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

CSRHub is pleased to announce it has formed a partnership with iCompli Sustainability, to offer a new kind of sustainability report – the ESG Metrics Brief – that brings together qualitative and quantitative data for the corporate sustainability marketplace.

The ESG Metrics Brief provides concise, yet comprehensive feedback on corporate sustainability performance. The unique benchmarking report delivers quick, easily digestible information on over 120 environmental, social and governance indicators.  The ESG Metrics Brief will help corporate sustainability, procurement and investor relations officers assess performance, identify potential brand and reputation vulnerabilities, and make more informed decisions.

Using the ESG Metrics Brief, stakeholders can see how a company compares with its peers on the CSRHub rating system as well as other leading public and private sustainability scoring frameworks, including Bloomberg and CDP.  The report examines a company’s current performance on key indicators such as GHG, water, waste, injury rates, women in management, a company’s progress over time, and industry averages.

To learn more, go to www.csrhub.com/content/icompli-csrhub-esg-metrics-brief/.

About CSRHub

CSRHub® provides access to the world’s largest corporate social responsibility and sustainability ratings and information service, covering 15,000+ companies in 132 countries. By aggregating and normalizing the information from 400+ 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, professionals, and academics use CSRHub to benchmark company and supply chain performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance. Subscribers can access 12 indicators and millions of detailed data points on employee, environment, community, and governance performance. CSRHub is a B Corporation. For more information about CSRHub, visit www.csrhub.com or contact sales@csrhub.com.

About iCompli Sustainability

iCompli Sustainability (iCompli) is a division of BPA Worldwide, the world’s largest media audit company. A not-for-profit organization established in 1931, BPA’s audit services have expanded to include external assurance of government and industry standards and independent verification of companies’ sustainability claims. iCompli provides a research-driven systems approach to help organizations make defensible decisions about their sustainability initiatives. We offer diagnostic and assessment services, data verification and report assurance, and third-party certification to industry sustainability standards. For more information about iCompli, visit www.icomplisustainability.com.

Recently graduate students from Columbia University SIPA participated in a Capstone research project in collaboration with CSRHub. The purpose of this project was to further explore the relationship between perceived corporate sustainability performance and operational performance, represented by cost of debt. Through use of a set of corporate social responsibility factors from the CSRHub database and data on the cost of corporate debt from the Bloomberg database, the Capstone team was able to investigate the relationship between the two. The team found that CSRHub’s 12-subcategory model for sustainability explained 9.3% of the variance in the cost of debt, or an estimated $343.4 billion in interest expenses for a group of 1,625 companies.

“The sustainability factors that had the most effect on debt varied by industry category and for those companies that had higher interest rates compared to those with lower ones. In general, better Board and Compensation & Benefits scores decreased debt cost. Strong Product and Energy & Climate Change scores can potentially enable companies with higher cost of debt to decrease their interest expenses. Companies with average and below average cost of debt in service and heavy industries benefited from strong Environmental Policy & Reporting and Resource Management practices, while those in light industries were helped by stronger Human Rights & Supply Chain performance.”

To see the outcome of the group’s research, click here or download below.

About CSRHub
CSRHub provides access to corporate social responsibility and sustainability ratings and information on 15,000+ companies from 135 industries in 132 countries. By using the world’s most comprehensive CSR metrics database and analysis tools, managers, researchers and activists can benchmark company performance, learn how stakeholders evaluate company CSR practices and improve a company’s sustainability.

By Carol Pierson Holding

At the Apple earnings call last week, CEO Tim Cook reported Apple’s latest record-breaking results and the strongest March quarter ever, with 27% revenue growth and 40% earnings growth year over year.

Cook then commented on the two new data centers Apple is building which will run on 100% renewable energy, risking another conservative investor backlash when he linked them to Apple’s climate change politics: “This is just part of the work we’re doing to protect the environment and leave the world better than we found it.”

