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

GRI Reporting’s Impact on ESG Ratings

[fa icon="calendar'] Dec 13, 2018 11:18:19 AM / by Bahar Gidwani

Two years ago, the sustainability business community elected me to the Global Reporting Initiative (GRI) Stakeholder Council (SC).  Thank you, it has been an honor to represent you.  I recently traveled to Amsterdam to attend the Annual General Meeting (AGM) of the Council.  I thought our readers might like to hear some of what we discussed and learned.

One caveat.  There were parts of our discussion that are (and should be) confidential.  The SC is tasked with advising GRI’s Board on its strategy.  We also select/elect some of GRI’s Board members.  Furthermore, these represent my individual views as a GRI SC member, but I am not an official spokesperson and don’t speak on behalf of the Stakeholder Council or of the GRI. These remarks have been reviewed by SC’s GRI liaison to be sure I’m not revealing information I shouldn’t.

GRI’s Value

Virtually everyone who is involved in sustainability reporting is aware of GRI’s contribution to our field.  It is the best known and the most respected approach to reporting—and has been for many years.  We have shown that companies who use the GRI method for organizing their reporting receive better sustainability ratings.  The table below shows a recent analysis across 4,000 companies.

Ave CSRHub Ratings vs No of GRI Reports

As you can see, companies that report using the GRI approach have consistently higher ratings on CSRHub than those who don’t.  Since CSRHub’s scores include input from 565 different rating sources, there is a strong correlation between using GRI’s methods and how positively a company is seen across a wide range of different rating methodologies.  Note that reporting only every other year is associated with less improvement.  One of the things we discussed at the SC meeting was that some companies seemed to be skipping years in their reports.  Our ratings data indicates that those who report every year seem to have a ratings advantage over those who don’t.

Harmonization

One of GRI’s focus areas has been the harmonization of different ratings systems.  This is in response to a perceived fractured reporting landscape and concerns from stakeholders (especially in the investment community) for simplicity and comparability in ratings.  The chart below shows an example of the disconnect those using ratings must cope with.

Diff ESG Rating Systems

The six companies above are all large and well-studied.  The consensus view of (as measured by CSRHub) is that their sustainability performance is pretty similar.  However, the four ESG rating systems (and credit score) that we show above show a lot of variation.  Even highly experienced users of these data sets are often at a loss to explain these differences.

One of GRI’s responses to these concerns has been to participate in the Corporate Reporting Dialog.  “The Dialog,” as it is known, is supported by seven ratings and standards-setting groups, including CDP, SASB, and Integrated Reporting.  GRI would like to become the “IFRS of ESG.”  Take a look at the International Financial Reporting Standards (IFRS) site, if you haven’t before (they are also a supporter of the Dialog) and you will see where GRI is heading.

What’s Next?

GRI is working on a number of new Standards. These will be released through the Global Sustainability Standard Board (GSSB) process.  There is a hope that more Standards can be released over the next year, than over the past.  GRI has built up its staff in the area and they are clear on their priorities.

Expect a continuation of the working sessions in 2019 for GRI Community members (formerly known as the GRI GOLD community).  There will be several meetings on corporate reporting, on integrating the UN Sustainable Development Goals (SDGs) into reporting, and on how best to organize digital reporting.

Please feel free to send me comments, suggestions, and advice that may help GRI continue to be successful.  I have one more year in my current term and would like to serve you, my constituents, well.

  


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.

 

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Webinar: Using ESG Ratings and Disclosure to your Advantage

[fa icon="calendar'] Sep 29, 2017 12:07:55 PM / by Cynthia Figge

Join us for a new webinar, 
ESGAD OneReport.png

Using ESG Ratings and Disclosure to your Advantage, co-hosted by Janice Warren, President of OneReport, Inc. and Cynthia Figge, CEO of CSRHub.

 

Wed, Oct 4, 2017 2:00 PM – 3:00 PM EDT

Register for the webinar here.

During this lively and informative session, we will discuss Environmental, Social, and Governance (ESG) factors that are recognized as relevant for assessing corporate performance, risk, and value, in addition to the societal and environmental impacts themselves. Yet, investor relations and corporate responsibility practitioners often have a love/hate relationship with the corporate responsibility (CR) and ESG or sustainable and responsible investments (SRI) raters and frameworks that have helped identify and shape these metrics. This webinar helps untangle the what, the why, and the “how-tos” of tackling ratings and disclosure.

