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

By Bahar Gidwani

Sustainable Brands kindly invited me to speak at their Boston New Metrics ’14 conference.  They asked me to lead a panel called “Tapping the Crowd for Insights and Solutions: Crowdsourcing, Crowdfunding, and the Personal Data Economy.”  I got to work with three experts: Gwen Nguyen, Cause Director, Indiegogo; Reki Hattori, CTO, Datacoup, and Dr. Thomas Malone from MIT’s Climate CoLab.  It was fun to work with them and I think both I and the audience learned something from our presentations and discussion.

We at CSRHub had recently posted research on the relationship between corporate social responsibility (CSR) and crowdfunding.  However, the SB folks wanted me to talk about how crowd data could influence sustainability metrics.  This is a topic we care about deeply—we have already integrated more than a quarter million pieces of crowd data into our database.

I started by pointing out that we already have many good sources of sustainability information.  In fact, there are almost too many for anyone to track via normal means.  CSRHub currently lists >330 sources in our system, and that number grows by three to ten sources per month.

CSRHub gathers all this data into one place, harmonizes it, and makes it useful to sustainability practitioners.  We’ve recently grown our coverage to include more than 9,000 companies in 106 countries.

Ten years ago, only a few large (or very socially-minded) companies issued corporate responsibility reports or reported their performance to groups such as GRI or CDP.  These days, thousands of companies have employee-driven community service programs, recycling and carbon reduction targets, and sustainability areas on their web sites.  As you can see below, after twenty years of progress, more than 90% of the Global 250 issues CSR reports.

KPMG Survey of CSR Reporting 2013 Shows That Most Big Companies Have CSR Reports

Hundreds of thousands of middle-sized and smaller companies—many of whom are privately held or not-for-profit organizations—are starting to report their social performance to their customers (via sustainability supply chain systems) or to local or national government organizations.  In contrast to the situation with bigger companies, most of the new data that smaller companies generate is never made public.  This has left a big gap that we believe crowd data can help fill.

For instance, we have already integrated sources that provide data on as many as two million companies.  (In fact, AMEE told me recently they may be able soon to track more than 10 million firms.)

Crowd sources monetize in various ways.  For instance, Ekobai charges companies to list on its site, WeGreen captures a small part of the consumer purchases it helps direct, and Glassdoor sells job ads.  To generate the traffic and attention they need, crowd sources typically cover both larger, well-studied companies, and smaller ones.

We already use the data on one company to standardize and normalize the data on other companies.  We can therefore use our non-crowd expert sources to understand and adjust the ratings we get from crowd sources.  As a result, we should soon be able to track at least 50,000 companies and hopefully soon have ratings on hundreds of thousands of companies, both public and private, from around the world.

Sustainability ratings and metrics are vital for making a number of business decisions.  By broadening the number of companies that can be rated, we should be able to enable faster and more accurate supply chain management, improve private investment decision-making, and encourage consumers to shift their purchases towards more sustainable products.  Most people seem to feel that consumer rating and credit management systems have improved our ability to make business decisions.  Broad-based sustainability ratings, based at least partly on crowd data sources, should generate similar long-term value for everyone.

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. Bahar is a member of the SASB Advisory Board.  He plays bridge, races sailboats, and is based in New York City.

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.

By Bahar Gidwani

One of the smartest folks I know—one of my directors when I was at McKinsey—had time to have a cup of coffee with me, last week.  During a chat that covered topics ranging from board practices to roof leaks, I told him a bit about CSRHub and our efforts to encourage corporate social responsibility (CSR) and sustainability.

After a while, my friend sat back and said, “But why would a CEO care about CSR?”  He

continued by pointing out that CEOs have to worry about profits, strategy, personnel …so many things that could push CSR off of her or his agenda.

I could have tried to pull a “study says” answer, and quote him data from a great Gibbs & Soell report.  They estimated that more than 80% of Fortune 1000 CEOs wanted their companies to “go green.”  However, my friend has done lots of studies himself.  He knows they don’t always predict what will happen in real world situations.

I instead offered him my belief that three pressures will force CEOs to understand and evaluate how their businesses are performing, socially:

• License to operate.  If a business abuses the trust of the community it resides in, it can eventually lose the power to operate normally.  Communities can slow down and block company decisions to expand a facility or increase its use of power, water, and other resources.  They can make it hard for a company to hire or fire.  A CEO needs to be sure that her or his company’s behavior engenders support from its local communities.
• Supply chain pressure.  Major companies have put pressure on their supply chains for years to deliver products faster, more cheaply, or with better quality.  Now they are also asking their suppliers to deliver products that are made more responsibly.  Even if a CEO’s company does not have this type of program, his or her company most likely sells products or services to a company that has set out sustainability goals and guidelines.
• Hiring and retention.  In a recent MIT survey, 77% of graduating MBAs claim they would take a lower salary if necessary, in order to work for a company that had a clear sustainability strategy.  In most major companies, attracting, training, and retaining employees is a critically important function.  A CEO who does not encourage her or his corporation to be responsible, could lose key human resources.