This took real chutzpah. Cook took a drubbing last year from conservative finance group NCPPR and its followers for spending on environmental projects not related to profit. Cook snapped back at critical NCPPR representative Justin Danhof, “If you want me to do things only for ROI reasons, you should get out of this stock.”

Tim Cook has become the passionate poster child for green electronics, touting environmental progress even with shareholders groups that may not be cheerleaders. And his operations department is implementing good works, eliminating emissions in new and existing Apple buildings, removing toxins from production and sourcing sustainable forests for packaging.

Just as important, Apple’s brand communications support its environmental efforts. Apple’s web site’s Environmental Responsibility touts both its green philosophy and its concrete actions. Cook intones on an Apple web video called “better” that “Climate change is real and a real problem for the world” and boasts that 94% of its corporate facilities and 100% of its data centers are now powered by renewable energy such as solar power.

Is Apple, now the world’s biggest company by market capitalization, finally leading corporate citizenship too? And doesn’t this just make Apple more vulnerable to environmental critics?

In fact, Apple is more vulnerable. An analysis in Huffington Post of Apple’s own 2014 report on climate change efforts reveals that “manufacturing (mostly in China) accounted for a whopping 73 percent of the company’s 34.2 million metric tons of greenhouse gas emissions.” Only 1 percent of the company's emissions are connected to its solar-powered headquarters and data centers.

Bloomberg’s Adam Minter recently attacked Apple for the same thing, noting that other companies like Boeing and GM already have factories powered by renewables. Apple is a laggard even among technology companies. Working with BSR, HP has developed energy-management action plans for 20 supplier factories in China. IBM now requires its nearly 20,000 suppliers to chart their emissions and energy consumption and develop plans for reducing both. Apple has joined the Electronic Industry Citizenship Coalition but has yet to announce specific targets. This suggests that Apple is engaged in, if not green-washing, then selective reporting.

Apple may be late signing on to corporate citizenship, but it’s just in time. The maker of Macs and iPhones has for years had success using fabulous design and cool chic to ride roughshod over environmental critics and techie complaints about closed systems. Now, the company is entering consumer payment systems (Apple Pay) and health care information (HealthKit), markets where trust is absolutely paramount. These products lock consumers into Apple for their money and their health, and what could be more personal?

Apple is selling to a generation whose purchases are, more than ever, guided by a company’s environmental actions. Six in ten 16- to 20-year-olds (“Generation Z”) say they will go out of their way to buy products and services from businesses they know are helping to create a better world, up from five in ten among Gen Y. And a post-2008 crash McKinsey study noted the widespread perception that financial services have violated their social contract with consumers, leaving space for a trusted source in consumer wallets. Apple needs creds as a corporate citizen to succeed in this new arena. An honest and aggressive commitment is required.

In Apple We Trust? See more on Cynthia Figge's chapter in the book Trust Inc. 

Photo courtesy of Darlo Reyes via Flickr CC

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council’s Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 14,400+ companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 14,400+ companies from 135 industries in 127 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.

By Bahar Gidwani

After an eighteen month break, Newsweek has re-launched its Green Rankings.  On June 5, it issued new ratings for the 809 companies that are on either the US 500 or Global 500 lists. The Green Rankings list is likely to continue to draw attention to corporate social responsibility performance and we are glad to have it back. We hope that Newsweek will continue to publish and promote work in this area.

Over the past few years, Newsweek’s Green Rankings had become one of the best known corporate CSR rating metrics partly because of its simplicity (everyone likes a top to bottom ranking) and because Newsweek’s large circulation put it in front of millions of ordinary consumers.

For several reasons we explain below, the Newsweek Rankings may not be a good benchmarking or best practices discovery tool for the sustainability professional.  In fact, as in past years, the new rankings are likely to continue to generate anxiety and confusion, as we all try to puzzle out and decode the signals they offer on how the world’s largest companies are performing. 

