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

HBR’s Top Performing CEOs List - Financial Results and Sustainability—A Complex Relationship

[fa icon="calendar'] Oct 26, 2016 8:00:00 AM / by Bahar Gidwani

 

The Harvard Business Review (HBR) recently published its 2016 list of the world’s top 100 CEOs.  As in the past, HBR’s staff looked at the financial and ESG (environment, social, governance) performance of the CEOs of 1,200 large companies.  They used a measure of financial performance developed by a team of Harvard academics for 80% of their score.  The remaining 20% came from averaging two overall measures of corporate sustainability performance, including CSRHub.

HBR has been publishing this list since 2010 and CEOs apparently intently study their “rank” and any year-to-year changes.  The list originally included only measures of financial return.  In 2015, HBR started including ESG performance, such as those CSRHub gathers and reports.

Is there a connection between a CEO’s financial performance measure and the corporate social responsibility (CSR) or ESG performance of the CEO’s company?  Those of us who care about sustainability would expect (hope?) the answer is “Yes.”  Unfortunately, details we uncovered during this year’s rating process say that the answer is probably “Maybe” or “It depends.”

 

Are the Top 100 Different From The Rest?

CSRHub rates the perceived ESG performance of 16,550 companies in 133 countries.  We have full ratings on 1,180 of the 1,200 companies that HBR studied.  The table below compares the average performance for the top companies against the rest of the list, for community, employee, environment, and governance issues.  (HBR included 104 companies in its Top 100 list, due to a number of ties.)

 

Comparison of the CSRHub Corporate Social Responsibility Rankings for HBR Top 100 Companies and Those Not Chosen

Comparison of the CSRHub Corporate Social Responsibility Rankings for HBR Top 100 Companies and Those Not Chosen

 

As you can see, the top companies had only slightly better perceived sustainability performance than the rest of the companies.  When we adjust for the different number of companies in each of the two groups, there is a significant (P<0.02) difference only in the Community area.

This suggests that the best CEOs out of this sample of companies pay a bit more attention to issues associated with the sustainability of their Products, have good Philanthropy programs, and care about Human Rights and their Supply Chains.  But, they don’t seem to pay significantly more attention than other CEOs to issues relating to Employees, the Environment, or to their corporate Governance.  And, they still rank in their community efforts below the average of the other 15,000+ companies we track.

 

Are the Top 50 Financial Performers Better Than the Next 50?

What about the “best of the best?”  If we divide the HBR Top 100 into two groups by their HBR financial performance scores, would the top financial performers have better or worse social performance than the bottom group?

The table below shows the answer to this question.  It is probably an answer that many sustainability professionals will not want to hear.  The top financial performers had much worse perceived sustainability performance than those with somewhat worse financial performance.

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 50 Companies and the next 54 Companies as Ranked By Their HBR Financial Performance Score

 

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 50 Companies and the next 54 Companies as Ranked By Their HBR Financial Performance Score

 

These results are good evidence that some CEOs may emphasize good shareholder returns (high profit margins, high turnover of assets, strong stock performance, etc.) rather than good social performance (good community relations, happy employees, a clean environment, etc.).  Of course, the HBR study focuses only on very large, publicly-traded companies and there are only 104 companies where we have full data.  But, there is virtually no probability—P < 0.000001—that the top 50 do not trail the next 54 on both overall ratings and on all four categories of social responsibility.

 

Does It Make Sense to Combine Financial With Social?

The table above illustrates why HBR decided to integrate social issues into their ranking.  Using a single financial scale wasn’t teasing out the best CEO performance.  Using only social measures wasn’t doing it either.  Instead, HBR integrated the two measures in a balanced way that resulted in the surprising result shown below.

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 10 Companies and the next 94 Companies, as Ranked by their Overall HBR Score

 

Comparison of the CSRHub Corporate Social Responsibility Rankings for Top 10 Companies and the next 94 Companies, as Ranked by their Overall HBR Score

 

The financial scores within the Top 100 are pretty similar.  By using a social performance signal to differentiate among these financially similar performers and create an Overall HBR Score, HBR was able to pick a top group that had both good financial returns and strong sustainability performance.  This shows it is possible to both “do well” and “do good.”  Thanks to HBR, CEOs who manage this difficult balance have a shot at getting the recognition they deserve.

