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

There is a Strong Link Between Brand Strength and Sustainability

[fa icon="calendar'] Jun 18, 2013 10:32:03 AM / by Bahar Gidwani

By Bahar Gidwani

Part 2 of a 5 part series

In a previous post, we laid the foundation for comparing a huge database on brand strength with the world’s largest database on corporate sustainability.  Our analysis follows for a strong correlation between the Brand Finance Brand Strength Index (BSI) and CSRHub’s overall sustainability performance rating (using the profile of the average CSRHub user).  The chart below shows this correlation for 1,079 companies.  It appears that about 22% of the variation in BSI can be explained by changes in perceived CSR performance.

Brand vs. CSR for 2012


CSRHub’s rating relies on four category ratings that in turn are based on twelve subcategory ratings.  When we perform a multivariate regression between the BSI and the twelve CSRHub subcategories, we get an even stronger correlation of 28%.

2013 BSI vs. 12 CSRHub Factors


This level of correlation is much higher than those cited in previous studies.  There are three potential explanations for this correlation:

  • One measure does not affect the other.  They just appear to due to random variation.
  • Brand value and CSR performance could both be correlated with some other factor such as market capitalization.  As a result, they appear to be correlated with each other, but in fact just share a common driver.
  • Brand value and sustainability are related and a company that seeks to do well in one area should consider also investing in the other.  As Edward Tufte has put it, "Correlation is not causation but it sure is a hint."

Our next post will probe to determine which of these explanations is most likely to be true.

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Part 1  The Tie Between Brand Value and Sustainability is Getting Stronger


Bahar GidwaniBahar 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 7,300+ companies from 135 industries in 93 countries. By aggregating and normalizing the information from 230 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.

 

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The Tie Between Brand Value and Sustainability Is Getting Stronger

[fa icon="calendar'] Jun 13, 2013 9:57:42 AM / by Bahar Gidwani

By Bahar Gidwani

Part 1 in a 5 part series

Does a company that invests in sustainability increase its brand value?  What parts of sustainability performance seem to drive brand?  This is the first of five posts about a new, broad, multi-year study that shows that the connection between sustainability performance and brand value has increased dramatically during the past year.  The study has also revealed that some aspects of sustainability are more closely related to brand, than others.

Several groups have published studies that purport to prove a connection between sustainability and brand.  These studies are widely cited by both branding experts and sustainability professionals.  For instance, The Conference Board has published a three part series of Director Notes on the relationship between “real” ESG (environmental, social, and governance) performance and “perceived” performance as measured via a brand strength indicator.

These and other past studies have tended to focus on a few hundred top companies and on industries that are perceived to be brand-driven such as consumer products and business services.  Because most sustainability performance data sets were created to serve investors, they tend to cover only large public companies in developed countries.  There are few data sets that cover more than 3,000 companies or that extend back in time more than five years.

A New Study Using New Sources

We were recently able to combine data drawn from two unique sources that have never before been combined.  Brand Finance uses a proprietary methodology to calculate the brand value of more than 5,000 leading global companies. Brand value is driven by the size of the company and the strength of its brand.  Brand Finance’s Brand Strength Index (BSI) measures this strength factor and allows investigations of the relationship between brand and sustainability that strip out the size of company factor.  The Brand Finance data set extends back to 2005.  CSRHub currently rates the sustainability performance of 7,300 companies in 93 countries.  It uses data from more than 230 sources to track twelve different measures of corporate social responsibility (CSR) and a number of special sustainability issues.  The CSRHub data set is updated monthly and extends back to December of 2008.

Both companies have used consistent methods to evaluate companies over the period studied—2008 through 2012.  1,094 of the companies tracked by Brand Finance in its most recent report are also tracked by CSRHub.  As a result, we have been able to compare brand value and sustainability performance across 97 industries in 16 industry groups (see table) and 54 countries in 10 regions (see map and table).  While the study has a bias towards larger companies and those that are publicly traded, we have been able to include at least some smaller companies in our data set (see chart).

The Study Covered 16 Industry Groups

CSR Brand study

The Study Covered Companies In 57 Countries

CSR Brand study 57 countries

Europe, Asia, and the US Were All Well-Represented

Asia, Europe, US well represented

Brand Enterprise Values

Our next post will look at what we discovered when we compared these two data sets.


Bahar GidwaniBahar 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 7,300+ companies from 135 industries in 93 countries. By aggregating and normalizing the information from 230 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.

