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

By Bahar Gidwani

We were recently invited by our friends at Trucost to moderate a webinar with the above title.  Our shared goal was to encourage more companies to start reporting their sustainability performance.

You can download the webinar from the Trucost site, here.  However, I thought I’d share a few of the things I learned from preparing for the talk and from the other panelists.

I started the webinar by sharing some figures from the CSRHub database.  I showed the audience that only 30% of companies in developing countries outside the US are using one of the three main reporting systems (the Global Reporting Initiative (GRI), the Carbon Disclosure Project (now CDP), and the UN Global Compact or UNGC).  US companies lag far behind—with only about 10% of the companies we track reporting via these systems.

I didn’t spend a lot of time during the webinar bragging about this data.  However, I was pretty proud to see that our coverage has now grown to the point where we can start to make broad, worldwide statements about corporate social performance.  We currently cover more than 7,300 companies in 93 countries.  Other sources have claimed that “reporting is rising rapidly” and that “90% of large companies are reporting.”  If we take the term “large company” to include those over $100 billion in revenue, these statements are true.  However, when we look at companies between $100 million and $1 billion (which most people would still consider “large”), reporting remains quite weak.

The next speaker was Lorinda Rowledge, who is one of the founders of EKOS International.  Over the past 17 years, Lorinda has helped many large companies take their first steps towards reporting their performance.  Among other things, she offered this set of insights into the benefits of making an initial report.

Our third speaker was James Salo of Trucost.  Jamie uses Trucost’s proprietary models (some of which he helped build) to improve company understand of their environmental performance.  He showed the audience this great example of how a company could use the data it gathers through a reporting process to help visualize its competitive position.

After we shared our slides, we took questions and comments from the audience.  In particular, there remains confusion about new standards for reporting such as those being proposed by SASB and the IIRC.  We agreed that we are happy to see the quality of reporting improved by these efforts—as long as they don’t discourage or confuse companies who are just starting on their journey into reporting.

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 7,300+ companies from 135 industries in 93 countries. By aggregating and normalizing the information from 200 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 Lorinda R. Rowledge

What most captured my intellectual curiosity -- and feelings of hope -- in 2010 was the daunting challenge and tremendous opportunity inherent in engaging employees in and through sustainability and corporate social responsibility.

As part of a major EKOS project, I interviewed internal leaders at P&G, SAP, 3M, BT, Microsoft, Interface, Toyota, Eileen Fisher, and other companies about their approach, and reviewed hundreds of articles, research findings, webinars, and academic papers on employee engagement.

In the end, I was struck by a renewed -- and urgent -- sense of optimism, an emergent "reframed" worldview about the fundamental relationship between employees, companies, and society, and an exciting array of guidelines and best practices that can be customized to simultaneously drive business performance, engage employees, and accelerate the transformation to sustainable business.

Below I introduce some key "warp and weft threads." Over the next few months I will weave a tapestry with some colorful stories and in-depth analyses in a series of short articles.

One of our greatest business leadership challenges may be creating the organizational culture and social context that optimizes the collective intelligence and collaborative effort of the entire workforce -- both for organizational effectiveness and innovation in general, and for advancing transformation to environmentally, socially, and economically sustainable business.

Despite clear data showing employee engagement is a key factor in business performance -- with "high engagement" companies having higher operating income, revenue, earnings per share growth rate, retail sales, profit margins, customer retention, safety, and employee retention -- studies from major global research firms like Gallup, TowersWatson, and Blessing White find that only 20-30 percent  of employees are actively engaged, meaning the vast majority of the workforce are coasting at best, actively disengaged or destructive at worst. Enlightened executives are increasingly seeing employee engagement as one of the most pressing strategic priorities. For example, a study by the Corporate Executive Board found employee engagement was one of the top two priorities of human resource leaders for 2010.

The good news is that this need for innovation in and increased commitment to engaging employees is occurring simultaneously with the requirement of sustainability/CSR implementation for much deeper integration and more intense innovation.  The synergies between CSR and engagement set the stage for a step-leap improvement in response to both elements of this leadership challenge.

Proactively pursuing sustainability/CSR is a significant, largely untapped, solution for engaging employees' passion, initiative, and search for meaning and contribution in their work. Advancing employee engagement in and through sustainability can propel a powerful virtuous circle contributing to dramatically improved business performance and ever more legitimate sustainability breakthroughs.

Employee engagement drives improvements in business performance; sustainability/CSR drives increased employee engagement; engaging employees accelerates sustainability integration and innovation; sustainable business innovation drives both superior business performance and more positive impact in the world.

Both research and direct experience among the leaders underscores this synergy.

The latest Sirota and Hewitt research into employee engagement and sustainability indicates:

• Employees satisfied with their company's sustainability performance (compared to those who are dissatisfied) are more highly engaged, feel their employers are more interested in their well-being, rate senior managers as having a stronger sense of direction, and feel their companies are more competitive in the marketplace (all factors central to employee engagement);
• The vast majority of employees at companies with high engagement say their employer is socially and environmentally responsible.

Sustainability provides what most people in today's workforce, from baby boomers to Gen Ys, are looking for in their work:  deeper meaning and a sense of purpose, opportunities to contribute and make a positive impact on the world, work in an organization with a good reputation in the community, and opportunities to develop knowledge and skills and advance their careers.

With the increasing consensus that sustainability/CSR is a business imperative, and that improvements and investments in sustainability/CSR yield cost savings, increased corporate reputation and brand value, new products and markets, and innovation, the majority of Fortune 500 companies as well as many smaller organizations now have corporate responsibility programs and reports. Most, however, are also a long way from reaping the benefits of engaging employees in sustainability.