 


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. 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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A New Title—“EHS and S”

[fa icon="calendar'] Dec 10, 2015 4:23:43 PM / by Bahar Gidwani

By Bahar Gidwani

I recently attended my first National Association of Environmental Managers (NAEM) NAEMconference.  It was fabulous!  Good content and a nice mix of sustainability practitioners from both large companies, small companies, and various types of advisors.  I especially liked the fact that practically everyone I met was on the “front line”—measuring results, setting out strategies, and reporting progress.

One of things I noticed was that a number of the people at the conference had a job title I’d not seen before.  Instead of “Manager of EHS” or “Vice President, EHS” (the “EHS” acronym stands for “Environment Health and Safety”) the new title was “EHS and S.”

Apparently a lot of companies have realized that their environment, health, and safety experts know a lot about another “S”—“Sustainability.”  We at CSRHub have divided sustainability into four areas:  Community, Employees, Environment, and Governance.  I was told that many EHS managers (who had dealt in the past mostly with the Employees and Environment areas) were now being asked to also help with Community relations and with the sustainability reporting aspects of Governance.

This change makes a lot of sense to me.  EHS professionals (NAEM has members who work at 800 different companies) have firmly established their roles within their companies.  They are hands on and tied directly into daily operations.  Their reports often end up on the desk of their company’s CEO—because CEOs increasingly recognize that their company’s success depends on having a clean environmental record and on ensuring that their employees are safe and healthy.  EHS professionals have traditionally had a technical or engineering background.  This makes them comfortable with designing and implementing software-based tracking and reporting systems.  They are used to organizing and rationalizing processes that had not been looked at before, from a fact-based, statistical approach.

It seems that the new “S” role is often the result of collecting together programs that had previously been scattered across various areas.  Employee engagement programs, charitable giving, and product improvement processes are now being tied to and can contribute to the success of traditional EHS programs.

I suspect this shift may relate to the trend towards integrated reporting.  EHS professionals are used to submitting information to government regulators.  They understand how important it is to have data that is both accurate and auditable by outside third parties.  Integrated reporting is driving the “soft” parts of sustainability management toward greater accuracy and exposing them to scrutiny by both internal auditors and outside stakeholders such as investors and non-governmental organizations.

Next time you come to an NAEM conference, look at the cards you get.  I’m sure you’ll see many that sport an extra “S.”  Ask the question I did—“Does that extra letter mean you got another 1/3 added to your budget?”  I’m sure those you ask will laugh as hard as those did, as most have neither gotten more budget—or a raise—despite the extra burdens they’ve accepted.

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. 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 400 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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CSRHub Simplifies Sustainability Benchmarking: An Interview with CSRHub Co-founder Cynthia Figge

[fa icon="calendar'] Nov 4, 2014 9:35:51 AM / by CSRHub Blogging

As previously seen in the WiznessBlog.

benchmarking

Wizness and CSRHub have joined forces to simplify sustainability benchmarking against Cynthia Figge, Co-founder and COO of CSRHubcompetitors. CSRHub co-founder Cynthia Figge answered questions about her company and how the new benchmarking product will benefit users.

Q: What is CSRHub’s goal and purpose?

A:  CSRHub aggregates information about corporate social performance into one place so companies and individuals can track sustainability worldwide. It’s the first easy way to discover how companies perform and compare on sustainability and CSR issues.

 

Q: What was the genesis of CSRHub?

A: My partner Bahar Gidwani and I founded CSRHub in 2007 to solve the CSR data problem. Back then, there were many often conflicting data sources – sound familiar? We were the first company to recognize that the growing body of CSR information would soon require a Big Data solution. We figured out how to combine the data into a single rating that incorporates an ever-growing number of sources. We started with the premier environment, social, governance, the ESG firms, also known as socially responsible investment or SRI — we aggregate nine now — and added data from 300 sources so far and counting, NGOs plus government agencies, social networking groups, indexes and publishers. Our proprietary tools combine more than 60 million pieces of data on sustainability and CSR performance into a consistent set of ratings.

