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

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.

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Ten Years of Ratings History, CSR ratings, CSR Rankings, ESGHub, Bahar Gidwani

CSRHub - What's Changed After Ten Years of CSR Ratings: Part One

[fa icon="calendar'] Nov 7, 2018 10:06:07 AM / by Bahar Gidwani

Part 1 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?

 

Steady Overall Improvement

CSRHub’s ratings incorporate the input of virtually every major source of opinion about how companies treat environment, social, and governance (ESG) issues.  Our patented methodology weights and combines these opinions in a way that makes them comparable both between companies and over time. 

The chart below on Average CSRHub Ratings shows that since 2008, average ratings increased by almost 9 points to a peak in 2016. They fell somewhat over the last two years, but have still ended up by 6 points over ten years. Even from 2008 to 2010, through the worst of the Great Recession, ratings rose. The year-to-year changes are modest and gradual over time, suggesting there have been fundamental changes in business strategy for these companies during this period.

 CSRHub Average Ratings

 

Growth in the universe of rated companies may have diminished this improvement


We only provided sustainability ratings for around 2,000 companies in 2008—we could only find about 50 ESG data sources at that time.  By now, we have gathered data on more than 140,000 companies from 550 sources—and offer ratings on more than 18,000.  The growth in our ratings universe appears to have diminished the overall increase in ratings.

The chart below shows that the average rating for all companies in our universe rose more slowly through 2014 than for the consistent set shown above.  Then, as a flood of new companies began reporting information, the average rating for all companies has slowly dropped.

 Average RatingsSlumped

 

Clear Shifts in Emphasis – the top rated CSRHub category for most years has been “Employees”


Our overall ratings are based on twelve subcategory ratings that in turn feed four different category scores.  We’d written previously about the fact that the emphasis between our four category scores seemed to shift over time.

These shifts appear to be continuing. Governance rose sharply during the 2008-10—probably as a response to the 2008 financial crisis.  Environment ratings surged in between 2012 and 2016, as companies responded to pressure on climate change and water issues.  Employee issues have remained the most highly rated area since 2010 while Community ratings started as the lowest in 2008 and have stayed near the bottom.  The idea that companies are more concerned about their employees than the community they live in is something we believe other ratings groups have not yet noticed.

ECEG Levels

 

Look for part 2 in our series tomorrow, as we continue to explore CSR trends.

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.

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in CSR ratings, CSR Rankings, Ten Years of Ratings History

Implementing SASB - A Role for Regulators and Industry Associations

[fa icon="calendar'] Apr 4, 2016 10:04:40 AM / by Bahar Gidwani

By Bahar Gidwani

This is part 3 of a 3-part series on Implementing SASB.

In my last two posts, I showed that two dissimilar industries may have a similar lack of preparedness to disclose material sustainability-related information to investors.  In order to conform to the guidance set out in SASB’s standards, the Metals & Mining (M&M) and Apparel, Accessories, & Footwear (AA&F) will need to collect large quantities of new data or reshape existing data streams.

Outside organizations such as government regulators and industry associations could prove to be crucial factors in moving these industries forward.  For instance, all US mining operations are required to report injuries to the Mining Safety Health Administration (MSHA).  Therefore, a high percentage of M&M companies are able to disclose information on their workplace health and safety issues.

Health and Safety Disclosure

Unfortunately, MSHA does not require companies to publicly disclose their reports to this agency.  Each company tends to to take its own approach to the scope and format of its public disclosure—and outside sources interpret these results in different ways.  The result is that the same company may get a good rating from one source and a bad one from another.

Health and Safety Statistics

MSHA probably cannot change its disclosure rules without Congressional support—but, it could provide a pathway for sharing more of data—and for encouraging more consistent reports—by inviting companies to declare that their raw original filings can be collected and shared.  (This is similar to some of the efforts that have been undertaken in the supply chain area.  For instance SEDEX allows customers to share their audits of suppliers with one another.)  Then, sources who analyze this information would at least have the same starting point for their work—and companies could better compare their performance against those of their peers.

