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

CSR Data Tied to Better Scores

[fa icon="calendar'] Mar 12, 2012 9:01:35 AM / by Bahar Gidwani

By Bahar Gidwani


The subject of this post could be summarized as (for those who know Latin) scientia potentas est. This is a quote from Francis Bacon that means, “in knowledge is power.” We recently contributed knowledge from our sustainability information system, that helps substantiate some ground-breaking research. Both studies showed a connection between strong social performance and a commitment to sharing data and knowledge. We hope these research studies will be powerful tools for influencing corporate behavior.

On March 6, Cora Lee Mooney, in conjunction with the BrownFlynn team, published a report called “GRI Application Levels: Why Strive for an A?” Brown Flynn is a both a well-known sustainability consulting firm and one of only a few GRI-certified training partners. They wanted to understand if companies benefit from receiving the A level for their Global Reporting Initiative (GRI) report. Do they get credit for the hard work this accomplishment requires, from outside stakeholders? With a lot of hard work, they confirmed that there was a positive relationship between GRI application level and CSRHub’s sustainability rating score.

The folks at Brown Flynn were careful not to claim that the simple act of reporting information caused companies to be more positively viewed. It is possible (and perhaps even likely?) that companies that adopt GRI reporting are good corporate citizens, even before they start the reporting process. For instance, the following graph shows that the distribution of ratings on the CSRHub system for companies who commit to the UN Global Compact, is much better than those who do not.

Data1

Still, establishing a connection between GRI ratings and perceived sustainability performance is important. Those who want to find good companies to work with, buy from, supply to, or serve can start with those who participate in GRI. Further, showing that each higher level of GRI participation is associated with a higher average sustainability score may encourage companies to push to report more.

About a week ago, we learned that Christopher J. Hughey and Professor Adam J. Sulkowski at the University of Massachusetts Dartmouth had used CSRHub data to study the relationship between the amount of information companies release and their perceived social performance. The authors used standard statistical tools to prove a correlation between the amount of data that companies in the oil and gas industry disclose and their sustainability score on CSRHub. The idea that more data leads to a better score is one we’ve looked at in several ways. (The chart below shows the correlation between number of sources of data and overall rating across our entire coverage universe.) This paper was the first we’ve seen that nailed things down scientifically.

Data2

Over the past year, we’ve supplied data for and supported studies by several of our partners, including NGOs, research houses, and publications. As our database grows (we now have more than 10 million data elements), our coverage widens (we have partial data on 83,000 companies), our number of sources increases (we will soon have more than 150 sources), and our time scale lengthens (we now have 17 months of ratings history) we should be able to empower many types of research, in many fields. It is great to see how seriously firms like Brown Flynn and academic groups such as UMass are probing and analyzing sustainability performance. Thanks to their work, we are starting to see our field move away from arguments based on what should be right, to arguments based on what we can prove is right. A sound basis in well-studied facts should allow us to win over those who doubt and question the importance of corporate social responsibility.


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.

 

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Expanding Sustainability Data: Emerging Sources

[fa icon="calendar'] Jun 3, 2011 11:22:11 AM / by Bahar Gidwani

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.

  Screen shot 2011-06-03 at 12.17.12 PM

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.

 


 

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.

 

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Expanding the Boundaries of Sponsorship

[fa icon="calendar'] May 9, 2011 8:12:58 AM / by Bahar Gidwani

How the Catlin Group Turned Climate Change Research Corporate


By Bahar Gidwani


4684077396_510fdf97e8 Catlin Group Limited is a major UK Insurance company ($4B of premiums written, 600 people, HQ is technically in Bermuda).  A few years ago its CEO, Stephen Catlin, was considering how best to boost his company’s visibility.  Apparently, he considered sponsoring a sports team (a fairly standard practice among large companies) and then decided instead to sponsor an Arctic research trip:

“There is a wide range of activities that companies like Catlin can sponsor, ranging from sporting events to artistic performances,” says Stephen Catlin, CEO of Catlin Group Ltd. “We believe that by sponsoring the Catlin Arctic Survey, we are making a contribution to the understanding of climate change, one of today’s most important issues both for the insurance industry and for the planet as a whole.” 

I only recently heard about the Catlin Arctic Survey—which has been generating great information about the Arctic ice cap for several years.  However, there are more than 25,000 mentions of it on Google, and a wide variety of social organizations have supported this effort.

In our system, Catlin gets a pretty average rating.  A quick check of their disclosures (they have a small section of their web site devoted to CSR issues) show they filed a public CSR report in 2010.  They have a code of ethics and have invested in employee development.  They disclose some aspects of management compensation and made about £800,000 of charitable donations to community groups.  Catlin is a member of Business in the Community (a UK group that is somewhat analogous to the US-based Business for Social Responsibility) and participates in ClimateWise (a group of UK insurance companies that cares about climate change).

However, Catlin has not committed to the UN Global Compact, has not joined Carbon Disclosure Project, and has not adopted the reporting guidelines suggested by the Global Reporting Institute.  In other words, it is a good citizen, but could do more.

Still, the smart decision to sponsor a high profile project has probably added more to Catlin’s brand than putting its name on a soccer stadium or putting its logo on the sides of a racing sailboat. The cost was modest—less than £3 million.  The logic was good—an insurance company should be interested in a project that could help us all better predict climate change. And the opportunity to participate as a partner with multiple advocacy and activist groups (otherwise prickly and suspicious) should keep Catlin on the “good list” for a lot of people.

