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Site Selection Magazine Corporate Social Responsibility (CSR) Analysis

[fa icon="calendar'] Jul 26, 2016 12:28:02 PM / by Bahar Gidwani

By: Bahar Gidwani

Do some states attract more progressive companies while others receive investment from companies who are thought to be less socially progressive?  If so, why might this occur?

A recent article in Site Selection Magazine used the CSRHub database as part of determining which of 50 US states and 132 non-US countries were most attractive for a new site from a sustainability perspective.  This article presents analysis which provides deeper understanding of the corporate social responsibility aspect. Our goal is to make it easier for companies to use sustainability as a site selection criteria and localities to screen siting companies for sustainability, thereby improving their desirability.

CSRHub’s Contribution to the Study

The CSRHub data set contains estimates of the perceived corporate social responsibility (CSR) performance of more than 16,000 entities.  It includes data on both public and private companies and on government entities and not for profits.  CSRHub collects information for its big data engine from more than 469 sources and its data set includes companies from 133 countries.  For more information on how CSRHub ratings are generated, please see the CSRHub site.

Because many Site Magazine entries were from subsidiaries, a total of 3,073 CSRHub companies connected to at least one site decision entry on the Site Selection list, and 2,217 of these matched companies had full CSRHub scores.  These companies were responsible for 5,549 of the site entries—About 55% of these site entries (3,052) were for U.S. sites and the other 45% were for sites in 106 other countries.

Using only scores from fully rated companies, CSRHub calculated two numbers for each US state and for each foreign country:

  • The average perceived CSR performance for the entities headquartered in that location. For example, CSRHub found that the 63 fully rated companies in Minnesota had an average percentile rank of 54.8%. Similarly, the 34 companies in Finland have 88% average ranks.  (CSRHub tracks a total of 137 companies in Minnesota and 72 companies in Finland.
  • The average perceived CSR performance of the entities who placed sites in a location. For example, entities with an average 58.5% rank placed 93 sites in Georgia.  (Another 23 sites were placed by entities who were headquartered in Georgia.)  Entities with an average 70.7% rank placed 75 sites in Brazil  (Another 5 sites were placed in Brazil by Brazilian companies.)

The difference between these numbers shows whether companies selecting sites in a given location are perceived to be more or less sustainable than that location’s current rating.  The following table shows the relevant data on both scores for the 39 US states that had at least 5 sites selected by companies outside of the state and at least five companies tracked by CSRHub.  The table is sorted in order by the difference between the two scores.

Comparison US State-part 1 Comparison US State-part 2

The preponderance of positive scores is probably due to several factors:

  • Many of the new entrants into these US states came from European companies. European companies have consistently higher sustainability ratings than US companies.
  • Idaho and South Dakota companies already have relatively high scores. They may be seeing lower scores for those siting in their state because they are attracting companies primarily interested in extracting their resources.
  • Connecticut has positioned itself as a business-friendly state and this may have encouraged some lower-ranked companies to enter.
  • Arkansas, Delaware, and Mississippi all have lower starting scores and are likely to see benefits from encouraging positive companies join their communities.

The table below shows the same information for non-US countries.  Note that we have narrowed the list to those countries with at least five sites from companies with headquarters outside the country and that have at least five entities that are fully rated by CSRHub.

Comparison Non-US state- part 1 Comparison Non-US state Part 2

The foreign table shows much bigger differences in the baseline performance of the companies in each country.  The three countries with the biggest negative differential are those who also have the highest average scores for their existing companies.  It is probably difficult for these countries to find many companies outside of their jurisdictions who can match this level of performance.

The three countries with the biggest positive score difference with new site contributors are:

  • Greece—which has very low scores from its current companies and who is getting huge support and attention from other higher-scoring parts of the EU.
  • Saudi Arabia—which is trying to build a base of sustainable, non-energy-reliant industries.
  • Egypt—which has such weak performance within its existing base of companies that outside companies must generally seem quite attractive.