My friend’s response was that these reasons are rational.  But, CEOs are often driven more by emotional needs than rational ones.  What could cause them to become passionate about sustainability issues?

At the time, I could only come up with one idea.  I’ve since thought of a second:

• Pride and jealousy.  CEOs track what other competing CEOs do.  They meet their competitors at conferences, envy them when they get awards, and parse their speeches and pronouncements for clues on their plans for the future.  When a competitor gets onto the Dow Jones Sustainability Index, Glassdoor’s Top 50 Places to Work or is near the top of the CR 100 Best Citizen’s list, a CEO may ask her or his staff, “Why didn’t we get that award?”  An answer of “we don’t know” or “who cares about awards” is not going to satisfy a CEO who is proud of her/his company and its performance.
• Children.  I’ve heard several CEOs say that they became interested in sustainability and CSR when their children raised these issues.  Like most parents, CEOs want to give their children a stable, comfortable life.  A CEO should want to leave behind a legacy that her or his children can be proud of.  And, if the CEO’s company is still around in twenty years, it could continue generating job opportunities (and stock market dividends?) that may directly benefit a CEO’s children.

I can’t say that I convinced my friend.  He has seen too many companies with short term orientations and knows too many CEOs whose egos provide plenty of passions stronger than the lure of sustainability.  However, I hope I at least showed him there are some long term trends that may continue pushing CEOs to care about CSR.  I think we could soon see a tipping point—in fact it may already be happening—where CSR awareness and interest becomes the norm and not the exception.

[csrhubwidget company="PepsiCo-Inc" size="650x100" hash="c9c0f7"]

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 is a leading source of corporate social responsibility ratings and information, creating direct comparisons of CSR and Sustainability performance among competitors and across supply chains, industries, and regions. CSRHub is the first to aggregate environmental, employee, community and governance data — 20 million elements from 200 sources covering 6,700 companies across 135 industries and 82 countries  — into an open, integrated, accessible database platform.

Through subscriptions at multiple price points, we serve corporations, consultants, academics and NGOs. We resell reports, training and consulting. Our sustainability widget feeds data to news sites, blogs, and corporate intranets. We sell data to our partners for integration into their products, using our API platform.

This is the final post in a 3-part series on expanding sustainability data. 

By Bahar Gidwani

One often-cited approach to broadening the availability of corporate social responsibility (CSR) information is via “reporting groups.”  Three examples of these organizations are the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), and the Corporate Register.  (Note, CSRHUB is an Organizational Stakeholder of the GRI, works closely with the UNGC, and refers its users to the Corporate Library for copies of company CSR reports.)  GRI helps companies organize their social reporting.  UNGC encourages conformance to a small set of social principles. Corporate Register stores and organizes corporate CSR reports. The work of all three groups encourages both public and private organizations to publicly disclose various aspects of their social and sustainability performance.

Even after years of patient effort, these three organizations have only induced about 11,000 companies to reveal information.  Only about 6,000 companies participate in two of the three programs and only about 1,000 are in all three.  Yet, without a lot of data (at least all of the information that all three of these bodies might receive), it is hard to generate a rating of a company’s performance.

Further, when one examines the 1,000 organizations that are in all three programs, many have already been rated by the SRI community.  We estimate that only about 600 ratings could be added using the data these three groups have collected.  As a result, we won’t find the answer to our rating needs just through the efforts of the reporting community.

Fortunately, some new ratings sources are emerging that show promise of rising from the grass roots and filling in the lawn.  They include companies we’ve spoken about before such as:

• GoodGuide:  Using independent test methodologies and direct samples of consumer opinion, GoodGuide has been able to estimate the social impact of thousands of products.  Many of these products come from private or otherwise un-rated companies.  GoodGuide has invested the necessary time and energy to dig out data on these companies and produce its own ratings of them.  It now covers 100,000 products from more than a thousand companies.
• Glassdoor:  When employees want to look for a new opportunity, they turn to the company ratings on Glassdoor. These ratings have been created by aggregating employee opinions about companies. Like TripAdvisor for travel or Yelp for services offerings, Glassdoor has used the power of the crowd to discover how employees feel about their employer.  It now covers 110,000 companies.
• WikiPositive: Volunteer contributors have built profiles on the social performance of more than 900 smaller companies. Using wiki-style shared editing, each contributor’s view is ingested and added to a page. Editors review the data and ask for help refining and improving it.

Doing external research—either directly via a paid staff, via crowd source collection of comments, or using a group of wiki contributors—is time consuming and expensive.  The data gathered is useful for the particular need of the researcher, but may not cover the broad range of issues that are included in sustainability.

