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

CSRHub - What's Changed After Ten Years of CSR Ratings: Part Two

[fa icon="calendar'] Nov 8, 2018 9:12:11 AM / by Bahar Gidwani

Part 2 of a 2-part series.

In 2008 CSRHub began measuring performance in corporate social responsibility (CSR). Using ten years of history, we are now starting to answer questions such as: 

  • Has CSR performance improved over time?
  • What area of CSR is improving the most?
  • Is the universe of companies for which ratings are available expanding beyond the large public corporations?
  • How strong is the alignment between CSR performance and company CSR reporting on CSR?

 

More Data on More Companies

A dramatic increase in ratings sources beyond Wall Street-driven and research companies has expanded the field of companies for which ratings can be developed.  For example, the number of companies and other entities studied by CSRHub has increased from 2,000 in 2008 to 18,000 in 2018. In 2008, the major sources of data were the analyst research houses which covered only large public companies. While this data produces rich consistent opinion matrices and remains a vital component of the CSRHub system, other crowd sources, not-for-profit groups, publications, and government regulators helped expand the covered universe to include smaller companies, not-for-profit organizations, and government entities.

 CSRHub Uncover Ratings

 

Still a Disconnect Between Reporting and Performance

One of the reasons we developed CSRHub was because we felt there was a disconnect between reporting (what companies said about themselves) and performance (what companies actually do).  We could not find a way to pierce the veil and determine performance directly.  This is why we created a proxy based on the aggregate opinion of how a company is performing on ESG (environment, social, governance) issues, from a wide range of expert sources.  Our scores build a feedback loop so that companies can see how their performance and reporting are perceived.  We hope they will use this feedback to improve both the truth about their corporate social behavior and what they tell their stakeholders about themselves.

We recently launched a new tool in partnership with Bloomberg that illustrates clearly that reporting and performance are still only loosely related.  The chart below shows for the S&P 100 a measure of disclosure (the horizontal axis is the percent of Bloomberg’s 900 sustainability indicators that have been captured for each company) against a measure of perceived sustainability performance (CSRHub’s overall rating).  The correlation between these measures is only 28%.  This indicates that there must be other “explanatory variables” that drive how a company’s ESG performance is perceived, besides the extent of its sustainability disclosures.

 ESGHub

 

Looking Ahead at CSR Trends

We don’t expect to see many major new analyst-driven sources of ESG data emerge.  It is expensive and time-consuming to use human analysts to review and weigh a company’s sustainability performance.  We’ve seen new data sets that are driven by news reports, tweets, or other bottoms up evidence.  These sets are interesting, but we have not seen much correlation between them and the many other sources we review.  There are many new sources of data coming from not-for-profit groups—especially those who have focused on supply chain issues.  We also expect government-regulation-driven disclosures to expose more small and mid-size companies—especially in Europe and parts of Asia.

Our big data-driven system seems to be working well and producing useful insights into the relative sustainability performance of thousands of companies.  We plan to continue growing our coverage and tying the signals from our data to tools that can be used by companies, analysts, activists and researchers around the world.

With the exception of the still-broad gap between disclosure and performance metrics, CSR has moved forward over the last ten years.  CSRHub will continue to track the change in emphasis on core issues and incorporate new data sets as they emerge. What gets measured – and reported – is what gets implemented.  We’ll keep working to help keep CSR moving forward for the next ten years.

 

Download the full report

 


Bahar_Gidwani-10Bahar Gidwani has built and run large technology-based businesses for many years. Bahar holds a CFA (Chartered Financial Analyst) and was one of the first people to receive the FSA (Fundamentals of Sustainability Accounting) designation from SASB. Bahar worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. He has founded several technology-based companies and is a co-founder of CSRHub, the world’s broadest source of corporate social responsibility information. 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 is the largest ESG and sustainability rating and information platform globally. We aggregate 180M data points from 550+ data sources including 12 leading ESG analyst databases. Our patented algorithm aggregates, normalizes, and weights data to rate 18,000 companies in 132 countries across 136 industries. We track 97% of world market capitalization. We cover 12 subcategories of ratings and rankings across the categories of environment, employees, community and governance. We show underlying data sources that contribute to each subcategory’s ratings. CSRHub metrics are a consensus view (any 2 sources may have about a 30% correlation so we make sense of the disparate data). We tag companies for their involvement in 17 Special Issues. We provide Macro-enabled Excel dashboard templates, customizable dashboards, and an API. Our big data technology enables 85% full coverage of data across our rated companies and robust analyses. We provide historical ratings back to 2008.