We hope that studies such as the one done by Site Selection Magazine will encourage companies to include sustainability factors in their site research strategies.  Our data suggests that the localities who are accepting new sites will generally see candidate companies who are at least as socially positive as the companies who are already in their communities.  However, it may make sense for localities to screen each candidate carefully and seek to improve their reputation for being a socially positive and sustainable place to put a new site.

Appendix 1:  How CSRHub Generates a Score

How CSRHub generates a score

Appendix 2:

Appendix 2- part1 Appendix 2- part2

Appendix 3:

Appendix 3-part1 Appendix 3-part2 Appendix 3-part3



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 132 countries. By aggregating and normalizing the information from 461 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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The Relationship Between Corporate Sustainability and Human Development

[fa icon="calendar'] Apr 12, 2016 10:24:32 AM / by Bahar Gidwani

By: Bahar Gidwani

A number of years ago, CSRHub showed that its measures of corporate sustainability correlate with the level of development of countries.  For that study, we used the United Nations Human Development Index (HDI).  We found a correlation of 28% for 27 developed countries, but poor correlation with human conditions in less developed countries.

Harvard Business School Professor Michael Porter and his colleagues at a group called The Social Progress Imperative have developed a new way of measuring country human development called the Social Progress Index.  The SPI Index is highly correlated with the UN HDI.

SPI_Development Index

The SPI contains more levels of detail than the HDI.  (For the SPI, 61 raw value indicators lead to 12 calculated scores that roll up to three dimensions and a final score.  The HDI is driven by five measures.)  The SPI covers 161 countries—the HDI tracks 199.  Both cover more countries than CSRHub (we have data on companies in 132 countries).  However, after we throw out the 70 countries where CSRHub does not yet have enough rated companies to generate solid average scores for all four of the categories CSRHub tracks, there is a 57 country overlap with the SPI.

At the most simple level, the SPI score for a country is well-correlated with the average CSRHub ratings for the companies in each country.  The r-square of 33% is paired with a F score of 6.5.  This suggests a greater than 0.9995 confidence that two data sets are related.

CSRHub and SPI scores

Digging down into the details shows that positive corporate behavior in the community area is negatively correlated with gains in SPI.  In contrast, positive corporate behavior in environment areas is positively correlated with gains in SPI.

SPI explained by CSRHub Category

We believe that companies in countries with weak SPI scores have built good community programs to offset their society’s weaknesses.  In contrast, companies in the countries with good SPI scores have built up their environment programs, to help improve trust in their activities.

The high “P-Values” and small tStat coefficients for the correlations with Employees and Governance ratings indicates that these company programs are not directly tied to the SPI.  This makes sense, as the SPI’s indicators are focused on societal issues such as health, literacy, and longevity, not on how well corporations pay their employees, train them, or how well they govern themselves.  Still, it is disappointing that there is not a connection between these elements and the SPI.  We would have liked to believe that paying one’s employees well and giving them good benefits would improve overall health and well-being.  We would also have liked to see a tie between a high standard of ethics within corporations and strong government programs that care for those who are disadvantaged or poor.

Note that our study is limited due to the fact that we tie a company solely to the country it is headquartered in.  Most of the larger companies we track have operations in multiple countries and often, multiple regions.  We are also working with a single year’s data on both companies and countries.  Longer term studies may reveal a richer level of detail.

With the wealth of data now available via the SPI, there should be many opportunities for further study on the tie between corporate behavior and societal performance.  We hope our readers will share any results they uncover so that we can make sure that responsible corporations get fair credit for the social benefits they create within their societies.


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. 

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No Spark in Obama’s Energy Debate

[fa icon="calendar'] Oct 9, 2012 10:47:54 AM / by Carol Pierson Holding

By Carol Pierson Holding

Last week’s Presidential debate was supposed to showcase the differences betweenclimate change President Obama and his challenger, Mitt Romney. But between Romney’s radical move to the center and Obama’s lackluster performance, the two seemed to agree more than they disagreed.

