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

Would I Still Love Football If They Didn’t Keep Score? (And Can I Really Care About CSR If I Don’t Know The Score?)

[fa icon="calendar'] Oct 15, 2010 5:12:31 PM / by Steve Zuhl

In the spirit of full candor I must admit that I have cared more, for longer about football (FB) than my more recent interest in corporate social responsibility (CSR).  I also confess that a part of my being exalts in a win, or suffers from that special hell that comes front and center with a loss, after a big game for a favorite team.  Regardless of what occurs during the three hours of the game, the bottom line story of the scoreboard renders all else meaningless in comparison.
Now don’t get me wrong, I have enormous appreciation for a one-handed catch at the top of a 40 inch vertical leap, or a diminutive running back that leaves “broken ankles” and shattered egos in his wake, or a kicker that launches a successful field goal from a different zip code, or a 350 pound lineman pirouetting with the grace of Baryshnikov.  However, regardless of the shock or awe I may experience by an extraordinary feat it is only how it factors into the score of the game that creates enduring meaning.
I suggest that the same applies for CSR.  The problem, of course, is that for those of us with more than a passing interest in both (FB and CSR), we are painfully aware that while the former has clearly understood ways to score and track who is winning, the latter has no agreed  upon yardstick.  There are many organizations and systems that provide CSR “scores” for virtually any major company.  The point is that unlike FB, CSR scores lack a common currency.  Different people and organizations look at the various aspects of CSR with diverse perspectives as to what is more or less important.  As well they should.  For example, if your hot button is safety you would likely be less upset by a substantial mistake by a greeting card company than for a dynamite manufacturer.  The beauty of six points for any touchdown doesn’t seem obtainable for CSR measurement.
In spite of the myriad of perspectives, there is however, something that can provide a light at the end of the dark CSR measurement tunnel.  CSRHUB allows you to look at companies through adjustable glasses by determining the relative weight of CSR dimensions according to your personal insights and views.  Check it out to see how it works (www.csrhub.com).
It has been said that the power to tax is the power to destroy.  I suggest that the power to measure is the power to improve, or at least to understand and thereby be a catalyst for change.  I am convinced that shedding the light of measurement and comparison in the world of CSR is likely the best way to accelerate CSR improvement.
Whether you are pleased or dismayed by the CSR scores you uncover, think the glass is half full.  It’s a step in the right direction.  If you don’t think so, you could probably also spend three hours watching the big game this weekend without knowing the score.  I couldn’t.


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A New Sustainability Rose?

[fa icon="calendar'] Aug 5, 2010 8:24:42 AM / by Cynthia Figge

Matthew Kiernan makes a gutsy call on the Responsible Investor site for a new term--strategically aware investing--to replace RI (Responsible Investing), ESG (Environment, Social, Governance), and CSR (Corporate Social Responsibility).  It takes guts to come up with a new acronym, especially one that contains the word “strategic”. While I continue to believe as I said in our CSRHUB blog that “a rose is a rose”, words have power, and we definitely need to break through old mindsets to mainstream sustainability. However, sometimes good words take a long time to reach currency, when at the outset they seem “nichey” and live on the edge.

For example, well over ten years ago I had the opportunity to hear the CEO in a Fortune 50 company address his Environment, Health and Safety group. He openly derided the term “sustainability” as part of a cadre of paradigm shifting terms, dismissing it as if created by some academic that had no relationship with the real world. Fast forward and this same person is now CEO of another major American corporation where both the word and the implementation of sustainability are fully embraced and in full drive. Terms (and their underlying concepts) take time to catch on, be part of business practice, and become so integrated that they are hardly used to distinguish excellent operations (think “quality”) from the ordinary.

I applaud the intent of mainstreaming the practice of considering CSR and ESG in investing (and other economic decision making). However, I’d prefer not to create new terms, if we can help it.  Instead, let’s keep pushing the mainstream to understand the current sustainability acronyms until they achieve more universally accepted currency rather than increasing the number of noodles in the alphabet soup of sustainability-related terms.  

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[fa icon="comment"] 0 Comments posted in corporate social responsibility, CSR, CSRHUB opinion, Cynthia Figge, ESG, governance, social, responsible investing, RI, sustainability, environment

The Virtuous Quadrant

[fa icon="calendar'] Jul 6, 2010 4:43:00 PM / by Bahar Gidwani

Can businesses maximize both their profits and the social benefits they create?  Or, do economic and social profits compete with one another?  100+ years of literature and lore have trained us to believe that businesses can’t optimize both their profits and their social benefits.  From Upton Sinclair (e.g., The Jungle) and Charles Dickens (A Christmas Story), through Erin Brockovich and The Informant!, we have heard of countless examples of horrors that can be caused by corporate greed and money-grubbing.However, a number of people seem to believe that this paradigm can be broken.

A few weeks ago, I attended a Harvard Business School of New York seminar called Green Private Equity: Investing in Our Future that discussed Private Equity’s involvement in encouraging sustainability.  The session was led by Diana Glassman of EBG Capital and the panel included one of McKinsey’s better-known former partners, Carter Bales.