In this webinar, we will focus on 2017 challenges and opportunities including:

  • ESG landscape shift and the new business case
  • Materiality – Identifying and tracking the metrics that matter most
  • Internal stakeholders and process: challenges and opportunities
  • Navigating the road ahead: ESG ratings and reporting pitfalls, perception, and performance

Who should attend:

  • Those involved in developing or managing a corporate or ESG strategy
  • Corporate Responsibility (CR) and sustainability practitioners
  • Investor relations
  • Corporate communications, corporate affairs, and public affairs
  • Leads for ESG disclosure, reporting, and framework/ratings response management

Register for the webinar here.

If you have any questions on how this topic can be of value to your company, please contact us here.

 

 cynthia_figge-at-Sustainable-Brands-13.jpgCynthia Figge is a forerunner and thought leader in the corporate sustainability movement who co-founded EKOS International in 1996, one of the first consultancies integrating sustainability and corporate strategy. Cynthia is CEO and Cofounder of CSRHub. Cynthia has worked with major organizations including BNSF, Boeing, Coca-Cola, Dow Jones, and REI to help craft sustainability strategy integrated with business. She was an Officer of LIN Broadcasting/McCaw Cellular leading new services development, and started a new “Greenfield” mill with Weyerhaeuser. She serves as Advisor to media and technology companies, and served as President of the Board of Sustainable Seattle. Cynthia has an MBA from Harvard Business School. Cynthia is based in the Seattle area.

      OneReport CSR

Janice Warren is President of OneReport, an innovative provider of corporate responsibility (CR) software for information management, reporting, and publishing. She and her firm help companies navigate leading investment research organizations and environmental, social and governance (ESG) frameworks and address evolving ESG metrics for raters, investors, and stakeholders. Previously, Janice managed investor relations and corporate communications for a specialty materials manufacturer, where she handled responses to ESG questionnaires, external reporting and communications.  Janice is a long-standing National Investor Relations Institute (NIRI) member and has served on the board of the NIRI Boston Chapter.  Her involvement with responsible investment and corporate responsibility began as an undergraduate student at Bowdoin College.  Janice holds an MBA from Northwestern University’s Kellogg School. View more information on OneReport.

 

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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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ImpactSpace and CSRHub bring environmental, social and governance (ESG) ratings to impact investments

[fa icon="calendar'] Oct 4, 2016 9:09:47 AM / by CSRHub Blogging

4 October, 2016 - ImpactSpace, the open database for the impact investing marketplace, is bringing CSRHub’s environmental, social and governance ratings into the world of impact investing.

ImpactSpace users seeking company information will be able to see CSRHub CSR/ESG ratings and data whenever available. CSRHub provides access to corporate social responsibility and sustainability ratings and information on more than 16,500 companies.

Similarly, CSRHub’s pages on these companies will be linked to the appropriate page on ImpactSpace.  Additionally, CSRHub users will be able to search for ImpactSpace companies on the CSRHub site.  (This search link shows the 119 companies that are already connected.)

The partnership will bridge the growing marketplace for impact investments and the broader effort to track and report ESG (environmental, social and corporate governance) performance. The “impact space” is made up of small companies and private investors, with investments are typically in the millions of dollars. The “ESG” space is inhabited by large, often publicly listed companies, with billion dollar valuations and large institutional investors.

“CSRHub has data on 140,000 smaller companies that it cannot yet rate,” said Bahar Gidwani, chief executive of CSRHub. With help from partners such as ImpactSpace, CSRHub hopes to give many of these smaller companies the opportunity to receive full credit for their sustainability work. This recognition will help them find new customers, attract high quality employees, and receive support from their local communities.”

Impact investors believe there is a business opportunity to support companies for which achieving positive social and environmental outcomes are core objectives. On the ESG side, in general, there are indications that strong ESG ratings signal strong management more broadly.

Both recognize that risk and opportunity are ultimately two sides of the same coin, when it comes to emerging issues such as greenhouse gas reduction, supply chain security and community relations.

“The partnership with CSRHub greatly enhances the value of our datasets for users and expands their scope.” said Zuleyma Bebell, co-founder and director of ImpactSpace.  “Going forward, companies and investors of all sizes can be evaluated and tracked against sustainable development metrics.”

About CSRHub

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 16,511+ companies from 135 industries in 133 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. Contact: Bahar Gidwani, CEO, bahar@csrhub.com.

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About ImpactSpace
ImpactSpace is the open data platform powering the global impact marketplace. Together with our sister site, ImpactAlpha, we are providing stories and data to investors, entrepreneurs and other market participants driving business advantage with social and environmental impact. Contact Zuleyma Bebell, Director, zbebell@impactalpha.com

Impact Space

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