Q: Who are CSRHub major ESG/SRI data sources?

A: Our sources include premier ESG organizations ASSET4 (Thomson Reuters), CDP (Carbon Disclosure Project), EIRIS, GovernanceMetrics International, IW Financial, MSCI (ESG Intangible Value Assessment and ESG Impact Monitor), RepRisk, Trucost and Vigeo.

Q: What is the CSRHub schema?

A: Our data schema lays it out in detail, but generally our ratings are based on four categories: Environment, Employees, Community, and Governance. Each category has three subcategories. For example, within the Environment category there are Environmental Policy and Reporting, Energy and Climate Change, Resource Management. For Employees, Diversity and Labor Rights, Compensation and Benefits, Training Health and Safety, and so on.

Q: How are people using CSRHub ratings?

A: The market uses us for six applications:

First, for benchmarking. Our ratings and analysis tool covers 9,296 companies across 135 industries to track competitors over time.

A lot of our users analyze performance by stakeholder for CSR and Sustainability Reports. We offer a, single powerful interface to over 348 sources of information.

Professors and students conduct academic research and projects. Our tool analyzes six years of data and over 60 million data points, and is currently used in hundreds of universities globally.

Sustainability is increasingly important to company brand. Companies use us to build authentic brand values and increase customer loyalty.

CSRHub is used to build a world-class sustainable supply chain. Our APIs can map into a company’s supply chain network across 106 countries.

Finally, we find that sustainability performance is increasingly a factor in economic decisions. People search for places to work, brands to buy, and partners to support based on their values.

Q: How does CSRHub enable comparisons between companies? Can we really integrate apples and oranges?

A: The CSRHub schema maps data elements from all these data sources into the twelve subcategories, then aggregates and normalizes the data for comparability. The schema isn’t unique, but the aggregation and normalizing absolutely is. Bahar and I together had the perfect skillset to attack this challenge. We met at Harvard Business School. I went on to cofound EKOS International, one of the first consultancies to integrate sustainability and corporate strategy, way back in 1996 if you can believe it. Bahar has a CFA and built and ran Web-based and technology-based businesses on Wall Street with Kidder, Peabody and for McKinsey.

Q: Why is knowing my CSRHub rating and ranking in my industry important?

A: Benchmarking is key to competing successfully and creating value. Knowing your CSRHub rating and ranking enables your company to gain an independent perspective about how well you perform compared to other companies, identify specific areas for improvement, and monitor company CSR performance over time. Integrating CSRHub benchmarking across divisions enables a company to prioritize improvements and provide greater transparency of progress.

Q: How will CSRHub and Wizness work together?

A: CSRHub and Wizness are collaborating to create a Benchmark Template Report available on the Wizness Publisher website. Our reports will be streamlined, digital, social and mobile solutions for key stakeholders interested in sustainability data and progress.

Q: When will this benchmarking tool be available?

A: An early preview of the report is available now in PDF form at the following address: https://publisher.wizness.com/csrhub

Photo courtesy of Wizness.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 9,200+ companies from 135 industries in 106 countries. By aggregating and normalizing the information from 348 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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March Data Madness for CSRHub

[fa icon="calendar'] Mar 18, 2013 9:00:18 AM / by Bahar Gidwani

By Bahar Gidwani

CSRHub recently extended the historic data available to its subscribers back to 2008.  Our users can now study the month to month change in sustainability performance for thousands of companies from December 2008 to the present.

We current rate 7,200 companies, using data drawn from more than 200 sources.  Our data set has been growing steadily at about 100 new companies rated per month.

March Madness

We use the wide range of data types and perspectives our sources give us to adjust and normalize our data.  We used normalization factors based on our robust 2010 to 2012 data sets to adjust the more limited data sets we had for 2008 and 2009.  As a result, our ratings have remained remarkably stable.

