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

By Bahar Gidwani

Part 2 of a 2-part series

The first part of this post described the reasons iCompli and CSRHub decided to create the new ESG Metrics Brief report.  We thought it might be helpful to provide a concrete example of the kinds of information—and opportunities for action—that these reports create.

At number 8 on the 2014 Fortune list, Ford is a well-studied, multinational with a long history of interest in sustainability.  Ford has reported to the GRI since 2007, to CDP since 2006, and has won many awards and recognitions.  CSRHub has 139 different sources of information on Ford and 22,501 different ratings points.  Ford’s overall CSRHub rating of 60 puts it at the 71% percentile among the 118 motor vehicle manufacturers that CSRHub tracks.

The overview

The first chart in Ford’s ESG Metrics Brief provides a visual representation of this relative performance:

While overall performance is well above average, it is clear that of the four major categories of sustainability performance that CSRHub tracks, Ford is strongest in “employees” and weakest in “governance.”

The ESG Metrics Brief has access to CSRHub’s eight years of ratings history and a similar range of history from Bloomberg.  This chart shows how Ford’s CSRHub rating has changed over this time period.

The ESG Metrics Brief next brings in other ESG sources from Bloomberg’s system.  Here is the relative performance for Ford as seen by ISS and by CDP.

Drilling down

After a user has reviewed the overall situation for a company, he or she can “drill down” into each of the four main categories that CSRHub covers.  For instance, here is the change over time for Ford’s governance rating, compared to those of its peers.

The above chart uses CSRHub ratings.  Other sources and metrics drawn from Bloomberg help further explain Ford’s loss of competitive advantage compared to its peers in this area.  One factor may be a reduction in the amount and quality of Ford’s disclosures.

A second factor could be the perception that Ford’s CEO compensation is out of line with that of its peers.

Bloomberg tracks a wide array of metrics and policies that give users of the ESG Metrics Brief even more insight into this part of Ford’s sustainability behavior.

The bottom line

We believe that an ESG Metrics Brief will be a good starting point for those who want to understand one company’s sustainability performance.

• The report is easy to obtain.  It takes three business days or less to generate each report.
• The report is inexpensive.  Each report costs only $495—much less than the time and energy required for most researchers to generate something comparable, and far less than the cost to license the datasets.
• The report is broad and comprehensive.  You get data on more than 120 indicators across all areas of sustainability.  Each report normally compares against between 10 and 30 peers.
• The report helps inform the stakeholders in a sustainability strategy process.  You can share the report internally and help prove your case for new programs, further investments, and shifts in strategy.

We have more data than we can ever fit into any single report!  We look forward to getting feedback from our users about the ESG Metrics Brief and continuing to fine-tune it to meet their needs.

See more now, including a full sample, at  http://www.csrhub.com/content/icompli-csrhub-esg-metrics-brief/.

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 15,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 400 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.

By Bahar Gidwani

Part 1 of a 2-part series

Sustainability professionals spend hundreds of thousands of dollars and months of time developing and managing their sustainability programs.  Most dread the almost inevitable question from their manager or their manager’s manager—”How are we performing relative to our peers?  Where are we doing well and where do we need to improve?”  The iCompli CSRHub ESG Metrics Brief is designed to make it easy to answer these questions in a fact-based and authoritative way.

Why has it been hard to get answers?

Sustainability managers know their own programs—and understand the data they generate and report.  However, hundreds of outside sources each form their own opinions on a company’s sustainability performance.  They use different criteria and come to different conclusions—and both their analysis methods and their viewpoints are not always readily available.

For instance, is Wal-Mart more socially responsible than Target?  The barriers to answering this question include:

• Too much information – CSRHub contains 131 sources of sustainability information for Wal-Mart and 118 sources for Target.
• Gaps in the data - 85 of the above data sources rate both company, but many sources are unique to only one of the two companies.
• Broad range of comparable companies – CSRHub tracks 274 retail companies worldwide.  To fairly compare Wal-Mart and Target, one needs to put them into context against all of these other competitors.

Our new solution required combining two components

CSRHub’s database system maps, merges, and normalizes sustainability ratings from 425 sources.  It includes information from Wall Street firms such as Thomson, MSCI, EIRIS, and Trucost; data from non-governmental organizations such as CDP, GRI, Transparency.org and the UN Global Compact, and information from government databases, publications, and various types of certification and crowd sources.  By combining almost 80 million pieces of data, CSRHub can generate objective scores of the perceived sustainability performance for more than 15,000 companies in 132 countries.