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CSRHub’s Bahar Gidwani speaking at Intro to ESG Training at Baruch College/CUNY

[fa icon="calendar'] Jun 6, 2017 8:00:00 AM / by CSRHub Blogging

CSRHub CEO and Co-Founder, Bahar Gidwani, will be speaking at a One-Day Training Program presented by Governance & Accountability Institute and Global Change Associates, titled Into to ESG, Sustainable & Impact Investment Training. This training is hosted by Zicklin School of Business at Baruch College/CUNY on June 15, 2017.

Gidwani_Infographic_500px.jpg

 

Bahar will be speaking at the session focused on Bridging the Gap: Sustainability vs. Profitability.

June 15th:

1:55pm- Bridging the Gap: Sustainability vs. Profitability

Bahar Gidwani, Founder & CEO, CSRHub

 

Register here, with CSRHUB20 for 20% off!

See the full interview with Bahar Gidwani and Hank Boerner on this upcoming event here


Bahar_Gidwani-10.jpgBahar 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 17,400 companies from 135 industries in 134 countries. By aggregating and normalizing the information from 530 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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A Quick Look at Brand Finance’s 2017 Banking League Table

[fa icon="calendar'] Feb 7, 2017 10:14:04 AM / by Bahar Gidwani

Brand Finance has recently released its analysis of the brand strength for the world’s 500 top banks.  This annual review uses Brand Finance’s royalty relief methodology to estimate how much of a bank’s market value derives from its brand assets.

Over the past few years, we have studied the relationship between brand strength and sustainability.  With help from both Brand Finance and other partners and data sources in the brand measurement space, we’ve determined there is a stable and reasonably strong correlation (between 10% and 30% depending on the source, time, period and type of data) between our data and these gages of corporate success.

Therefore, we were not surprised to see that those banks who had big increases in brand strength also had big increases in sustainability performance and vice versa.  The chart below shows companies who had a two step change in brand strength (e.g., from A to AA- or from AAA to AA+) on the horizontal axis compared to those who had a multi-point change in their overall CSRHub rating.  The top right and bottom right corners show banks where brand and sustainability score changes agree.

Brand Finance - Improved Sustainability - Stronger Brand 2.jpgThere are always outliers in any analysis.  So the presence of one bank (Intesa Sanpaolo) in the top left box didn’t bother us too much.  However, there were four names in the bottom right box, that had brand strength increases but sustainability strength declines.

A quick analysis shows that the driver for the change in perceived sustainability performance for these banks was governance issues—an area we’d previously showed did not have much affect on brand.  These four banks showed relatively little change on the community, employee and environment issues that are most tied to brand.

Bank Governance Issues 2.jpg

We look forward to working with more data from Brand Finance as they populate the rest of this year’s league tables.  Our partnership with Brand Finance allows them to share details of our ratings with their clients.  I’m sure that there will be many banks—and other companies—who will be interested to see how improving their sustainability performance could affect their brand values.

Search a company on CSRHub and see their sustainability performance.

 


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 16,800 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 500 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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Tears Don’t Mend Broken China

[fa icon="calendar'] Jan 12, 2017 11:32:16 AM / by Bahar Gidwani

renewal.jpgI’ve always been clumsy.  There were many broken dishes and glasses in my childhood.  My Mom was always kind about it.  She’d say, “Tears don’t mend broken China.”  She had other similar phrases I remember (e.g., “If you get a load of lemons, it is time to make lemonade!”), but the lesson was always Midwestern positivism.  Don’t sit around moaning about what can’t be fixed—keep moving forward and don’t let your own failures hold you back.

Our recent election broke dishes for those of us in sustainability.  Many of my friends in the field and a number of our clients have asked if US corporate sustainability programs will be put on hold for the next four years.

