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

By Carol Pierson Holding

The Sustainability Accounting Standards Board (SASB) just announced a new credential

So Hard to Change Course

for accountants charged with analyzing sustainability issues that impact the bottom line.  “More and more companies are disclosing sustainability information. In 2011, only about 20 percent of S&P 500 companies produced a sustainability report, while in 2014 that number jumped to 75 percent.”

Should this make us jump for joy? I’d hoped for more.  By now, we were supposed to have one overall reporting scheme that integrated financial results with quantified sustainability measures.

I remember how participants cheered at the 2007 Socially Responsible Investment (SRI) Conference when piles of the Wall Street Journal’s special section “A Smarter Approach to SRI” were distributed. The section acknowledged SRI investors, data analysts and portfolio managers as a valid segment of investing, chronicling SRI’s shift from a sin-avoidance screen (no tobacco, liquor or firearms) to a philosophy that doing good in the world produces great financial results.

We thought we could see the end of a need for SRI. After all, if a strategy is producing better returns, wouldn’t everyone jump on the bandwagon? Wouldn’t accounting standards incorporate sustainability factors into their reporting requirements? Wouldn’t financial analysts demand access to standardized sustainability measurement?

Yet here we are, eight years later, and we’re no closer to sustainability integration. The SEC requires financial reporting on climate change and conflict minerals to account for their risk, but that was put in place in 2010 and has only been minimally enforced. The U.S. has not required sustainability reporting seen in other countries, and the U.S. accounting board (FASB) leaves sustainability reporting to independent organizations, removing FASB’s responsibility to put sustainability factors side by side with financial reports.

Sustainability data, also called CSR, is available – in fact, CSRHub, sponsor of this blog, posts some of its data online for free. But none have been used to establish standards that can be enforced.

Despite these roadblocks, some investors have figured out how to incorporate sustainability performance into their investment strategies, and they’ve had remarkable success. This month’s The Atlantic reports on Al Gore’s phenomenal performance with sustainable investing: his firm earned 12.1 percent annually over ten years, an astounding 5 percentage points over the average managed account.

Gore’s results are substantiated by studies from Oxford University and the Wharton School. So why are supposedly rational investors not enrolling in droves?

Bank of England’s Chief Economist Andrew Haldane has considered this behavior irrational as well. The Atlantic piece explains:

“…this is known as the ‘$20 bill paradox’: An economist sees some money lying on the sidewalk and says, ‘That can’t be a $20 bill, because if it were, someone would have picked it up.’ But Haldane’s analysis shows a persistent market failure because of habits of mind, compensation structure, and other real-world factors that make investors undervalue long-term returns.”

A perfect example comes courtesy of this month’s Harvard Business Review’s “Best-performing CEOs in the World.” For 2015’s report, the authors factored in 20 percent sustainability performance with its standard financial measures, profit and change in stock value. Eight years after the Wall Street Journal endorsed sustainability, Harvard has come around too. Should be great news right?

Predictably, Jeff Bezos, founder of Amazon, was first last year. Also predictably given Amazon’s abysmal sustainability record, Bezos dropped to 87^th this year.

But the market didn’t punish Bezos at all. The week the rankings were released, Amazon’s price was unaffected, bouncing around within its normal range. Even more telling, when the company’s “bruising workplace’” was excoriated by the New York Times then universally critiqued for weeks on end, the stock barely budged. Sustainability affects long term returns, which just don’t matter to most investors.

So what’s the news here?

By adding sustainability as a factor to its Best Performing CEOs ranking, HBS is supporting its mission to “Educate Leaders Who Make a Difference in the World. Yet the market’s “habits of thought” are to value short term over long term returns and reward ambitious leaders who fail to understand the inter-connectedness of the world.

You have to applaud the change in CEO ranking criteria, celebrate the SASB credential and admire those who proselytize sustainable investing. But we still have a long way to go to change real world habits.

Photo courtesy of Andy Blackledge via Flickr CC.

Carol Pierson Holding is President and Founder, Holding Associates. Carol serves as Guest Blogger for CSRHub. Her firm has focused on the intersection of brand and social responsibility, working with Cisco Systems, Wilmington Trust, Bankrate.com, the US EPA, Yale University’s School of Environmental Sciences, and various non-profits. Before founding Holding Associates, Carol worked in executive management positions at Siegel & Gale, McCann Erickson, and Citibank. She is a Board Member of AMREF (African Medical and Research Foundation). Carol received her AB from Smith College and her MBA from Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 132 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

The Supreme Court will be taking up the gay-marriage issue for the first time at the end of March. Apple Inc., Morgan Stanley, and many other companies are same-sex marriage advocates. These companies are standing against the Defense of Marriage Act (DOMA). This law states that legally married gay couples can’t claim the federal tax breaks and other benefits available to opposite-sex spouses. Hundreds of American companies have spoken out against the Defense of Marriage Act and Proposition 8 over the years, and many of those companies signed onto briefs opposing both anti-gay laws. In 2008, Proposition 8 put a ban on gay marriage in California. This is now being challenged by corporate groups such as Facebook Inc. and Intel Corp. They have argued that “gay-marriage bans in 41 states harm workplace morale and undermine recruiting” (Greg Stohr). Companies such as Starbucks, Amazon and Apple have supported a brief that says "Proposition 8 and similar laws inflict real and wholly unnecessary injury on business ... No matter how welcoming the corporate culture, it cannot overcome the societal stigma institutionalized by Proposition 8 and similar laws."