Other groups are seeking to address these issues by providing new self-driven ratings opportunities. Some of these are verified by a third party—some are not. Most allow contributed data to be kept private, but reward companies and organizations for agreeing to make some or all of it public.  Three examples are:

• B Corporation: More than 400 companies have self-administered the B Corporation certification process (including CSRHUB!). B-Corporations commit to being socially responsible on a variety of dimensions. Recently, B Corporation has integrated its system with that of the Global Impact Investing Rating System (GIIRS).  This system is intended to help both investors and companies better understand the impact of their operations and investments.
• Underwriters Laboratories Environment (ULE): With its many years of experience certifying product safety and quality, Underwriters Laboratories (UL) is a natural candidate to provide help with sustainability ratings.  The Environment branch of UL has launched several product certification efforts. ULE is developing a company certification process that will measure and verify many aspects of environmental and social performance.
• The Sustainability Consortium (TSC): TSC was launched by WalMart, and is now jointly administered by Arizona State University and the University of Arkansas. Its 75 members are trying to expose the social performance of the companies in various supply chains, and more accurately quantify and communicate the sustainability of products. For example, the Consortium works with the Carbon Disclosure Project (CDP) and uses the CDP’s methodology for measuring carbon. Those who participate in the Consortium disclose the carbon content of their products privately to CDP.

We hope these new sources can eventually fill in the data we need to complete our ratings matrix.  It appears to us that the most progress at first will be in the US—we know of few bottoms-up approaches being pioneered in Europe or Asia. However, all of these efforts are closely tied to Web-based technology and therefore all should be easily moved into other economic areas.

It is hard to estimate the time needed to complete this process. Ten years?  Progress may move quickly if and when countries make environmental and social reporting mandatory. There may not be an initial economic benefit for participating in rating systems, but companies and organizations who spend time and money completing the rating process will likely uncover new business opportunities and insights into their brands and markets.

At some point, a tilt will occur and it will become costly not to participate. From that point on, we believe the quality and depth of ratings data will grow rapidly. At least the frameworks we have built so far will become the basis for this future system.  Therefore, we who are pushing this area now should hope to benefit from the investments we have made and will continue to make.

By Bahar Gidwani

As promised, we’ve talked in previous posts about the wide array of information that is available on corporate social responsibility (CSR) and sustainability subjects.  The big financial research firms, standards organizations, not-for-profits, and government sources each offer their own top-down, carefully organized version of how companies are performing socially.  What about bottom-up measures?  Are there “crowd-sourced ratings” for CSR?  If you are like me and you use the travel reviews on TripAdvisor or the product reviews on Amazon, you know how valuable this type of data can be.

We’ve been able to integrate three crowd sources so far, into our giant database of ratings information.  One of our earliest partners was a company called Jigsaw.  (Jigsaw was bought last year by Salesforce.com for $142 million!)  Its members volunteer data on the companies and people they work with.  In return, they get back information on other companies and people they are interested in.  As the data flows in, Jigsaw uses special programs to cross-check names, addresses, and descriptions.  The result is an ever-growing address book of information on thousands of companies.  This address book helped us figure out which companies to track and gave us a head start on their industries and locations.

Glassdoor is another example—and a good one—of how crowd sourcing can help with CSR analysis.  An employee who joins the Glassdoor site can upload her or his comments on the company she or he is working for.  The employee can comment on the work environment, pay scale, and on the performance of the management team (including the company’s CEO).  After a while, Glassdoor builds up enough data on a company to allow it to publish a rating of how it treats its employees—and scores for things like the performance of the company’s CEO.  Glassdoor members get to see this data, comment further on it, and then use it in their job search and career planning.  We’ve started integrating this bottom-up score into the Labor section of our data—and hope to soon have comments about how the inside view via Glassdoor compares to how company labor policies are seen by external sources.

Wikis represent a different, more collaborative approach, to crowd sourced data.  The best-known example of a Wiki is Wikipedia—one of the most-visited sites on the Web and everyone’s favorite modern-day encyclopedia.  We’ve now partnered with a Wiki called WikiPositive, that was built by the folks at 3 Sisters Sustainable Investments.  (BTW, 3 Sisters recently decided to also support and invest in our CSRHUB enterprise.)  Over the past two years, WikiPositive has recruited a large and growing group of contributors who are interested in helping investors (and others) discover the positive value that is being created by smaller publicly-traded companies.  This group felt too much emphasis was being put on the CSR activities of the top 1,000 or 1,500 public companies, when many of the most interesting new approaches to sustainable business management were being developed by smaller companies.  Their site represents a great example of how crowd input can be used to change the focus of a discussion and bring new information into a discussion.

A number of other interesting models and concepts are being explored.  For instance, MoxyVote allows individuals to get involved in the proxy process—a long-standing method for influencing corporate behavior.  Greenwala gives its users the opportunity to form communities of interest and then recommend green and sustainable products to one another.  Alonovo and other responsible shopping sites capture feedback on the products they sell from their user base of socially aware consumers.  Goodguide offers carefully researched ratings on the products it covers—and then encourages its users to add their views and advice.

We need to organize the feedback we get on the ratings we offer and help our users learn from each other.  We are working on our own system for integrating feedback from users directly into our scores.  By adding this data to the data we get from a growing list of crowd data sources, we should ensure that our ratings accurately include the views of the people who work in, buy from, and serve the companies we rate.

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.