In AA&F the Sustainable Apparel Coalition (SAC) has led the way towards improved supply chain management for its members, by creating the Higg Index.  This set of tools is designed to help organize and harmonize supply data for the AA&F industry.  Unfortunately, only 21 of the 159 companies we studied in our AA&F report (13%) are members of SAC.  Note that their perceived sustainability performance is well above the average for the non-members.

SAC member ratings

The AA&F industry has formed special organizations to respond to supply chain issues.  For instance, in response to the Rana Plaza collapse, a group of European-based clothing companies set up the Accord on Fire and Building Safety in Bangladesh (Accord).  This group has grown to include 220 members, of whom 67 are tracked by CSRHub and 14 are part of the SICS group of Apparel, Accessories, & Footwear companies.  A second group of 17 mostly US companies set up the Alliance for Bangladesh Worker Safety (Alliance).  Labor unions and other NGOs have criticized the garment industry for failing to create a unified response and for some of the actions of both groups.  In general there has been more support for the Accord group than for the Alliance (see this Clean Clothes Accord analysis, for instance), but both groups have been harshly criticized and many of the problems that underlay the Rana disaster (and the previous deadly fire also in Bangladesh, at the Tazreen factory in 2012), continue to be present.  Still, companies in both groups seem to have sustainability performances that are above the level for the industry in general.  This indicates that a combination of intra-industry leadership and external pressure could help move the AA&F industry forward.

CSRHub Ratings of Apparel industry

More details on these findings are available in the SASS reports on these two industries.

In these three posts, we have shown that it may take many years for two industries to disclose all of the investor-material information that is described in the SASB standards.  During the adoption period, investors who desire the material information described in these standards will either need to work with partial data, use indicators that correlate with or can otherwise substitute for the desired metric, or invest in only those companies who have adopted the standard.  We do not know which approach will dominate or how long it will take before compliance becomes the norm and not the exception.  However, the next few years are likely to offer exciting opportunities to investors who specialize in using non-financial sustainability-related information.

See The SASS (Sustainable Accounting Standings Series) Apparel, Accessories and Footwear Industry Report.

See The SASS (Sustainable Accounting Standings Series) Metals & Mining Industry Report.

See part 1 of the Implementing SASB series.

See part 2 of the Implementing SASB series.


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 15,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 435 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.

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Accessories & Footwear, Accord on Fire and Building Safety in Bangladesh, Alliance for Bangladesh Worker Safety, Apparel, Bahar Gidwani, Clean Clothes Accord, CSR ratings, Metals & Mining, SAC, SASB, SASS, SICS, Sustainability Accounting Standards Board, Sustainability Accounting Standings Series, Sustainable Apparel Coalition, Uncategorized

Implementing SASB - Aspirational Goals

[fa icon="calendar'] Mar 31, 2016 9:26:32 AM / by Bahar Gidwani

By Bahar Gidwani

This is part 2 of a 3-part series on Implementing SASB.

In my last post, I started contrasting and comparing the readiness to follow SASB guidance for two industries: Metals & Mining (M&M) and Apparel, Accessories, & Footwear (AA&F).  Based on the higher rate of reporting in AA&F, we would consider that industry more highly “evolved” as far as sustainability reporting, than M&M.

Apparel industry more prepared for SASB

Despite the generally higher level of reporting within AA&F than in M&M, most of the companies in both industries do not appear ready at present to implement and report the metrics involved in the SASB standard.  This is because each industry’s “topics’ and “metrics” are different and the “bar” set for both industries is well above current practice.

The eleven M&M topics cover reporting of labor issues, carbon production, and other aspects of company operation.  The four AA&F topics focus mostly on these companies’ supply chain and the risks that are in them.  This table summarizes the percentage of companies that in each industry that our data indicated could be ready to report each topic.

SASB topics comparison

As you can see, we believe only 40% of the companies we studied in each industry have the data required to satisfy investor’s needs for material information.  The remaining companies (and for M&M, we must add the 75% of companies who had so little available data that we could not study them) could not disclose the data suggested in the SASB standard, even if they were willing to do it.