CSRHub tracks 245 companies that have gay and lesbian partner benefits. Companies on this list have implemented policies that respond to the special needs of gay, lesbian, and transgender employees. These policies may include expanded health and family leave policies, explicit rules regarding workplace discrimination, and management training programs. Of the 202 companies that backCSRHub gay marriage, 78 are identified by CSRHub as having these gay and lesbian policies and benefits. Some of these companies are listed below.

 Companies with Gay and Lesbian policies

[csrhubwidget company="Starbucks-Corporation" size="650x100" hash="c9c0f7"]

Photo courtesy of freedomtomarry.org.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,000+ companies from 135 industries in 91 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

CSRHub rates 12 indicators of employee, environment, community and governance performance and flags many special issues. We offer subscribers immediate access to millions of detailed data points from our 200 data sources. Our data comes from eight ESG (environment, social, governance) analysts, well-known indexes, publications, “best of” or “worst of” lists, NGOs, crowd sources and government agencies. By aggregating and normalizing the information from these sources, CSRHub has created a broad, consistent rating system and a searchable database that links each rating point back to its source. The rapidly expanding CSRHub dataset principally adheres to the Global Reporting Initiative (GRI) G3.1 guidelines.

By Bahar Gidwani

As promised, we’ve talked in previous posts about the wide array of information that is available on corporate social responsibility (CSR) and sustainability subjects.  The big financial research firms, standards organizations, not-for-profits, and government sources each offer their own top-down, carefully organized version of how companies are performing socially.  What about bottom-up measures?  Are there “crowd-sourced ratings” for CSR?  If you are like me and you use the travel reviews on TripAdvisor or the product reviews on Amazon, you know how valuable this type of data can be.

We’ve been able to integrate three crowd sources so far, into our giant database of ratings information.  One of our earliest partners was a company called Jigsaw.  (Jigsaw was bought last year by Salesforce.com for $142 million!)  Its members volunteer data on the companies and people they work with.  In return, they get back information on other companies and people they are interested in.  As the data flows in, Jigsaw uses special programs to cross-check names, addresses, and descriptions.  The result is an ever-growing address book of information on thousands of companies.  This address book helped us figure out which companies to track and gave us a head start on their industries and locations.

Glassdoor is another example—and a good one—of how crowd sourcing can help with CSR analysis.  An employee who joins the Glassdoor site can upload her or his comments on the company she or he is working for.  The employee can comment on the work environment, pay scale, and on the performance of the management team (including the company’s CEO).  After a while, Glassdoor builds up enough data on a company to allow it to publish a rating of how it treats its employees—and scores for things like the performance of the company’s CEO.  Glassdoor members get to see this data, comment further on it, and then use it in their job search and career planning.  We’ve started integrating this bottom-up score into the Labor section of our data—and hope to soon have comments about how the inside view via Glassdoor compares to how company labor policies are seen by external sources.

Wikis represent a different, more collaborative approach, to crowd sourced data.  The best-known example of a Wiki is Wikipedia—one of the most-visited sites on the Web and everyone’s favorite modern-day encyclopedia.  We’ve now partnered with a Wiki called WikiPositive, that was built by the folks at 3 Sisters Sustainable Investments.  (BTW, 3 Sisters recently decided to also support and invest in our CSRHUB enterprise.)  Over the past two years, WikiPositive has recruited a large and growing group of contributors who are interested in helping investors (and others) discover the positive value that is being created by smaller publicly-traded companies.  This group felt too much emphasis was being put on the CSR activities of the top 1,000 or 1,500 public companies, when many of the most interesting new approaches to sustainable business management were being developed by smaller companies.  Their site represents a great example of how crowd input can be used to change the focus of a discussion and bring new information into a discussion.

A number of other interesting models and concepts are being explored.  For instance, MoxyVote allows individuals to get involved in the proxy process—a long-standing method for influencing corporate behavior.  Greenwala gives its users the opportunity to form communities of interest and then recommend green and sustainable products to one another.  Alonovo and other responsible shopping sites capture feedback on the products they sell from their user base of socially aware consumers.  Goodguide offers carefully researched ratings on the products it covers—and then encourages its users to add their views and advice.

We need to organize the feedback we get on the ratings we offer and help our users learn from each other.  We are working on our own system for integrating feedback from users directly into our scores.  By adding this data to the data we get from a growing list of crowd data sources, we should ensure that our ratings accurately include the views of the people who work in, buy from, and serve the companies we rate.

Bahar Gidwani is a Cofounder and CEO of CSRHUB. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.