I’m not as good as my mother was, at mending dishes (or comforting someone who is crying!).  But I do see some reasons for hope:

  • Well-run corporations care about profit, reputation, and mission. If their sustainability programs generate a profit, reduce risk, or help them accomplish their longer-range goals, they should continue to pursue them.
  • Young folks soon take over. We get requests daily from students around the world who need data for a sustainability study or project.  For every student who majors in CSR there are ten other young people who care passionately about the world’s future.  Unless something dramatically changes how young people view the future, we will continue seeing a generation-driven rise in interest in sustainability.
  • US companies trade with the rest of the world—and the rest of the world won’t backtrack on sustainability. If a US company wants to be successful in Europe, Asia, the Middle East, etc. it must adhere to a high standard of ethics, respect indigenous peoples, avoid polluting local water supplies, combat climate change, etc.
  • US companies have the same stakeholders they did on November 7. Managers, employees, communities, suppliers, customers, and investors will continue to remind companies about the risks that companies will face if they do not behave responsibly. It will remain important to have a “social license to operate.”
  • Momentum matters. Corporations are big ships that turn slowly.  They have put money and time into corporate social responsibility (CSR) programs.  They won’t shift these resources into other things, without good reason and a lengthy analysis process.

 

What types of changes may occur?  Don’t expect stringent new guidelines from US regulators (e.g., the SEC, the EPA, OSHA, etc.).  Look for more boycotts and “buycotts.”  (Several groups are boycotting Trump-related brands and there seems to be a countervailing push to punish firms that won’t advertise on Breitbart.)  Some companies may offer less-sustainable alternatives in certain product areas.  (E.g., muscle cars, heavily-sugared cereals, and other “retro” products.)  Corporations may put on hold major new green investments until things “settle down.” None of this is long-term stuff.  We can mend these pieces and fix these holes.

We at CSRHub see our data and tools as a way to improve how a company communicates its progress and a means to reduce the cost of and improve the effectiveness of sustainability reporting. My mom once put the lid of a tea pot I’d smashed under my pillow and told me that it would give me sweet dreams.  Let’s remember what we’ve been through and all that we’ve accomplished so far.  Then, let’s move forward and dream again, about a better future.

Photo courtesy of  Ruth Edwards


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 16,800 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 500 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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Understanding the Just 100

[fa icon="calendar'] Dec 15, 2016 9:40:43 AM / by Bahar Gidwani

Just Capital was established in 2015 by two successful and well-known investors: Paul Tudor Jones and Martin Whittaker.  Its mission is to use “the power of markets to drive positive change on the issues Americans care most about.”  After two years of research and reflection, Just Capital has now published a list of the 100 best “corporate citizens.”

We’ve been interested in this project from its inception and provided the Just Capital research team with access to our ratings and other data.  Unlike other ratings systems that attempt to decide what things are good behavior or bad behavior, Just Capital sought the opinion of ordinary citizens about what defines good corporate citizenship.  When they released the first readings from these surveys last year, it caused a stir within the sustainability community by showing that social and ethics issues were more important to most Americans than environment or other governance issues.

We suspected that Just Capital’s approach would generate ratings that differ from those of the other 491 ratings sources we integrate into CSRHub’s data set.  A simple comparison between the top 100 company ratings and CSRHub’s ratings shows there is about an 8% R Squared between Just Capital’s perspective on corporate social responsibility (CSR) and that of CSRHub’s aggregate of all other sustainability rating sources.

Just 100 and CSRHub Correlation.png

 

For this first review, Just Capital chose to focus on components of the Russell 1000 Index.  They pointed out that this group of companies has a large market capitalization and that most are headquartered in the US.  (Only around 40 of the current members of the Russell 1000 Index have non-US headquarters.)  One of the planned uses for the Just ratings is to encourage US investors and consumers to support “just” companies.  Investors may find this first list useful, but US consumers and businesses buy products and work with hundreds of large foreign companies that have not yet been evaluated.

Just Capital looked at about 90% of the companies in the Russell 1000 Index.  It sought to discover how these companies performed across 67 different metrics.  CSRHub covers 969 companies from this Index and has access to around 3,000 different metrics on these companies.  Just Capital had to make a number of assumptions and adjustments to account for missing data.  CSRHub’s system automatically adjusts for missing data issues through its normalization and weighting algorithms.  Despite these methodological differences, there is some agreement between our systems.  In particular, the 100 companies Just Capital picked did have better average performance using CSRHub’s rating system than the other 869 companies we rate in the Index.

