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

Are Crowdfunded Companies Socially Responsible?

[fa icon="calendar'] Sep 11, 2014 8:47:23 AM / by Bahar Gidwani

By Bahar Gidwani

Over the past few years, thousands of companies both in the U.S. and abroad have raised funds through crowdfunding.  Wikipedia defines the term as:

“Crowdfunding is the collection of finance from backers—the "crowd"—to fund an initiative and usually occurs on Internet platforms. The initiative could be a nonprofit (e.g. to raise funds for a school or social service organization), political (to support a candidate or political party), charitable (e.g. emergency funds for an ill person or to fund a critical operation), commercial (e.g. to create and sell a new product) or financing campaign for a startup company.”

We could expect crowdfunding to be especially attractive for younger entrepreneurs.  These “millennials” should tend to embrace newer, on-line methods of raising money—especially since they may not have started a venture before using traditional funding means.  Companies managed by millennials might also have more socially-positive styles of management than traditional companies and may target markets that care about sustainability and social issues.  As a result, we were hopeful that we could combine the 59 million data points in our CSRHub sustainability metrics database with data from Crowdnetic, and reveal a connection between crowdfunding and positive corporate social responsibility (CSR) performance.

Last fall, Crowdnetic, a New York-based company, launched CrowdWatch, a centralized hub that tracks offerings conducted under SEC Rule 506(c).  This rule allows private issuers to offer securities through general solicitation, as long as all purchasers are accredited investors and other conditions are met.  For more details, see http://www.sec.gov/info/smallbus/secg/general-solicitation-small-entity-compliance-guide.htm.  Since CrowdWatch’s launch, Crowdnetic has gathered data on thousands of companies (most of them commercial enterprises) that are seeking to raise funds under 506(c).  Crowdnetic aggregates and normalizes companies in its database, in accordance with its proprietary taxonomy.  A quick analysis of data gathered through the first half of this year found that 72 of a set of 3,540 companies were in industries such as “green building materials,” “solar & wind power,” or “organic food & beverages.”  Given our preliminary analysis, this indicates that crowdfunded companies do not appear to have an especially strong concentration in sustainability-oriented products.  The companies that did offer sustainable products were fairly evenly spread over a range of different industries.

We next looked in the CSRHub database for other types of sustainability performance data on the Crowdnetic-tracked companies.  Besides product information, CSRHub tracks characteristics such as leadership ethics, employee diversity, transparency and reporting, as well as supply chain practices.  We encountered a number of issues with this matching process:

    1. Companies use many name variants, and a number of companies may share a similar name.  The CSRHub database captures thousands of these name variants from its more than 300 sources.  Our staff conducted a company-by-company review of each potential match to ensure that we had accurate matches.
    2. All of the Crowdnetic data set companies were based in the U.S.  Only 3,871 or 43% of the roughly 9,000 companies CSRHub rates are in the U.S.  This limited our opportunities for matching.
    3. The companies Crowdnetic tracks are small, privately-held companies (typically under $100 million in revenue). Most of the companies CSRHub rates are large (greater than $100 million in revenue) and publicly traded (we rate about 1,000 private companies, NGOs and government entities).

At the end of the matching process, we found only two companies who had both received crowdfunding and had received enough attention for their sustainability performance to be rated by CSRHub.

crowdfunding scores

CSRHub measures how a company is perceived to perform on a wide range of corporate social responsibility (CSR) issues.  The average rating for the roughly 9,000 rated companies (across more than 100 countries) stands at around 54.  So, one of the rated companies has an overall score below this average, and one has a score above.  (Ratings range from a low of around 20 to a high of around 70, but have a strong “central tendency.”)  (There are more details about the CSRHub ratings system on our web site.)

CSRHub has gathered data on more than 100,000 companies that it does not yet rate.  CSRHub follows a well-defined set of rules that determine when we can rate any part of a company’s performance and also when we can offer an overall rating.  Most of these unrated companies are smaller private enterprises—similar to those that Crowdnetic tracks.  We found 17 instances where CSRHub had partial data on a crowdfunded company.

crowdfunded companies

Most of CSRHub’s smaller company information is coming from data gathered via several types of expert sources (supply chain tracking, government regulators and non-governmental organizations) and crowd sources (consumer ratings, employee ratings and sentiment tracking systems).  We have data on crowdfunded companies from a number of sources in each of these categories.