The end result shows that Target is generally more sustainable than Wal-Mart—although Wal-Mart is seen has having better performance on environmental issues.

This perception perspective helps identify where a particular company is weak or strong.  But, most corporate managers need to also see comparable sets of facts and figures, before they can invest in new projects or change their strategy.  The new ESG Metrics Brief combines CSRHub’s insights with the hard facts contained in Bloomberg’s well-respected ESG (Environment Social Governance) Database.

Bloomberg tracks data on more than 30,000 publicly-traded companies, from around the world.  Its data set includes information not only hundreds of data items its own staff gathers from public sources and company filings but also data from other major ESG sources such as Sustainalytics and ISS.  The result is a set of comprehensive reports on 6,969 companies in 77 countries.

Look for part 2 of this series to see a concrete example of the kinds of information—and opportunities for action—that the new ESG Metrics Brief's create.

To see more now, including a full sample, go to www.csrhub.com/content/icompli-csrhub-esg-metrics-brief/.

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 15,000 companies from 135 industries in 132 countries. By aggregating and normalizing the information from 400 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.

As previously seen in the WiznessBlog.

Wizness and CSRHub have joined forces to simplify sustainability benchmarking against competitors. CSRHub co-founder Cynthia Figge answered questions about her company and how the new benchmarking product will benefit users.

Q: What is CSRHub’s goal and purpose?

A:  CSRHub aggregates information about corporate social performance into one place so companies and individuals can track sustainability worldwide. It’s the first easy way to discover how companies perform and compare on sustainability and CSR issues.

Q: What was the genesis of CSRHub?

A: My partner Bahar Gidwani and I founded CSRHub in 2007 to solve the CSR data problem. Back then, there were many often conflicting data sources – sound familiar? We were the first company to recognize that the growing body of CSR information would soon require a Big Data solution. We figured out how to combine the data into a single rating that incorporates an ever-growing number of sources. We started with the premier environment, social, governance, the ESG firms, also known as socially responsible investment or SRI — we aggregate nine now — and added data from 300 sources so far and counting, NGOs plus government agencies, social networking groups, indexes and publishers. Our proprietary tools combine more than 60 million pieces of data on sustainability and CSR performance into a consistent set of ratings.

Q: Who are CSRHub major ESG/SRI data sources?

A: Our sources include premier ESG organizations ASSET4 (Thomson Reuters), CDP (Carbon Disclosure Project), EIRIS, GovernanceMetrics International, IW Financial, MSCI (ESG Intangible Value Assessment and ESG Impact Monitor), RepRisk, Trucost and Vigeo.

Q: What is the CSRHub schema?

A: Our data schema lays it out in detail, but generally our ratings are based on four categories: Environment, Employees, Community, and Governance. Each category has three subcategories. For example, within the Environment category there are Environmental Policy and Reporting, Energy and Climate Change, Resource Management. For Employees, Diversity and Labor Rights, Compensation and Benefits, Training Health and Safety, and so on.

Q: How are people using CSRHub ratings?

A: The market uses us for six applications:

First, for benchmarking. Our ratings and analysis tool covers 9,296 companies across 135 industries to track competitors over time.

A lot of our users analyze performance by stakeholder for CSR and Sustainability Reports. We offer a, single powerful interface to over 348 sources of information.

Professors and students conduct academic research and projects. Our tool analyzes six years of data and over 60 million data points, and is currently used in hundreds of universities globally.

Sustainability is increasingly important to company brand. Companies use us to build authentic brand values and increase customer loyalty.

CSRHub is used to build a world-class sustainable supply chain. Our APIs can map into a company’s supply chain network across 106 countries.

Finally, we find that sustainability performance is increasingly a factor in economic decisions. People search for places to work, brands to buy, and partners to support based on their values.

Q: How does CSRHub enable comparisons between companies? Can we really integrate apples and oranges?

A: The CSRHub schema maps data elements from all these data sources into the twelve subcategories, then aggregates and normalizes the data for comparability. The schema isn’t unique, but the aggregation and normalizing absolutely is. Bahar and I together had the perfect skillset to attack this challenge. We met at Harvard Business School. I went on to cofound EKOS International, one of the first consultancies to integrate sustainability and corporate strategy, way back in 1996 if you can believe it. Bahar has a CFA and built and ran Web-based and technology-based businesses on Wall Street with Kidder, Peabody and for McKinsey.

Q: Why is knowing my CSRHub rating and ranking in my industry important?