Newsweek’s methodology for calculating the ratings has changed several times.  This year’s revamp is pretty radical.  The initial data set for the 2014 list was supplied by Bloomberg and RepRisk.  Bloomberg captures a wide range of environment, social, and governance (ESG) from company financial disclosures, sustainability reports, and other public documents.  Bloomberg also ingests data from CDP—formerly the Carbon Disclosure Project—on carbon and water-related issues.  RepRisk has one of the world’s largest databases of corporate risk information.  Newsweek arranged for Corporate Knights, a well-respected Canadian research firm, to review these data sets.  It also sent a survey to 775 of the 809 companies. It is interesting that they could only find contact info for 95% of these very large companies—and that only 363 of them or 45% of the sample set responded.  Corporate Knights may also have consulted some of the other data sources it has available, such as MSCI’s Intangible Value Assessment (IVA) and Thomson Reuters Asset4 databases.

The 2012 Newsweek list included data from Sustainalytics—a full service ESG ratings firm—and Trucost—one of the leading suppliers of carbon, water, and other environmental information.  The 2012 list dropped an interesting and deep source of CSR data that was in the 2011 list—expert opinions on CSR performance that had been gathered by Corporate Register. The 2012 list had a strong emphasis on environmental performance, driven perhaps by a desire to make the list a “Green” ranking.  For the 2014 list, Corporate Knights decided to explicitly include corporate risk, board involvement, management compensation, and credit for outside assurance to its criteria.

We have ingested most of the sources from both years’ methodologies into our database, including RepRisk, Trucost, Asset4, CDP, and MCSI’s IVA.  As do many of the 300+ sources we studied, Corporate Knights studied the publicly-disclosed information that Bloomberg collects.  So, we would expect to see a fairly high correlation between our ratings (which measure the overall perceived sustainability performance of companies) and Newsweek’s scores.  The chart below shows that we had a 35% correlation between our scores and the Green Ranking scores, for the 2014 US data.

Interestingly, this year’s ratings for the US 500 seem somewhat less correlated with our overall ratings than they were in the past.

We believe these factors may have driven this shift:

• The old index gave more weight to environmental issues than the new one does.  Environment is probably the most/best studied area within corporate social responsibility.  As a result, there is less variation among expert opinions within the environmental area than with other parts of CSR such as employee, community, or governance performance.  There was a 55% correlation between the 2012 Newsweek rating (based on an average of their four reported subcategories) and our Environment category rating (which includes climate change, transparency/reporting, and resource management issues).  There was only a 25% correlation between Newsweek’s ratings and our Environment category in 2014.

• The new ratings methodology includes a penalty for “disclosure.” Rather than trying to fill in missing items, Corporate Knights decided in 2014 to penalize companies that fail to disclose a required item.  CSRHub has so much data that it is generally able to automatically fill data gaps. This methodological difference may have introduced a new source of variation between our ratings and reduced the correlation between them.

• The CSRHub database has grown substantially since 2012.  We currently have 53 million data points and cover 9,000 companies in 102 countries.  In 2012, we had only 13 million data points and covered only 6,500 companies in 83 countries.  As we add more information to our system, it is natural that our correlation with any individual and more limited data source, will drop.

As with any rating system, we could find fault with some of the individual results within the Newsweek Green Rankings.  For instance, Campbell Soup has a 67 overall rating in CSRHub.  This puts it third in the list of 216 food companies that we track.  Campbell supports BCCCC, CECP, and the Sustainable Packaging Coalition.  It was on Corporate Knight’s own Global 100 list in both 2013 and 2014.  But, Campbell gets only a 39.6% score in the Green Rankings system.

Inconsistencies between rating systems reinforce the need for corporate sustainability managers to focus on broad measures of performance that are stable across industries, geographies and time. Again, we applaud Newsweek for raising awareness of sustainability across a wide audience. Professionals in the field should feel free to use CSRHub data dating back to 2008 to get an independent perspective on the hundreds of sustainability metrics that are produced each year.

