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

GRI Reporting’s Impact on ESG Ratings

[fa icon="calendar'] Dec 13, 2018 11:18:19 AM / by Bahar Gidwani

Two years ago, the sustainability business community elected me to the Global Reporting Initiative (GRI) Stakeholder Council (SC).  Thank you, it has been an honor to represent you.  I recently traveled to Amsterdam to attend the Annual General Meeting (AGM) of the Council.  I thought our readers might like to hear some of what we discussed and learned.

One caveat.  There were parts of our discussion that are (and should be) confidential.  The SC is tasked with advising GRI’s Board on its strategy.  We also select/elect some of GRI’s Board members.  Furthermore, these represent my individual views as a GRI SC member, but I am not an official spokesperson and don’t speak on behalf of the Stakeholder Council or of the GRI. These remarks have been reviewed by SC’s GRI liaison to be sure I’m not revealing information I shouldn’t.

GRI’s Value

Virtually everyone who is involved in sustainability reporting is aware of GRI’s contribution to our field.  It is the best known and the most respected approach to reporting—and has been for many years.  We have shown that companies who use the GRI method for organizing their reporting receive better sustainability ratings.  The table below shows a recent analysis across 4,000 companies.

Ave CSRHub Ratings vs No of GRI Reports

As you can see, companies that report using the GRI approach have consistently higher ratings on CSRHub than those who don’t.  Since CSRHub’s scores include input from 565 different rating sources, there is a strong correlation between using GRI’s methods and how positively a company is seen across a wide range of different rating methodologies.  Note that reporting only every other year is associated with less improvement.  One of the things we discussed at the SC meeting was that some companies seemed to be skipping years in their reports.  Our ratings data indicates that those who report every year seem to have a ratings advantage over those who don’t.

Harmonization

One of GRI’s focus areas has been the harmonization of different ratings systems.  This is in response to a perceived fractured reporting landscape and concerns from stakeholders (especially in the investment community) for simplicity and comparability in ratings.  The chart below shows an example of the disconnect those using ratings must cope with.

Diff ESG Rating Systems

The six companies above are all large and well-studied.  The consensus view of (as measured by CSRHub) is that their sustainability performance is pretty similar.  However, the four ESG rating systems (and credit score) that we show above show a lot of variation.  Even highly experienced users of these data sets are often at a loss to explain these differences.

One of GRI’s responses to these concerns has been to participate in the Corporate Reporting Dialog.  “The Dialog,” as it is known, is supported by seven ratings and standards-setting groups, including CDP, SASB, and Integrated Reporting.  GRI would like to become the “IFRS of ESG.”  Take a look at the International Financial Reporting Standards (IFRS) site, if you haven’t before (they are also a supporter of the Dialog) and you will see where GRI is heading.

What’s Next?

GRI is working on a number of new Standards. These will be released through the Global Sustainability Standard Board (GSSB) process.  There is a hope that more Standards can be released over the next year, than over the past.  GRI has built up its staff in the area and they are clear on their priorities.

Expect a continuation of the working sessions in 2019 for GRI Community members (formerly known as the GRI GOLD community).  There will be several meetings on corporate reporting, on integrating the UN Sustainable Development Goals (SDGs) into reporting, and on how best to organize digital reporting.

Please feel free to send me comments, suggestions, and advice that may help GRI continue to be successful.  I have one more year in my current term and would like to serve you, my constituents, well.

  


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 - 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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