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

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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[fa icon="comment"] 0 Comments posted in Asset4/ThomsonReuters, Bahar Gidwani, CSR, social issues, IW Financial, MSCI, Vigeo, CDP, corporate citizenship, Just Capital, Russell 1000 index, Just 100, sustainability ratings sources

CSRHub’s Cynthia Figge Speaking at International Corporate Citizenship Conference 2013

[fa icon="calendar'] Apr 17, 2013 10:13:58 AM / by CSRHub Blogging

Design your vision for tomorrow at Boston College’s 2013 International Corporate Citizenship Conference

Each year the Center’s International Corporate Citizenship Conference draws hundreds of professionals from around the world. Leading policy makers from the largest domestic and international corporations attend - executives responsible for corporate citizenship, corporate social responsibility, sustainability, public relations, communications, work/life issues, and a wide range of community and business.

This year’s conference theme - Designing Opportunity - emphasizes corporate citizenship's potential for fueling innovation and growth. Boston College research and the practice of leading companies show that linking citizenship activities to core business strategy can lead to new products, expanded markets, a more engaged workforce, improved relationships in the community, and, ultimately, a stronger financial performance of the firm. Learn new practices that add value to programs and contribute to a collaborative and creative process.

CSRHub’s COO, Cynthia Figge will be part of a breakout session on the “Value of Reporting.”

ESG matters have become more material to companies and their business, and more and more companies are reporting ESG performance. Almost all of the Global 250 issue non-financial reports and reporter numbers have been growing at an almost exponential rate recently. What are the key benefits to reporting and what are the costs that have kept some companies from disclosing nonfinancial information? We will cover the major benefits and drawbacks to reporting and also review the most commonly used framework globally – the GRI Framework.

  • Facilitator: Cynthia Figge, COO and Co-Founder, CSRHub
  • Brendan LeBlanc, Executive Director, Climate Change & Sustainability Services, Ernst & Young LLP
  • Dermot Murray, Sustainability Business Strategy Advisor, FedEx
  • Marilee McInnis, Senior Manager, Southwest Airlines

 

The conference will be held April 21-23, at the Boston Marriott Copley Place, 110 Huntington Avenue, Boston, MA 02116. Click here for more information.

 

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[fa icon="comment"] 1 Comment posted in corporate social responsibility, Cynthia Figge, Uncategorized, sustainability, BCCCC, Boston, Boston College’s 2013 International Corporate Citi, corporate citizenship

Shared Value: CSR Re-branded?

[fa icon="calendar'] Jan 17, 2011 10:31:41 PM / by Carol Pierson Holding

By Carol Pierson Holding

 

Harvard Business Review’s cover story this month, “Creating Shared Value,” should be a celebration of how far CSR (Corporate Social Responsibility) has taken us. Just look at how much closer we are to accepting CSR as a core competitive strategy. As fans of authors Michael Porter and Mark Kramer know, these two have been proponents of CSR for years, pushing the field forward with new ideas like “Strategic Philanthropy” and now, “Shared Value.” Most impressive about their latest article is its place on the cover of this conservative business journal.

 

Two years after Harvard Business School ran an alumni conference on the future of capitalism (which eerily coincided with Lehman’s collapse and market’s 900+ point drop), that institution’s journal leads with this article, subtitled “How to reinvent capitalism — and unleash a wave of innovation and growth.” Finally, the argument about whether CSR is key to our future or just window dressing seems to be put to rest.

 

I applaud the authors. But why, aside from promoting their consulting business, would they insist that CSR is discredited and should be replaced by Shared Value? They misstate CSR’s mission as “doing good” when in fact it is “doing well by doing good,” which is the same as their concept of Shared Value. In fact, until recently, they were huge supporters of CSR. In their 2006 article, “Strategy and Society: The Link Between Competitive Strategy and Corporate Social Responsibility,” they pointed out flaws in CSR but weighed in heavily in its support.

 

Whether you call it Shared Value, CSR, ESG, or Corporate Citizenship, or Sustainability, or Corporate Responsibility, or Triple Bottom Line or any of the other terms people use, we are all pushing the same agenda—to do well by doing good. And the term “CSR” is well known and accepted in business.

 

It has been written about extensively in the business press. Most controversially, it has appeared twice on the cover of The Economist. First, to dismiss it per Milton Friedman’s “The business of business is business,” then a second time, in support of the concept. CSR has a set of metrics in place through the 20+ year old SRI ratings, a self-reporting structure in GRI, and a requirement in many companies’ RFP’s for a CSR report. Insurance, risk assessment, accounting bodies including FASB and many other industries and institutions all have “CSR” or “Sustainability” efforts underway. Porter/Kramer do a great service in lifting the issue to the front page of business, but why would we want to abandon all the progress made under the CSR rubric?

 

With CSR finally accepted as a core business strategy, Porter/Kramer now jump into the fray not with ideas of how to move more companies into the “Doing well to do good” camp, but with arguments about why their new name and model is better than CSR. Worse, even though they have several branding pros on the staff of their consulting firm, they dismiss the value of communications in support of CSR as mere promotion, ignoring the importance of communication in changing consumer behavior. Many of the companies Porter/Kramer cite as examples of Shared Value have used their brand to change consumer behavior for the better (think ads and promotion for GE Energy Smart CFL light bulbs). Yet Porter/Kramer fail to mention this.

 

Watching TV last week, I came across a great example of CSR communications’ power to increase sales while saving the planet.  The EPA confirms that in many cities, “The personal automobile is the single greatest polluter.” A key component to reducing these emissions will be the Electric Vehicle. Current ads for the Chevy Volt, the leading American-made Electric Vehicle (EV), are clearly good for Chevy’s brand reputation. But dismissing the ads as mere promotion misses the more important story: the advertising reduces fear of the EV by showing how easy it is to recharge, thereby persuading more consumers to buy EVs.  If this is CSR, I’ll take it over Shared Value any day.

 


 

Carol Pierson Holding is a writer and an environmentalist; her articles on CSR can be found on her website at  http://www.holding.com/Index%20links/articles.html.

 

 

 

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[fa icon="comment"] 9 Comments posted in capitalism, corporate social responsibility, CSR, Electric vehicle, ERI, Harvard Business Review, Harvard Business School, strategic philanthropy, Uncategorized, Milton Friedman, sustainability, The Economist, Mark Kramer, Shared Value, Triple Bottom Line, Carol Pierson Holding, corporate citizenship, CSRHub, Michael Porter, Nissan Volt

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