Both answered Jim Lehrer’s first question “How would you create new jobs?” with the same priorities: job training and creating energy independence. In fact, both agreed to boost oil and gas production. But Obama added a plug for his alternative energy policies. “We've got to look at the energy sources of the future, like wind and solar and biofuels, and make those investments,” he said, referring to his largely successful subsidies for alternatives to fossil fuels.

From that point on, Romney turned oil and gas into a symbol of patriotism and the path to prosperity, using the word “energy” three times more than Obama and positioning new energy sources as expensive failures.

Obama failed to cite the reason his policies are so desperately needed, that climate change may in fact be the greatest threat to our national security. Instead, Obama looked like a spendthrift or worse, out of touch with American middle-class concerns. Even though, according to Bloomberg, 70% of Americans now believe in climate change. Even though, according to CSRHub ratings, safeguarding the environment is increasingly a priority for business.

Romney called out gas prices that have doubled and the rise in electricity prices, citing the crushing burden on middle-class families.

Ignoring the facts, Romney criticized Obama for not opening Federal lands for exploration. He promised to double the number of permits and open coasts and Alaska to fossil fuel companies.

Obama mentioned solar, wind and geothermal only once. Without bringing up climate change, and without a rebuttal, Romney pressed on.

Romney promised to “bring that pipeline in from Canada“ and to help “people in the coal industry…crushed by (Obama’s) policies.”

As if thumbing his nose at environmental science, he smiled right into the camera and said, “I like coal.”

His rationale for these policies? “I want to get America and North America energy independent so we can create those jobs.”

So when Obama brought up cutting the $4 billion in “corporate welfare” that the US pays every year to behemoths like ExxonMobil, he sounded like a spoilsport.

Romney argued that Obama’s facts were wrong – the oil subsides are actually $2.8 billion – and that those subsidies are inviolate. “That's been in place for a hundred years,” he said, as though oil subsidies were deeply entrenched in our Democracy.

But what really stuck in my mind was Romney’s brilliant repositioning of the new energy subsidies. By comparing a $2.8 billion cut to oil and gas against the $90 billion in “breaks for the green energy world,” he made support for alternative energy sources seem hugely expensive and frivolous in comparison to far cheaper oil subsidies. He repeated twice that green energy investment is “about 50 years' worth of what oil and gas receives.”

Still not satisfied, Romney linked the $90 billion to Solyndra and the other “50%” of green investments that had failed. In fact, those investments have lost just $3 billion, or 3%, but Obama said nothing, so it stood as fact.

But the real shame is that Obama lost the opportunity to pull out numbers that make everything else pale in comparison. NOAA reports that 2011 saw a record 14 extreme climate disasters that cost over $1 billion each for total losses of $55.3 billion and 660 lives. Future projections are even grimmer: US News cites projections of 100 million deaths globally from climate change in just 18 years. In the US, 2% of America’s annual GDP, or some $300 billion, will evaporate.

Yet Romney plans to eviscerate the EPA and a number of other programs aimed at reducing the effects of climate change. He’s a believer that climate change is real, yet will do nothing to mitigate the effects. A New York Times article cites Romney’s intent to take a weed whacker to environmental regulations going back 40 years – taking down even those declared “unambiguously correct” by the Supreme Court.

Climate change may not be popular, but people do want to hear about clean tech and green jobs. These are exciting, entrepreneurial opportunities for job creation. Where were they in Obama’s debate?

At heart, climate change is a moral issue. The hardest hit will be our future generations. And yet Romney stole that argument too. Using the word “moral” three times, Romney pointed to the deficit: “(It’s) not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation.” Shouldn’t that be Obama’s argument for addressing climate change?

Photo courtesy of marcn via Flickr.


Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHub.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on nearly 5,000 companies from 135 industries in 65 countries. By aggregating and normalizing the information from over 170 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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