Of course, some of the coverage has been quirky. You can read articles about why lacy underwear has become part of the expedition’s equipment or how members of the team prepared to swim to the North Pole.  However, on balance, Catlin has probably done well on its investment—as Queen Isabella did by supporting Christopher Columbus and Lincoln Ellsworth did by supporting Arctic and Antarctic exploration (Ellsworth had a mountain range named after him!).  I hope their success prompts other companies to consider shifting some of their sponsorship budget into activities that will help further social, community and environmental causes.


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.

Inset photo courtesy of Polar Cruises. 

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CSR Standards: Who Makes the Rules?

[fa icon="calendar'] Jan 4, 2011 9:57:21 AM / by Bahar Gidwani

By Bahar Gidwani

This post originally appeared in Triple Pundit.

In a previous post, we described the trove of corporate social responsibility (CSR) data that is available from finance-related researchers.  One of the main places these firms get their data is from company-written CSR reports.  Corporate Register offers links to more than 6,000 of these reports—from all types of companies and organizations.

How do companies decide what to report and how to report it?  Since CSR and sustainability reporting are fairly new areas, most companies look outside of their accounting and management teams for guidance and standards.  They get help from organizations such as:

Global Reporting Initiative (GRI): One of the first and most-widely used reporting standards bodies, GRI launched in the late 1990s with support from a who’s who of sustainability pioneers and backing from UNEP.  Thanks to untold hours of work from stakeholders, technical advisors, and national organizations, GRI has defined and guided CSR reporting for more than 2,500 companies and organizations.  The latest GRI standard (called G3) includes more than 160 areas for measurement and disclosure.  GRI is now working to encourage mandatory dual reporting (where companies must report both their fiscal and social performance) by 2020.

International Standards Organization (ISO): We have all benefited for years from ISO standards for product quality, health, and safety.  Now, ISO has created a standard for internal tracking and reporting social responsibility performance called ISO 26000.  This massive project has benefited from input from 450 participating experts, 210 observers, and 42 liaison organizations.  ISO26000 data can generally be “mapped” into the formats needed for other standards (such as GRI) so companies can use their internal data for external reporting.  ISO also offers the ISO 14000 standard for environmental management.  This standard helps companies track and improve their environmental performance.

Social Accountability International (SAI): The SA8000 standard is based on the UN Universal Declaration of Human Rights, Convention on the Rights of the Child and various International Labour Organization (ILO) conventions.  It applies at the facility level—so companies may have only gone through the SA8000 process on some of their plants or offices.  As of September of 2010, more than 2,300 facilities in 62 companies have received SAI certification—and many other facilities are at various stages in the process.  Of course, many of the materials gathered during this type of certification can feed into an organization’s CSR report.

Impact Reporting and Investment Standards (IRIS): The Global Impact Investing Rating System (GIIRS) was launched to give company ratings to impact investors (those who want to use their investments to generate positive change).  As part of this ambitious effort, GIIRS has helped to develop IRIS—an independent set of standards that would help mission-driven businesses measure and report their social impact.  The current IRIS taxonomy includes five spreadsheets of measurement processes and more than 90 definitions.

UL Environment: There are several emerging efforts underway to give companies a voluntary standard way of rating themselves, and obtaining third party verification. These include an exciting project by UL Environment, in partnership with Greener World Media, which is developing an organization-wide sustainability standard that will be used to assess corporate policies and practices, known as the ULE 880.

B Corporation (B Corp): More than 360 companies (including CSRHUB) have now completed the B Corp assessment process.  We answered a long list of questions about our social behavior and then were quizzed about various aspects of our performance.  We got a passing grade—plus good reminders about the social side of our mission and management approach.  B Corp reveals a list of the companies that have completed the assessment, but does not yet share most of the data it gathers.

Table: Berit Anderson

In general, there is a gap between the data companies gather and the data that they reveal, via CSR reports, regulatory filings, and other communication activities.  There may also be a gap between the data companies report and their true performance.  Most CSR standards allow for “third party verification.”  However, in many cases, the only groups with the necessary training and experience to serve as verifiers are CSR and sustainability consulting groups—with the fees for their reviews paid by the companies they are reviewing.  This leads to charges such as “greenwashing” and to a lack of the uniform reporting and transparency required to prove the effectiveness and credibility of these standards.  CSR standards groups are doing worthy and necessary work—but they need more regulatory and marketplace support to force companies and organizations to comply with both the spirit and the letter of their standards.


Bahar Gidwani is Cofounder and CEO of CSRHUB. 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, worked on Wall Street with Kidder, Peabody, and with McKinsey. Bahar has consulted to companies including Citibank, Banco Portuguese do Atlantico, Crane Co., Sperry, GE, General Dynamics, Computer Associates, Oracle, Microsoft, Computer Sciences, EDS, Cerner, and Acxiom. He has an MBA from Harvard Business School. Bahar is based in New York City.

CSRHUB is a corporate social responsibility ratings tool that allows managers, researchers, consultants, academics and individual activists to track the CSR performance of major companies. We aggregate data from more than 90 sources to provide our users with a comprehensive source of CSR information about 5000+ publicly traded companies in 62 countries. Browse our ratings at www.csrhub.com.

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