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

The following post is part of a CSRHub series focusing on 10 trends that are driving corporate transparency and disclosure in the coming year. To follow the discussion of each trend, watch for posts on the CSRHub blog every Wednesday.

By Bahar Gidwani

If you’ve ever watched the tide turn, you know that there is a long period where nothing seems to happen then the water suddenly rushes in. The same thing is happening with sustainability as companies rush to take advantage of a surge of interest from consumers, employees and other stakeholders.

While we founded CSRHub in 2007, one of our founders, Cynthia Figge, has been working as a sustainability advisor since 1996. Back in the 1990s, there were few examples of major companies with sustainability programs. A few pioneers on Wall Street, at firms such as KLD, Calvert, Innovest, EIRIS, Vigeo and IW Financial, were starting to gather data on corporate social performance. But, there were no standards for behavior for reporting it, and companies were reluctant to talk about their “softer side.”

Sixteen years later, sustainability has become a “mega trend.” Eighty-eight percent of Fortune 1,000 CEOs say their company is “going green” (Gibbs & Soell, 2011). Seventy-five percent say they have internal people working on their sustainability projects. Sixty percent of 3,000 business executives say they are increasing investments in sustainability (2010 survey by MIT and BCG). Seventy-seven percent of recent MBA graduates would take a pay cut to work for a firm that has a sustainability strategy (2011 Point-to-Point study).

According to a recent study by Verdantix, spending on sustainability has reached almost $50 billion in just four countries – it is probably already above $100 billion worldwide.

At a growth rate of 19 percent per year, sustainability investment is growing more rapidly than spending on computer hardware, computer software and telecommunications equipment.  Major firms such as General Electric, SAP and KPMG have created whole divisions to target this market.

Even powerful King Canute could not stop the tide from turning. What took 20 years to start is likely to continue forward for another 20 years, and to reshape the shoreline of corporate behavior.

Bahar Gidwani is a Co-founder 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.

By Bahar Gidwani

There are a lot of “Top 50” or “Top 100” lists for corporate social responsibility (CSR) issues.  Companies get kudos for how they treat women, blacks or Hispanics; for their attitude towards climate change, ethics, or shareholder treatment; or for being a good place to work, nice to commuters, or good to working parents.

We currently track 27 of these lists, and aggregate their views into our CSR ratings.  We tend to see the same companies appear over and over on these lists.  Is this because there are a few great companies and everyone knows it?  Or is the concentration of attention and awards due to the fact that big companies have big PR budgets, fill out lots of questionnaires, and have products that everyone recognizes and respects?

Using the tools on our site, we found that companies in the Fortune 1000 (the 1,000 biggest US companies) got an average of 2.9 mentions on “top something” lists.  This compared to an average of 0.2 mentions each for another 1,087 smaller US companies that we track.

Of course, this could be because big companies perform better socially, than small ones.  After all, they have the resources to have strong training programs, good benefits, contribute to their communities, clean up their waste, cut their carbon use, etc.  We next used our tool to compare the distribution of overall ratings for US companies that are in the Fortune 1000 against those we track who are not.

The average overall ratings for these two groups are pretty close (using our eco-oriented user profile, Fortune 1000 companies get a 48.4 rating and non-Fortune get a 48.1).  However, it looks to me like an awful lot of the smaller companies are better than the big ones!  The average advantage for the big companies probably is due to that little group of big companies who are way to the right—with scores in the 70s.  Without their influence, big companies would probably look worse overall on our sustainability scores than small ones.

So, why do “them that got, get?”  I think big companies get more attention, praise, and rewards because they can spend a lot of time and money communicating their performance.  Big companies fill out surveys and questionnaires, send out lots of press releases, and can afford to send their people to conferences and training sessions.  The occasional small company that shows up on a “top something” list probably got there by chance or because they did a really super job on the issue that is being covered.

I’d like to see the folks who research these lists either dig a bit deeper or at least set up a side list for the best smaller companies.  Being on a top 50 or top 100 list is satisfying and rewarding for both the management of a company and its employees.  I see frequent mentions of these “wins” via company press releases, and I know they generate a feeling of pride and accomplishment among the people who are responsible for the achievement.  Big companies already get plenty of attention.  Let’s do more to ensure that smaller companies get their fair share, too.

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.