 

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[fa icon="comment"] 2 Comments posted in Bahar Gidwani, CSR, ESG, governance, social, Uncategorized, sustainability, sustainability investment, Brand, Brand Finance, Brand strength index, BSI, environmental, The Conference Board

Private Company Ratings on CSRHub

[fa icon="calendar'] Mar 20, 2013 9:00:29 AM / by Bahar Gidwani

By Bahar Gidwani

Publicly-traded companies are a big part of world economic activity.  However, most of the world’s goods, services, and jobs are generated by privately held companies (including large, medium-sized, and smaller companies), not-for-profit enterprises (including foundations, schools, and religious institutions), and government organizations (airports, ports, municipal governments, agencies, etc.).  CSRHub’s mission is to provide transparent information on the social performance of all types of enterprises.  This past month, we have begun to offer ratings on a number of private and government organizations.

Why couldn’t we do this before?  The original pressure for revealing social performance data came from investors who wanted to put their money only into companies that had a positive social impact.  These investors supported the work of financial analyst groups, encouraged the rise of reporting systems such as the Global Reporting Initiative, and helped fund not for profit groups like the Carbon Disclosure Project (which has recently re-christened itself “CDP”).  These systems tended to focus on the largest and most widely-held companies—the ones that large investors most wanted to know about.

Competitive pressures—and investor interest in investing in smaller growth companies and public companies in less-developed economies—has caused the coverage universe of financially driven research to expand.  Some of our data partners now claim to track the social performance of 30,000 publicly-traded companies.  At the same time, a growing number of non-public organizations have begun reporting data on their sustainability performance.  For example, we estimate that about 1,800 non-public organizations filed Global Reporting Initiative (GRI) reports in 2012, as did at least a thousand of the 5,000 reports offered via CDP.

Two additional sources of data have emerged on non-public companies over the past few years.  One is crowd source/user contributed data feeds.   Employee opinions about 110,000 companies come from Glassdoor, sustainability-oriented user ratings on 5,000 companies come from GoodGuide/ULE and more than 30,000 products and companies come from WeGreen, data on the brand value of 5,000+ organizations derive from Brand Finance, and 27 measures of risk on 32,800 companies, 7,000 projects, 5,300 NGOs and 4,500 governmental bodies come via RepRisk.  Some of these sources receive fees from investors, some are supported by donors, and some generate revenue from selling services such as job ads or consulting.

The second new source arises from the effort by major companies to improve the sustainability of their supply chains.  Engagement from a company’s supply chain is vital to meet announced sustainability goals (e.g., a 20% reduction in carbon use) or respond to pressure from social groups on water user, treatment of indigenous peoples, child labor, etc.  Using software systems from firms such as Source 44, OneReport, Credit360, Enablon, Eco-Vadis, CSRware, and others, large companies gather huge databases of sustainability data on their own operations and on their suppliers—many of whom are not publicly traded.  Industry organizations (e.g., EICC, The Sustainability Consortium, SEDEX, and Sustainable Packaging Coalition) help by providing standard questionnaires and by allowing their members to share data and supply chain audits.

When we add data from some of these new sources to the information we obtain from other more conventional inputs, we can rate almost 200 non-public companies and organizations.  The initial list includes companies such as Deloitte, PricewaterhouseCoopers, Levi Strauss, S. C. Johnson, and TIAA CREF.  We also have partial ratings on McKinsey & Company, The US Postal Service, and Finnair.  As a group, our non-public companies have a respectable average rating (using our average user profile) of 55.5—seven points above the average for all companies of 48.5.

non-public companies

This good performance makes sense—the first non-public organizations to report are likely to be those who have good social performance and who want others to know about it.  We expect the next wave of smaller organizations and government groups to bring this average down—just as smaller public company scores lag behind those of bigger public companies.  We also expect the number of sources on non-public organizations to converge towards the average for publicly-traded organization of about eight sources.

Average Number of Sources

Non-Public Organizations

4.3

Publicly-Traded Companies

7.8

Would you like to help us further our cause by bringing you more non-public organization information?  If you would, please:

  • Reward non-public organizations who report—even if their scores still are not as good as we might like—by giving them your business and your attention.
  • Share ratings from non-public organizations with other non-public organizations.  We need to break down the organizational barrier that says “we are private so we don’t talk about these things.”
  • Encourage anyone who collects information to allow the groups they collect their data from to control their own data and to have the option of sharing it.  It is unfair for big companies to require their supply chain components to pay to gather and report data, but to not get further value from their work.

Our long term goal is to provide a CSRHub rating for any type of organization—public, private, or governmental—of any size, in any location.  To reach our goal, we need your help to encourage all organizations to report their social performance and to make available more of the data that has already been collected in various sustainability tracking systems.


Bahar GidwaniBahar 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.

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.

 

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