Both the number and size of crowdfunded companies are growing.  At the same time, the number of companies with publicly-available social performance data and information is also growing.  CSRHub’s efforts to collect information on smaller companies should soon allow us to rate 90,000 or even 900,000 companies instead of 9,000.  Over the next few years, the overlap between our data sets should grow rapidly.

Crowdnetic’s statistics indicate that a small percentage of crowdfunded companies currently offer products or services in areas that are viewed as sustainable, such as organic food, energy-saving devices, social services or community impact programs.  CSRHub statistics do not include enough crowdfunded companies yet to tell if they have measurably better internal social behavior than non-crowdfunded companies.  We continue to believe that a connection is likely and will reexamine this question as soon as we have a broader overlap between the CrowdWatch and CSRHub data sets.

Bahar GidwaniBahar 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.

About CSRHub:

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 9,100+ companies from 135 industries in 104 countries. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.

CSRHub rates 12 indicators of employee, environment, community and governance performance and flags many special issues. We offer subscribers immediate access to millions of detailed data points from our 339 data sources. Our data comes from nine ESG (environment, social, governance) analysts, well-known indexes, publications, “best of” or “worst of” lists, NGOs, crowd sources and government agencies. By aggregating and normalizing the information from these sources with its patent-pending system, CSRHub has created a broad, consistent rating system and a searchable database that links each rating point back to its source.

CSRHub is a B Corporation, an Organizational Stakeholder (OS) with the Global Reporting Initiative (GRI), a silver partner with Carbon Disclosure Project (CDP), a founding member of The Alliance of Trustworthy Business Experts (ATBE), an advisory board member of Sustainability Accounting Standards Board (SASB) and supports both the Global Initiative for Sustainability Ratings (GISR) and the International Integrated Reporting Committee (IIRC).

About Crowdnetic:

Crowdnetic is a leading provider of technology and market data solutions to the global crowdfinance marketplace. They operate the industry’s premier centralized hub for real-time market data aggregated from platforms across the globe.

Founded in 2011 by experienced financial technology and data industry experts, Crowdnetic is committed to creating a productive and sustainable marketplace for the global crowdfinance industry. Bringing over 15 years of experience in building complex, data-intensive customized solutions, the leadership team has been instrumental in revolutionizing the industry through developing market data and analytics solutions.

Crowdnetic owns and operates CrowdneticWire.com, Lendvious.com, CrowdWatch.co and is a co-producer of the premier peer-lending conference, LendIt, the largest and most recognized conference in the P2P and online lending industry.


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EcoPlum Salutes Green Moms: Composting Pilot

[fa icon="calendar'] May 23, 2013 9:00:28 AM / by CSRHub Blogging

CSRHub is pleased to join our friends at EcoPlum in honoring Green Moms.

As previously seen at EcoPlum.

By guest blogger, Silvia Milanova

 If someone ever told you that a handful of people can’t make a difference, he or she hasn’t met the five hardworking moms who started the Food and Tray Waste Composting Pilot in District 3 schools on the Upper West Side of New York City. What began with the moms’ concern for making their own children’s schools more environmentally sustainable has evolved into a citywide effort to reduce waste and educate future generations.

The Pilot team, comprised of green moms from four different schools, Lisa Maller, Jennifer Prescott, Emily Fano,Laura Sametz, Pamela French (pictured left), were each a leader of the Green Teams in their children’s schools. They were able to convince their parent-teacher associations (PTAs) to raise funds to replace the cafeterias’ standard foam trays with compostable sugar cane trays. Styrofoam, or polystyrene foam, a petroleum-based plastic, is non-biodegradable, non-sustainable and non-recyclable; it’s also a big air pollutant and a possible human carcinogen. When used with food, especially with hot or acidic items, polystyrene can leach into the food and affect the reproductive system. Side effects include headaches and fatigue.
But despite the moms’ efforts, the compostable trays were still being thrown in the garbage. That’s when they decided to find a way to compost the trays.