I had known Carter when he was one of the top partners at McKinsey’s New York office.  I reconnected with him recently, when I learned that he had started a PE group targeted on sustainability and energy-efficiency issues called NewWorld Capital Group.  During the talk, Carter referred to the area he works in as “the Virtuous Quadrant.”  He seemed to believe that he could generate above-average returns, by investing in and supporting socially-positive businesses.Virtuous Quadrant Illustration

I came home and researched the term “virtuous quadrant.”  I was pleased to see that the first mention I could find was from a scientific paper on Land Use that was written in 1996 by another old friend of mine from McKinsey, Dr. Alistair (Ali) M. Hanna.  He used the term so casually that I suspect it may have been a term of art within at least the New York office of McKinsey for some time, before this.I’ve now found many mentions of the term, and a number of other articles and papers that support the thesis that lies behind it. For instance, two Swiss professors, Andreas Georg Scherer and Guido Palazzo, wrote a paper last September that contained references to around two hundred studies that support the view that “Many business firms have started to assume social and political responsibilities that go beyond legal requirements and fill the regulatory vacuum in global governance.”  (They don’t want links to their draft—I assume because it has not been published, yet.)

The Environmental Defense Fund has been spearheading an effort to get private equity firms to integrate CSR issues into their investment practices.  Our friend Greg Andeck at EDF sent me a recent New York Times article about how well KKR had done by encouraging its portfolio companies to set sustainability goals and Carter’s fund seems to be moving ahead well.  So, perhaps we are at a tipping point in how business people think about their role in society—and in what society expects and demands from businesses?  If so, I hope that CSRHUB can play a role in revealing this progress, through the ratings we generate and the information we expose.

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Less trustworthy than Congress?

[fa icon="calendar'] May 25, 2010 1:26:39 PM / by Bahar Gidwani

An article in today's Wall Street Journal surprised me with a poll that showed American voters trust big business even less than they trust members of Congress.  Banks (treated as a separate category by the Gallup pollsters who did this work) have zoomed downward in trust terms since 2006, and are now just a smidge above Congress.  The Supreme Court was the last party mentioned--and its trustworthiness seems to be rising.

To put a number on things, about 18% of voters felt big businesses could be trusted--down from about 25% in 1990.  I don't know where lawyers and used car salespeople would rank...but it couldn't be much worse.  I suspect that a series of big-business-bashing movies have reinforced these feelings and concerns.  And events such as the oil spill in the Gulf and the coal mine disaster in West Virginia don't help.

Interestingly, it seems to me that businesses are acting much more responsibly than they did 20 years ago.  We certainly see a growing interest in the corporate social responsibility issues we track at CSRHUB.  More than 8,000 companies report now on their CSR performance--and they can't all be lying!  The Web (and tools like ours) are bringing transparency and visibility that helps hold companies responsible when they do wrong.  I hope that soon the many companies who are doing good will also start to earn the trust they deserve, for the positive actions they are taking.

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[fa icon="comment"] 0 Comments posted in Bahar Gidwani, big corporations, corporate social responsibility, CSR, CSRHUB opinion, social action, trust, sustainability, trends in CSR, polls, social responsibility

Transparency and the Mega Trend

[fa icon="calendar'] Apr 30, 2010 5:41:16 PM / by Cynthia Figge

By Cynthia Figge

A recent article in the Harvard Business Review by David Lubin and Daniel Esty should bring cheer to anyone who has been concerned about how slowly corporations seem to be adopting sustainability strategies.  The article titled “The Sustainability Imperative” argues persuasively that incorporating sustainability practices into corporate behavior is a “mega trend”.

A section titled “Reporting and communication” made me especially happy.  The authors say, “Developing metrics that allow companies to measure benefits and understand costs is essential to adapting and refining their strategy, as well as communicating results.”  Companies need an external measure of their sustainability progress —and they need benchmarks that compare them to their competitors, so they know how much further they need to go.  We have spent two years developing a measurement instrument we call CSRHUB—a tool we hope can provide this type of broad and uniform metric.

The authors go on to point out something I and my partners at EKOS International have seen in many of the companies we have worked with.  “When the assessments were based only on publicly available information and a company’s external reporting, we got scores that were almost always lower, and often significantly so, than scores developed in consultation with the company and with full inside information.”  In other words, many companies may be doing better on sustainability issues—and on their corporate social responsibility performance in general—than is publicly known.

For example, if you look at the default ratings on the CSRHUB site for Wal-mart and Costco, you will find Wal-mart gets a score of 56 and Costco gets a 48 (on a scale of 0 to 100).  As a Costco customer I hope that this difference may be overstated, but it’s difficult to know. Some of the difference our sources perceive between these two companies may be driven by their varying policies of disclosure. One explanation for the rating difference is that it’s the penalty for lack of transparency.   Costco is followed by fewer data sources:  Only twelve sources report on Costco compared to seventeen for Wal-mart. Wal-mart has expanded its website coverage of CSR, while Costco has only recently published a first report on sustainability.

If you are a subscriber to our system, you can see more of the picture.  Subscribers will see that Costco gets a 39 on its corporate transparency and reporting compared to 52 for Wal-mart, and 45 on its environmental policy and reporting compared to 63 for Wal-mart.  In contrast, we show closer ratings for a more fundamental element—environmental resource management (Costco gets a 51 rating while Wal-mart gets a 59).

I hope more companies come to understand both points this HBR article makes regarding communication. First, companies need to develop metrics that enable them to track their own progress.  Second, companies should contribute to the metric-forming process by revealing their policies and practices.  Doing both will strengthen transparency, and give good-performing companies credit where due for the improvements they have made, and hopefully serve as a catalyst to “manage sustainability as a business megatrend”.

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[fa icon="comment"] 4 Comments posted in benchmarks, comparison, competition, corporate social responsibility, Costco, CSR, CSRHUB opinion, Cynthia Figge, Harvard Business Review, megatrend, sustainability, transparency, social performance, Wal-Mart, corporate communications, environment, measurement, metrics

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