing now accounts for more than $1 out of every $5 under professional management in the U.S.), corporate social, environmental and governance practices continue to gain relevance for investors and issuers alike.

New York Life Insurance Company ranked highest for Employees at 81 and Governance at 76. New York Life Insurance Company offers various educational programs for their employees, and is also well known for their inclusive policy toward employees of different backgrounds.

Bottom Ranking Fortune 500 Companies.jpg

Dollar Tree Stores, Inc. holds the lowest Employee rating with 41, which falls in the bottom 9% in terms of the Fortune 500 Employee ranking. They have a record of 100 violations with OSHA, many of them repeat offenses. In 2015 Dollar Tree paid a total of $825,000 in fines for blocked emergency exits, and improper storage methods that were in danger of injuring employees.

Berkshire Hathaway Inc. holds the lowest overall CSR rating, despite being listed fourth on the Fortune 500. “Berkshire has extremely low CSR scores across all subcategories,” Cynthia Figge, COO and Co-founder of CSRHub says. “They have 45 data sources, including all 13 of our major ESG analyst source databases, so this provides a strong signal of their perceived performance.”

Fortune Global 500 firms spend over $15 billion a year on corporate philanthropy, and Spearhead a wide variety of social responsibility (CSR) initiatives. Forty-three percent of Fortune 500 companies have set renewable or sustainable energy targets, 22 of which have committed to powering all of their operations with renewable energy.

While Fortune 500 companies may maintain the highest total revenue, the varying CSR ratings of the top-ranking companies show that fiscal performance doesn’t necessarily factor in social and environmental value. Still, PwC’s 19th Annual Global CEO Survey showed that CEOs believe that over the next five years, the most successful organizations in their respective industries will incorporate both financial and non-financial matters in reporting, have investors seeking ethical investments, make corporate responsibility core to the company, and that top talent will prefer to work for organizations with social values aligned to their own.

Beyond the bottom line, socially responsible corporations may sacrifice higher revenue to maintain brand value and reputability, which, given the shift in investor preference, may lead us to see a very different Fortune 500 list in the coming years.

 

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CSRHub Adds A Major New Source--Ideal Ratings

[fa icon="calendar'] Mar 21, 2017 10:07:39 AM / by Bahar Gidwani

CSRHub recently added a major new source to its pantheon of ratings partners—Ideal RatingsIdeal Ratings.jpg Ideal Ratings seeks to provide ESG data to Socially Responsible Investors (SRIs).  This is similar to the target market for our long-time friends at ET Global Indexes, IW Financial, MSCI, RepRisk, Thompson’s Asset4, Trucost and Vigeo EIRIS.  However,  Ideal Ratings has some features that differentiate it from these other sources:

  1. 40,000 company coverage. Ideal Ratings includes information on almost all of the 48,000 publicly-traded companies that CSRHub tracks.  Only RepRisk (which currently rates more than 80,000 entities!) has broader coverage.  Thanks to this new addition to CSRHub’s system, we will be able to continue expanding the number of companies we rate from our current tally of about 17,000 to at least 20,000, over the next few months.
  2. Comprehensive list of policy and disclosure indicators. We receive more than 300 different indicators from Ideal Ratings.  This is comparable to the lists from Asset4, MSCI, and Vigeo EIRIS—although Ideal Ratings is more oriented towards tracking specific policies and disclosures than any of our other sources except Asset4.
  3. Extra depth on some special issues. Like many other sources, Ideal Ratings assesses how companies perform on issues that are of special interest to particular stakeholder groups.  Ideal’s operations are in Egypt, so it is not surprising that it offers strong information on Sharia law issues.  Ideal Ratings also tries to estimate the percentage of revenue from issues such as Nuclear Power, involvement in controversial regimes, and “sin” issues such as gambling and alcohol sales.  This is similar to work that IW Financial also publishes.

While Ideal Ratings offers “opinions” on the overall sustainability performance of the companies it covers, its views appear to be quite different from those of both other major sources (such as MSCI’s Innovest) and from CSRHub’s sources in the aggregate.

Ideal Ratings and CSRHub.jpg

Of course, this different viewpoint does not mean Ideal Ratings is wrong or off track!  Each of our sources shows similar differences with the others.  We are happy to add the Ideal Ratings’ viewpoint to our system and encourage a company who would like to better understand how they are perceived by this source to reach out directly to Ideal Ratings or contact our team at CSRHub for a review of how their company is rated by all of our sources.

 


Bahar Gidwani

Bahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 17,265+ companies from 135 industries in 133 countries. By aggregating and normalizing the information from 525 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

 

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CSRHub's Cynthia Figge speaking at 2017 International Corporate Citizenship Conference at Boston College

[fa icon="calendar'] Mar 15, 2017 10:29:51 AM / by CSRHub Blogging

CSRHub Co-Founder and COO, Cynthia Figge, will be a panelist at Boston 2017 International Corporate Citizenship Conference at Boston CollegeCollege’s 2017 International Corporate Citizenship Conference. This event will be held on March 26-28th in Boston, MA. Cynthia will be speaking at the Session focused on Evolving Reporting Landscape.  

The evolving reporting landscape: Using the data you disclose

The number of companies engaging in sustainability reporting is at an all-time high—and growing. Now, the conversation no longer centers on whether companies should report but rather how.  In this session, learn more about the trends and topics that are shaping the future of reporting, and what you can do now to make sure that you are leveraging the process in such a way that creates a better business—and a better world.

Breakout Session: Evolving Reporting Landscape

Tuesday, March 28, 2017
Moderator: Dan Bross, BCCCC Executive Forum emeritus

Panelists:   Dana Beckman, Director Corporate Affairs, Alliance Data
Cynthia Figge, COO and Cofounder, CSRHub
Evan Harvey, Director of Corporate Responsibility, NASDAQ
Julia Wilson, Director, Global Responsibility and Sustainability, Nielsen

 

To see more of our partners’ training opportunities or where Cynthia Figge or Bahar Gidwani will be speaking next, please click here.

 

 

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