For example, the M&M industry is asked to disclose data on their energy efficiency.  About a quarter of the companies we studied seemed to be ready to do this.  The rest were either only somewhat ready or not ready at all.

Three levels of disclosure

A more complex requirement from the AA&F industry will be equally difficult to comply with for most companies in that industry.  For example, the AA&F industry is asked to disclose the percentage of its suppliers who have been found to be out of conformance with various labor standards.  However, our research shows that only 25% of the studied companies show evidence that they are disclosing this type of information.

Companies and sources

More details on these findings are available in the SASS reports on these two industries.

See The SASS (Sustainable Accounting Standings Series) Apparel, Accessories and Footwear Industry Report.

See The SASS (Sustainable Accounting Standings Series) Metals & Mining Industry Report.

See part 1 of the Implementing SASB series.


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 15,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 435 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.

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Accessories & Footwear, Apparel, Bahar Gidwani, CSR ratings, Metals & Mining, SASB, SASS, SICS, Sustainability Accounting Standards Board, Sustainability Accounting Standings Series, Uncategorized

Implementing SASB - Two Industry Examples

[fa icon="calendar'] Mar 30, 2016 10:03:41 AM / by Bahar Gidwani

By Bahar Gidwani

This is part 1 of a 3-part series on Implementing SASB.

Over the past six months, we have been working with the Sustainability Accounting Standards Board (SASB) on a series of reports we call the Sustainability Accounting Standings Series (SASS).  The reports are designed to help companies understand SASB’s guidance on the sustainability-related information that reasonable investors would consider material in their SEC filings.  We have used CSRHub’s vast library of reporting information (we have collected 91 million pieces of corporate sustainability data and rate more than 15,500 companies) to assess the readiness of 280 companies in the Apparel, Accessories & Footwear (AA&F) and 1,799 companies in the Metals & Mining (M&M) industries.  Although these completely different industries are each at a different stage in their journey towards integrated reporting, they face a number of common issues as they move towards integrating SASB’s guidance into their financial reporting.

We used the SASB industry Classification System (SICS) to select the companies to study in each report.  The table below shows that M&M companies are far behind AA&F on their reporting and disclosure practices.

CSRHub SASB sustainability data

On the other hand, almost all AA&F companies have disclosed at least some sustainability data and almost half have reached the point where they can receive full CSRHub ratings.

In contrast, the M&M companies CSRHub can rate tend have much higher rates of commitment to external reporting systems such as the Global Reporting Initiative (GRI) and the United Nations Global Compact (UNGC) than AA&F companies do.  In fact, M&M companies have higher average reporting rates for these two metrics than do all CSRHub-rated companies.

Apparel and Footwear GRI UNGC

We suspect this difference may be due to the fact that AA&F companies have moved beyond basic reporting processes and towards more sophisticated methods.  It may also be a result simply of selection effect when we compare a sample that has virtually all AA&F companies against the handful of M&M companies who have disclosed significant amounts of information.

Another similarity is that the top five companies and bottom five companies in each industry look remarkably similar in terms of their perceived sustainability performance.  The two industries show a similar range of CSR behavior.

Top 5 company csr comparison

More details on these findings are available in the SASS reports on these two industries.

See The SASS (Sustainable Accounting Standings Series) Apparel, Accessories and Footwear Industry Report.

See The SASS (Sustainable Accounting Standings Series) Metals & Mining Industry Report.


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 15,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 435 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. 

Read More [fa icon="long-arrow-right"]

[fa icon="comment"] 0 Comments posted in Accessories & Footwear, Apparel, Bahar Gidwani, CSR ratings, Metals & Mining, SASB, SASS, SICS, Sustainability Accounting Standards Board, Sustainability Accounting Standings Series, Uncategorized

Subscribe to Email Updates

Lists by Topic

see all

Posts by Topic

see all

Recent Posts