A: Benchmarking is key to competing successfully and creating value. Knowing your CSRHub rating and ranking enables your company to gain an independent perspective about how well you perform compared to other companies, identify specific areas for improvement, and monitor company CSR performance over time. Integrating CSRHub benchmarking across divisions enables a company to prioritize improvements and provide greater transparency of progress.

Q: How will CSRHub and Wizness work together?

A: CSRHub and Wizness are collaborating to create a Benchmark Template Report available on the Wizness Publisher website. Our reports will be streamlined, digital, social and mobile solutions for key stakeholders interested in sustainability data and progress.

Q: When will this benchmarking tool be available?

A: An early preview of the report is available now in PDF form at the following address: https://publisher.wizness.com/csrhub

“Photo courtesy of Wizness.”

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.

The following is part 2 of a 3-part series on “Big Data.”

By Bahar Gidwani

We have previously defined “Big Data” and shown how we feel a Big Data system built by CSRHub could help address some problems that exist in collecting corporate social responsibility (CSR) and sustainability data on companies.  We have also further described the problems with the currently dominant method of gathering this data—an analyst-based method.

CSRHub uses input from investor-driven sources (known as “ESG” for Environment, Social, and Governance or “SRI” for Socially Responsible Investment), non-governmental organizations, government organizations, and “crowd sources” to construct a 360 degree view of a company’s sustainability performance.

The illustration below shows the steps in our process.

The steps are:

•  Convert measurement from each data source into a 0 (low) to 100 (high) scales.  This  requires understanding how each source evaluates company performance.
•  We next connect each rating element with one or more of our twelve subcategory  ratings.  (Some elements may also map partially or exclusively to special issues such as  animal testing, fracking, or nuclear power.)
•  We compare each source’s ratings with those for all other sources.  Each company we  study gives us more opportunities to compare one source’s ratings with another.  The  total number of comparisons possible is very large and growing, exponentially.  We  use the results of our comparison to adjust the distribution of scores for each rating  source so that they fall into a “beta” distribution that has a central peak around 50.
•  Some sources match up well with all of our other data.  Some sources don’t line up.  We add weight to those who match well but continue to “count” those who don’t.

We then repeat steps A to D as many times until we have found a “best fit” for the available data.  Each time we add a new source, we go through an initial mapping, normalization, and weighting process.

An Example

It may help explain our data analysis process by using a specific example.  Hewlett Packard is a heavily tracked company.  We have 154 sources of data for this company that together provide 17,571 individual data elements.  Only 62 of these data sources provided data for our July 1, 2014 rating—the rest of the data sources provided data for previous periods (our data set goes back to 2008).  The 62 current data sources provided 575 different types of rating elements and a total of 610 different ratings values that do not affect/apply to special issues.

After their conversion to our 0 to 100 scale, we map the rating elements into our twelve subcategories.  We now have 1,403 ratings factors.  We selected our subcategories to allow an even spread of data across them. You can see that we have a reasonably even spread for Hewlett Packard:

Before we can present a rating, we need to check first that we have enough sources and enough “weight” from the sources we have, to generate a good score.  In general, we require at least two sources that have good strength or three or four weaker ones, before we offer a rating.  As you can see, we have plenty of sources to rate a big company such as HP.

Even after normalization, the curve of ratings for any one subcategory may have a lot of irregularities.  However, we have enough data to provide a good estimate of the midpoint of the available data, for those ratings we report.  Below you can see that some sources have a high opinion of HP’s board while others have a less favorable view.  The result is a blended score that averages to less than the more uniform Leadership Ethics rating.

The overall effect of our process is to smooth out the ratings input and make them more consistent.  As you can see in the illustration below, the final ratings distribution is organized well around a central peak.  The average overall rating of 64 is below the peak, which is around 80.  The original average rating was 61.

By making a few assumptions about how the errors in data are distributed, one can assess the accuracy of ratings.  In a previous post, we showed that CSRHub’s overall rating accurately represents the values that underlie it to within 1.8 points at a 95% confidence interval.

In our next post, we will discuss the benefits and drawback of using this complex and data intensive approach to measuring company CSR performance.

See part 1, Using “Big Data” to Rate Corporate Social Responsibility: One Company’s Approach.

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

After an eighteen month break, Newsweek has re-launched its Green Rankings.  On June 5, it issued new ratings for the 809 companies that are on either the US 500 or Global 500 lists. The Green Rankings list is likely to continue to draw attention to corporate social responsibility performance and we are glad to have it back. We hope that Newsweek will continue to publish and promote work in this area.

