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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.

View:

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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[fa icon="comment"] 3 Comments posted in Bahar Gidwani, CSR, CSR performance, ESG, governance, social, Uncategorized, sustainability, sustainability investment, Brand, Brand Finance, Brand strength index, BSI, environmental, The Conference Board

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

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