By: Bahar Gidwani
Do some states attract more progressive companies while others receive investment from companies who are thought to be less socially progressive? If so, why might this occur?
A recent article in Site Selection Magazine used the CSRHub database as part of determining which of 50 US states and 132 non-US countries were most attractive for a new site from a sustainability perspective. This article presents analysis which provides deeper understanding of the corporate social responsibility aspect. Our goal is to make it easier for companies to use sustainability as a site selection criteria and localities to screen siting companies for sustainability, thereby improving their desirability.
CSRHub’s Contribution to the Study
The CSRHub data set contains estimates of the perceived corporate social responsibility (CSR) performance of more than 16,000 entities. It includes data on both public and private companies and on government entities and not for profits. CSRHub collects information for its big data engine from more than 469 sources and its data set includes companies from 133 countries. For more information on how CSRHub ratings are generated, please see the CSRHub site.
Because many Site Magazine entries were from subsidiaries, a total of 3,073 CSRHub companies connected to at least one site decision entry on the Site Selection list, and 2,217 of these matched companies had full CSRHub scores. These companies were responsible for 5,549 of the site entries—About 55% of these site entries (3,052) were for U.S. sites and the other 45% were for sites in 106 other countries.
Using only scores from fully rated companies, CSRHub calculated two numbers for each US state and for each foreign country:
- The average perceived CSR performance for the entities headquartered in that location. For example, CSRHub found that the 63 fully rated companies in Minnesota had an average percentile rank of 54.8%. Similarly, the 34 companies in Finland have 88% average ranks. (CSRHub tracks a total of 137 companies in Minnesota and 72 companies in Finland.
- The average perceived CSR performance of the entities who placed sites in a location. For example, entities with an average 58.5% rank placed 93 sites in Georgia. (Another 23 sites were placed by entities who were headquartered in Georgia.) Entities with an average 70.7% rank placed 75 sites in Brazil (Another 5 sites were placed in Brazil by Brazilian companies.)
The difference between these numbers shows whether companies selecting sites in a given location are perceived to be more or less sustainable than that location’s current rating. The following table shows the relevant data on both scores for the 39 US states that had at least 5 sites selected by companies outside of the state and at least five companies tracked by CSRHub. The table is sorted in order by the difference between the two scores.
The preponderance of positive scores is probably due to several factors:
- Many of the new entrants into these US states came from European companies. European companies have consistently higher sustainability ratings than US companies.
- Idaho and South Dakota companies already have relatively high scores. They may be seeing lower scores for those siting in their state because they are attracting companies primarily interested in extracting their resources.
- Connecticut has positioned itself as a business-friendly state and this may have encouraged some lower-ranked companies to enter.
- Arkansas, Delaware, and Mississippi all have lower starting scores and are likely to see benefits from encouraging positive companies join their communities.
The table below shows the same information for non-US countries. Note that we have narrowed the list to those countries with at least five sites from companies with headquarters outside the country and that have at least five entities that are fully rated by CSRHub.
The foreign table shows much bigger differences in the baseline performance of the companies in each country. The three countries with the biggest negative differential are those who also have the highest average scores for their existing companies. It is probably difficult for these countries to find many companies outside of their jurisdictions who can match this level of performance.
The three countries with the biggest positive score difference with new site contributors are:
- Greece—which has very low scores from its current companies and who is getting huge support and attention from other higher-scoring parts of the EU.
- Saudi Arabia—which is trying to build a base of sustainable, non-energy-reliant industries.
- Egypt—which has such weak performance within its existing base of companies that outside companies must generally seem quite attractive.
We hope that studies such as the one done by Site Selection Magazine will encourage companies to include sustainability factors in their site research strategies. Our data suggests that the localities who are accepting new sites will generally see candidate companies who are at least as socially positive as the companies who are already in their communities. However, it may make sense for localities to screen each candidate carefully and seek to improve their reputation for being a socially positive and sustainable place to put a new site.
Appendix 1: How CSRHub Generates a Score
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. 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.