Over the past few years, Newsweek’s Green Rankings had become one of the best known corporate CSR rating metrics partly because of its simplicity (everyone likes a top to bottom ranking) and because Newsweek’s large circulation put it in front of millions of ordinary consumers.

For several reasons we explain below, the Newsweek Rankings may not be a good benchmarking or best practices discovery tool for the sustainability professional.  In fact, as in past years, the new rankings are likely to continue to generate anxiety and confusion, as we all try to puzzle out and decode the signals they offer on how the world’s largest companies are performing. 

Newsweek’s methodology for calculating the ratings has changed several times.  This year’s revamp is pretty radical.  The initial data set for the 2014 list was supplied by Bloomberg and RepRisk.  Bloomberg captures a wide range of environment, social, and governance (ESG) from company financial disclosures, sustainability reports, and other public documents.  Bloomberg also ingests data from CDP—formerly the Carbon Disclosure Project—on carbon and water-related issues.  RepRisk has one of the world’s largest databases of corporate risk information.  Newsweek arranged for Corporate Knights, a well-respected Canadian research firm, to review these data sets.  It also sent a survey to 775 of the 809 companies. It is interesting that they could only find contact info for 95% of these very large companies—and that only 363 of them or 45% of the sample set responded.  Corporate Knights may also have consulted some of the other data sources it has available, such as MSCI’s Intangible Value Assessment (IVA) and Thomson Reuters Asset4 databases.

The 2012 Newsweek list included data from Sustainalytics—a full service ESG ratings firm—and Trucost—one of the leading suppliers of carbon, water, and other environmental information.  The 2012 list dropped an interesting and deep source of CSR data that was in the 2011 list—expert opinions on CSR performance that had been gathered by Corporate Register. The 2012 list had a strong emphasis on environmental performance, driven perhaps by a desire to make the list a “Green” ranking.  For the 2014 list, Corporate Knights decided to explicitly include corporate risk, board involvement, management compensation, and credit for outside assurance to its criteria.

We have ingested most of the sources from both years’ methodologies into our database, including RepRisk, Trucost, Asset4, CDP, and MCSI’s IVA.  As do many of the 300+ sources we studied, Corporate Knights studied the publicly-disclosed information that Bloomberg collects.  So, we would expect to see a fairly high correlation between our ratings (which measure the overall perceived sustainability performance of companies) and Newsweek’s scores.  The chart below shows that we had a 35% correlation between our scores and the Green Ranking scores, for the 2014 US data.

Interestingly, this year’s ratings for the US 500 seem somewhat less correlated with our overall ratings than they were in the past.

We believe these factors may have driven this shift:

• The old index gave more weight to environmental issues than the new one does.  Environment is probably the most/best studied area within corporate social responsibility.  As a result, there is less variation among expert opinions within the environmental area than with other parts of CSR such as employee, community, or governance performance.  There was a 55% correlation between the 2012 Newsweek rating (based on an average of their four reported subcategories) and our Environment category rating (which includes climate change, transparency/reporting, and resource management issues).  There was only a 25% correlation between Newsweek’s ratings and our Environment category in 2014.

• The new ratings methodology includes a penalty for “disclosure.” Rather than trying to fill in missing items, Corporate Knights decided in 2014 to penalize companies that fail to disclose a required item.  CSRHub has so much data that it is generally able to automatically fill data gaps. This methodological difference may have introduced a new source of variation between our ratings and reduced the correlation between them.

• The CSRHub database has grown substantially since 2012.  We currently have 53 million data points and cover 9,000 companies in 102 countries.  In 2012, we had only 13 million data points and covered only 6,500 companies in 83 countries.  As we add more information to our system, it is natural that our correlation with any individual and more limited data source, will drop.

As with any rating system, we could find fault with some of the individual results within the Newsweek Green Rankings.  For instance, Campbell Soup has a 67 overall rating in CSRHub.  This puts it third in the list of 216 food companies that we track.  Campbell supports BCCCC, CECP, and the Sustainable Packaging Coalition.  It was on Corporate Knight’s own Global 100 list in both 2013 and 2014.  But, Campbell gets only a 39.6% score in the Green Rankings system.

Inconsistencies between rating systems reinforce the need for corporate sustainability managers to focus on broad measures of performance that are stable across industries, geographies and time. Again, we applaud Newsweek for raising awareness of sustainability across a wide audience. Professionals in the field should feel free to use CSRHub data dating back to 2008 to get an independent perspective on the hundreds of sustainability metrics that are produced each year.

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 8,900 companies from 135 industries in 102 countries. By aggregating and normalizing the information from 325+ 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.