They explored their options: to ask the city to collect the organic waste (food and trays); to get a grant to pay for private collection; or to form a partnership with the local Whole Foods market and piggyback on their organics collection. While they brainstormed, they were fortunate to meet Laura Rosenshine, a composting entrepreneur. Laura was advising IESI, a private waste solutions company, on how to expand their organics business. Together with Laura’s help, the moms negotiated to have the trays collected and composted for four months free. As long as they were going to collect and compost the trays, IESI agreed to pick up all of the schools’ discarded food waste too. This included fruits, vegetables, meat, dairy, bones, pasta, sandwiches, and any other type of food the kids and the kitchen staff threw out.

The composting pilot program began in February 2012 in eight schools (4 buildings) and ran through the end of the school year. For the first few weeks of the pilot, the moms spent time in their respective school cafeterias guiding the students in the new program. They took it upon themselves to teach the students which foods they could compost by making easy-to-read signs. The kids enthusiastically embraced the opportunity. It was also a great way to re-educate them about the existing blue bucket metal/glass/plastics recycling program.

For one week each month during the pilot, the moms, along with student helpers, weighed the garbage, compost and recyclables, to gather data and see if the program was successful. And the waste reduction was significant. Together the four pilot buildings reduced their cafeteria garbage from 54 bags a day to just 8 bags; an 85 percent reduction by volume. An average of more than 400 pounds of food waste and 1,900 foam trays were diverted from the waste stream daily. The program has saved both garbage from going to landfills, and money for the city. The moms estimate that annually, just the eight schools alone would save $3,000 on garbage bags and more than $3,000 in garbage disposal fees. Multiply that by 1,200 public school buildings citywide, and the potential savings are major.

"When we started the pilot, we expected it would ultimately be successful by the end of the fourth month, but we never dreamed that it would become so obvious so quickly how significant the impact would be,” said green mom Lisa Maller.

In addition to the schools reducing cafeteria waste by 85 percent, one of the biggest payoffs for the moms has been the kids’ enthusiasm for the composting program and their willingness to help the environment.

On the second day of the program, a third grade boy brought in vegetable scraps from home to add to the collection bins. The student came up to one of the moms and asked if he could throw the scraps into the new food waste bin. Knowing they could be composted, he simply felt bad throwing them away in the garbage at home. Now, that is making an impact.

The green moms’ own children have also taken their knowledge home.

"Being so involved in educating the kids in the school cafeterias, we all are now so much more aware of the food waste we produce in our own kitchens, “said Maller. “ We can't ever throw out even the leafy top to a strawberry anymore without thinking—this can be turned into compost. If we forget, for sure our kids remind us."

And the impact of the green moms’ efforts doesn’t stop there. In September 2012, after recognizing the success of the District 3 pilot, the NYC Department of Sanitation agreed to take over collection of the trays and food waste in these four buildings. It expanded the collection to 21 buildings on the Upper West Side (Manhattan), and 20 in Brooklyn.

Recently, in his last State of the City address, Mayor Bloomberg announced that the school food waste composting program will continue to expand next school year, ultimately being citywide. His goal is to increase the city’s 15 percent* recycling rate, eliminate food waste, and save the city some money. New York City spends around $86* to send one ton of trash to out-of-state landfills, or more than $300 million annually to ship 12,000* tons of trash each day. And the costs go up almost every year.

Driven by an urge to make a difference in their children’s schools, the original five green moms created the pilot program unaware of how successful it would be. Or if it would work at all. But they never gave up on making a change, and their hard work has paid off.

"We are thrilled that City officials recognized the success of our pilot and the potential to replicate it citywide,” said Maller. “We are proud to have been the model for the future citywide program."

For more information on the pilot composting program, visit www.greenschoolsny.com.

*These numbers are estimates.

This article is part of a profile series EcoPlum is running for the entire month of May called Ecoplum Salutes Green Moms.  Please submit your own story about a green mom who inspires you!  Photos, Videos and short blurbs can be posted on our EcoClipz page.  For longer stories, please send them to submissions@ecoplum.com. Looking forward to hearing from you!


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