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. Bahar is a member of the SASB Advisory Board. He plays bridge, races sailboats, and is based in New York City.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 8,900 companies from 135 industries in 102 countries. By aggregating and normalizing the information from 325+ 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 change the world.

By Carol Pierson Holding

In March, I attended a pancake breakfast with residents of NYU’s Green House, a small dorm set aside for upperclass students who want to “shrink their environmental footprint.” I asked one future biochemist what she thought about NYU’s environmental program. Her bright young face turned sour as she complained that her environmental studies were dominated by disaster science. Where was the hope, she wanted to know?

Her complaint explained a lot of what I was seeing. Interest in climate change is low among the Gen X cohort. Environmental protests have fewer young people than older. Low demand for slots at environmental graduate schools holds acceptance rates at an average 50% of applicants. How awful to hear it confirmed by a current member of this cohort: the message of climate change urgency is failing.

In his article “Pessimism Is Impeding Environmental Advocacy,” Richard Matthews explains the phenomenon:

Decades of research show that appeals to fear can easily backfire causing recipients to reduce the fear without reducing the danger, perhaps by denying that there is anything to fear or concluding that the fear appeal was a manipulation attempt by an untrustworthy source.

 

Paul Bain (School of Psychology, University of Queensland) and his colleagues conducted a study that shows that informing people about the expected impacts of climate change had no effect on their positions. What did change the positions was thinking about how limiting greenhouse-gas emissions might promote interpersonal warmth and scientific and technological progress. …Bain’s research shows that approaches based on hope work far better than fear.

Sandy hit New York on October 25, 2012. The pancake breakfast was over four months later. It seemed at that moment as though all the attention brought to climate change by the Superstorm might be feeding fear and not, as we had hoped, igniting interest in remediation.

But then, just this week, the zeitgeist seems to have altered.

Maybe it’s only a series of coincidences, but all sorts of mainstream and even conservative media has jumped on the good news about climate change

Bloomberg released its projections for renewables, citing 230% growth by 2030. Bloomberg’s chief executive of New Energy Finance Michael Liebreich adds, “What it suggests is that we are beyond the tipping point towards a cleaner energy future.”

Forbes Magazine published a statement from Ceres President Mindy S. Lubber about how corporations are connecting sustainable models to their own long-term self-interest. She cites Ford as an example: “Ford is on the leading edge of the development of a new generation of hybrids and electric cars. It is challenging Toyota’s dominance in this market in part.”

[csrhubwidget company="Ford-Motor-Company" size="650x100" hash="c9c0f7"]

A report released by Carbontracker warns investors of a carbon bubble: “Greater understanding of the uncertainty and risk around fossil fuels can help the redistribution of these funds towards alternatives more attractive.”

Even the left-leaning media seem more optimistic. David Roberts writing for Grist writes “Solar panels could destroy U.S. utilities, according to U.S. utilities,” quoting an electrical industry report that compares utility delivery of energy to phone wires and predicting a similarly rapid rate of consumer switching. Oregon Public Broadcasting reported that a Beaverton start-up has created a floating "lily pad" that uses solar-activated nanotechnology to break down water contaminants.

And the web site that straddles both profit and planet, TriplePundit, headlined its April 22 edition with this: “Climate Change is Finally Real for the American People.” I urge you to read it. The author, Rosana Francescato, buttresses her argument that we’ve reached the tipping point on climate change with facts from opinion polls and quotes from military and finance leaders.

All this change in less than two months? Of course not. As Francescato says, “Belief in climate change has been progressing for years. Now we’re at the point where some of our most sober institutions are on board to deal with it, and they’ll be backed by increasing public support. With all these sectors of society working on the problem, we have a much better chance of solving it.”

I hope the message is getting to young people like my Green House friend. Climate change will definitely be the greatest challenge of their generation and even more galvanizing than sending a man to the moon. They’ll certainly have my gratitude.

Photo courtesy of macinate via Flickr CC.

Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 7,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,000+ companies from 135 industries in 91 countries. By aggregating and normalizing the information from 200 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 change the world.