CSRHub March data

Any registered CSRHub user can see a chart that shows the corporate social responsibility (CSR) performance of the companies we track, since 2008.  In many cases, the chart will show partial ratings for a number of months, and a gradual build towards a full rating.  The consequence of a CSR problem can often be tracked visually.  For instance, see these charts for BP following the Gulf Oil spill and the effects on Tepco’s ratings of the Fukishima meltdown.

BP

The Deepwater Horizon oil spill occurred in April of 2010.  By October, all of BP’s ratings had begun to fall.  The worst damage occurred in its Community category score—which fell from the low 60s to the low 40s.  BP’s overall score stabilized in the middle 50s by early 2011 and has remained in that area since then.

TEPCO

Japan was struck by a major tsunami on March 11, 2011.  Tepco’s Fukishima reactor became a worldwide center of attention in the weeks that followed.  Tepco’s environmental score took an immediate hit, followed by drops in its governance and employee scores as more details emerged of how the company had handled the event.  A number of governance changes in late 2011 and 2012 have brought that score now to a new high.

CSRHub professional level subscribers can “roll back” our system to any month in the period.  They can see which sources were available for each company in the system at any point in time.  They can also do historic benchmarks and analysis of long-term trends in corporate social responsibility (CSR) performance.

Several university researchers have already launched studies, using this newly expanded data set.  We expect their work to reveal many insights that we can share with you, as they become available.


Bahar Gidwani is a Cofounder and CEO of CSRHub. Formerly, he was the CEO of New York-based Index Stock Imagery, Inc, from 1991 through its sale in 2006. He has built and run large technology-based businesses and has experience building a multi-million visitor Web site. Bahar holds a CFA, was a partner at Kidder, Peabody & Co., and worked at McKinsey & Co. Bahar has consulted to both large companies such as Citibank, GE, and Acxiom and a number of smaller software and Web-based companies. He has an MBA (Baker Scholar) from Harvard Business School and a BS in Astronomy and Physics (magna cum laude) from Amherst College. Bahar races sailboats, plays competitive bridge, and is based in New York City.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,000+ companies from 135 industries in 91 countries. 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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What we want to accomplish

[fa icon="calendar'] Dec 7, 2009 12:02:38 PM / by Bahar Gidwani

After two years of hard work, we launched CSRHUB's alpha site this week.  There are pages on the site that talk about us, about our data sources, and about how we build our database and set up our "schema."

However, these pages probably don't give you a sense of what we want to accomplish.  Here are some things we don't and do want to do:

  • We don't believe anyone can create "absolute" rankings for the companies we cover.  Instead, we believe that the relative performance of companies depends on the personal views of our users.
  • We don't think that a single source or criteria should be used to evaluate how a company performs socially.  Instead, by combining multiple sources and ratings on twelve different subcategories, we can fairly compare a broad range of companies.
  • We know that different countries have different standards for corporate social and sustainability behavior.  However, we feel it is fair to compare companies from different countries--as long as we use the same criteria and aggregation methods.
  • Some people may try to use our data to make personal or even professional investment decisions.  We don't encourage this--our data concerns social behavior, not financial performance.  There are studies that show that strong social performance leads to good financial performance.  However, to take advantage of this connection, an investor needs comparative valuation information and other financial data that we do not supply.
  • We are not qualified journalists or a source of news.  Instead, we provide "transparency."  We make it easier for those who want to study company performance.
  • We do not help people choose which product to buy.  Most products contain components from a long supply chain of companies.  We can help identify which companies in this chain may have social values that conflict with those of our users.  But, there are many other factors we cannot yet quantify and accurately track. 

NYU Professor Jay Rosen recently pointed out that new on-line sources of information could "make the opaque world of power more transparent."  We like the idea that we can help offset the power of corporations and their ability to command attention from media and investors, with a transparent, easy-to-use information hub.  We will be adding features, company coverage, and new data sources over the next few months.  We hope you will tell us more about what you would like us to do and what you feel we should not try to do, as we move forward, together.

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