CSRHub Rankings comparison.png

 

On the other hand, there were some major differences between our rating systems.  19 of Just’s top 100 companies had overall CSRHub ratings that were in the bottom quintile (lowest 20%) of the 16,500 companies we track.  69 of the 869 companies that didn’t get into the Just 100 were in the top quintile of CSRHub’s ratings system.  To put it another way—the five top-scoring companies in the Just 100 had an average CSRHub rating of 59.  More than 100 of the other 869 that didn’t make the list had CSRHub scores above 59.

In order to better understand the difference in our results, we looked at individual examples.  Companies like Accenture, Intel, Cisco, Johnson & Johnson, and Microsoft were both in the Just 100 and at or near the top of CSRHub’s ratings.  (The average overall CSRHub percentile rank for these five companies was 96%, which means they were perceived in our system to perform better than more than 15,000 other companies.)  As we would expect, these companies had especially strong average scores in the Employee area (average 90% performance) and somewhat lower average scores on Environment and Governance issues (83% and 76%).

CSRHub and Just Capital high scores.png

 

The other end of the spectrum was more puzzling.  Here are five examples of where CSRHub’s view diverged with those of Just Capital.

high and low csr scores.png

 

Both Just Capital and CSRHub attempt to remove the influence of issues such as company size.  The ratings we have been using from Just Capital are their “relative” ranking—the measure of a company’s performance compared to others in its industry.  CSRHub’s rankings are also relative (since most of CSRHub’s sources take an industry-centric view of performance) but span all entities rather than just those in one industry.  Many of our sources overlap (and Just Capital had access to CSRHub’s ratings during its research process).  So, why are these five companies included in the Just 100?

The Just Capital folks deserve huge credit for transparency.  There is a tear sheet report on each of the companies in the Just 100—so it is fairly easy to see what factors swayed them to feel that a company deserved to be included.  CSRHub has a similar level of transparency—our users can inspect which sources we used and most of the data details that underlie our scores.

For instance, CSRHub has 62 sources and more than 1,200 ratings indicators for Discovery Communications.  Our systems show below average performance for all aspects of sustainability performance when compared to all of the companies we track (top section), the 128 Broadcasting and Advertising industry companies in our system (middle section), and the 6,374 US companies we have ratings for (bottom section).

 

Discovery Communications CSRHub drilldown.png

 

In its drill down, Just Capital gives Discovery an above average score on Worker Pay & Benefits based on 7 subscores.

 

Just Capital performance.png

CSRHub’s rating for this labor/pay topic are informed by 20 sources.  There are many negative reports, including:

  • No same-sex benefits (IW Financial).
  • No tie of compensation to overall climate performance (CDP).
  • Poor career management and promotion policies (Vigeo).
  • Low pay relative to global standards (MSCI ESG Governance Metrics).
  • Lack of Employment Quality monitoring systems (Thomson/Asset4).

These reports are offset somewhat by a positive score from Glassdoor regarding employee satisfaction (this 3.7 score is about 70th percentile) and 2014 awards from Forbes (Best Workplace), Best Workplace for Commuters, and Working Mother Magazine.  (Note though that only Working Mother repeated its award for 2015.)  It is hard to prove that Discovery deserves a poor score on this topic—but it is easy to see why others might disagree with Just Capital’s assessment.

Just Capital is well supported, media savvy (its launch events have been well attended and its article in Forbes received an “editor’s choice” star), and has a mission that resonates well with the general public.  It has taken a fresh approach to the challenge of evaluating corporate social behavior and its staff spent months forming its opinions.  Just Capital also reached out to the companies it was evaluating and invited them to contribute information.  For instance, Just Capital indicates in its tear sheet that Discovery plans to add same sex benefits for its employees in 2017.  When this is confirmed (and incorporated into the research done by CSRHub’s partners), it may “flip” some of the negative indicators we mention above.

CSR managers for companies who appear on the Just 100 should celebrate their good fortune.  Companies who did not should ask Just Capital to share the details that drove its assessment of their performance.  The CSR managers in these companies may then find facts that could be updated or corrected or areas where new programs could respond to Just Capital’s concerns.  As Just Capital expands its coverage and continues publicizes its ratings, we hope we will see benefits from its work for both corporations and consumers.  CSRHub plans to start incorporating Just Capital ratings into its analysis with its November data set, so that CSRHub users will be able to integrate this new perspective into their broader CSR communications program.

 


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 16,000 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 491 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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