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

By Bahar Gidwani

Sustainable Brands kindly invited me to speak at their Boston New Metrics ’14 conference.  They asked me to lead a panel called “Tapping the Crowd for Insights and Solutions: Crowdsourcing, Crowdfunding, and the Personal Data Economy.”  I got to work with three experts: Gwen Nguyen, Cause Director, Indiegogo; Reki Hattori, CTO, Datacoup, and Dr. Thomas Malone from MIT’s Climate CoLab.  It was fun to work with them and I think both I and the audience learned something from our presentations and discussion.

We at CSRHub had recently posted research on the relationship between corporate social responsibility (CSR) and crowdfunding.  However, the SB folks wanted me to talk about how crowd data could influence sustainability metrics.  This is a topic we care about deeply—we have already integrated more than a quarter million pieces of crowd data into our database.

I started by pointing out that we already have many good sources of sustainability information.  In fact, there are almost too many for anyone to track via normal means.  CSRHub currently lists >330 sources in our system, and that number grows by three to ten sources per month.

CSRHub gathers all this data into one place, harmonizes it, and makes it useful to sustainability practitioners.  We’ve recently grown our coverage to include more than 9,000 companies in 106 countries.

Ten years ago, only a few large (or very socially-minded) companies issued corporate responsibility reports or reported their performance to groups such as GRI or CDP.  These days, thousands of companies have employee-driven community service programs, recycling and carbon reduction targets, and sustainability areas on their web sites.  As you can see below, after twenty years of progress, more than 90% of the Global 250 issues CSR reports.

KPMG Survey of CSR Reporting 2013 Shows That Most Big Companies Have CSR Reports

Hundreds of thousands of middle-sized and smaller companies—many of whom are privately held or not-for-profit organizations—are starting to report their social performance to their customers (via sustainability supply chain systems) or to local or national government organizations.  In contrast to the situation with bigger companies, most of the new data that smaller companies generate is never made public.  This has left a big gap that we believe crowd data can help fill.

For instance, we have already integrated sources that provide data on as many as two million companies.  (In fact, AMEE told me recently they may be able soon to track more than 10 million firms.)

Crowd sources monetize in various ways.  For instance, Ekobai charges companies to list on its site, WeGreen captures a small part of the consumer purchases it helps direct, and Glassdoor sells job ads.  To generate the traffic and attention they need, crowd sources typically cover both larger, well-studied companies, and smaller ones.

We already use the data on one company to standardize and normalize the data on other companies.  We can therefore use our non-crowd expert sources to understand and adjust the ratings we get from crowd sources.  As a result, we should soon be able to track at least 50,000 companies and hopefully soon have ratings on hundreds of thousands of companies, both public and private, from around the world.

Sustainability ratings and metrics are vital for making a number of business decisions.  By broadening the number of companies that can be rated, we should be able to enable faster and more accurate supply chain management, improve private investment decision-making, and encourage consumers to shift their purchases towards more sustainable products.  Most people seem to feel that consumer rating and credit management systems have improved our ability to make business decisions.  Broad-based sustainability ratings, based at least partly on crowd data sources, should generate similar long-term value for everyone.

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

Publicly-traded companies are a big part of world economic activity.  However, most of the world’s goods, services, and jobs are generated by privately held companies (including large, medium-sized, and smaller companies), not-for-profit enterprises (including foundations, schools, and religious institutions), and government organizations (airports, ports, municipal governments, agencies, etc.).  CSRHub’s mission is to provide transparent information on the social performance of all types of enterprises.  This past month, we have begun to offer ratings on a number of private and government organizations.

Why couldn’t we do this before?  The original pressure for revealing social performance data came from investors who wanted to put their money only into companies that had a positive social impact.  These investors supported the work of financial analyst groups, encouraged the rise of reporting systems such as the Global Reporting Initiative, and helped fund not for profit groups like the Carbon Disclosure Project (which has recently re-christened itself “CDP”).  These systems tended to focus on the largest and most widely-held companies—the ones that large investors most wanted to know about.

Competitive pressures—and investor interest in investing in smaller growth companies and public companies in less-developed economies—has caused the coverage universe of financially driven research to expand.  Some of our data partners now claim to track the social performance of 30,000 publicly-traded companies.  At the same time, a growing number of non-public organizations have begun reporting data on their sustainability performance.  For example, we estimate that about 1,800 non-public organizations filed Global Reporting Initiative (GRI) reports in 2012, as did at least a thousand of the 5,000 reports offered via CDP.

Two additional sources of data have emerged on non-public companies over the past few years.  One is crowd source/user contributed data feeds.   Employee opinions about 110,000 companies come from Glassdoor, sustainability-oriented user ratings on 5,000 companies come from GoodGuide/ULE and more than 30,000 products and companies come from WeGreen, data on the brand value of 5,000+ organizations derive from Brand Finance, and 27 measures of risk on 32,800 companies, 7,000 projects, 5,300 NGOs and 4,500 governmental bodies come via RepRisk.  Some of these sources receive fees from investors, some are supported by donors, and some generate revenue from selling services such as job ads or consulting.

The second new source arises from the effort by major companies to improve the sustainability of their supply chains.  Engagement from a company’s supply chain is vital to meet announced sustainability goals (e.g., a 20% reduction in carbon use) or respond to pressure from social groups on water user, treatment of indigenous peoples, child labor, etc.  Using software systems from firms such as Source 44, OneReport, Credit360, Enablon, Eco-Vadis, CSRware, and others, large companies gather huge databases of sustainability data on their own operations and on their suppliers—many of whom are not publicly traded.  Industry organizations (e.g., EICC, The Sustainability Consortium, SEDEX, and Sustainable Packaging Coalition) help by providing standard questionnaires and by allowing their members to share data and supply chain audits.

When we add data from some of these new sources to the information we obtain from other more conventional inputs, we can rate almost 200 non-public companies and organizations.  The initial list includes companies such as Deloitte, PricewaterhouseCoopers, Levi Strauss, S. C. Johnson, and TIAA CREF.  We also have partial ratings on McKinsey & Company, The US Postal Service, and Finnair.  As a group, our non-public companies have a respectable average rating (using our average user profile) of 55.5—seven points above the average for all companies of 48.5.

This good performance makes sense—the first non-public organizations to report are likely to be those who have good social performance and who want others to know about it.  We expect the next wave of smaller organizations and government groups to bring this average down—just as smaller public company scores lag behind those of bigger public companies.  We also expect the number of sources on non-public organizations to converge towards the average for publicly-traded organization of about eight sources.

Would you like to help us further our cause by bringing you more non-public organization information?  If you would, please:

• Reward non-public organizations who report—even if their scores still are not as good as we might like—by giving them your business and your attention.

• Share ratings from non-public organizations with other non-public organizations.  We need to break down the organizational barrier that says “we are private so we don’t talk about these things.”

• Encourage anyone who collects information to allow the groups they collect their data from to control their own data and to have the option of sharing it.  It is unfair for big companies to require their supply chain components to pay to gather and report data, but to not get further value from their work.

Our long term goal is to provide a CSRHub rating for any type of organization—public, private, or governmental—of any size, in any location.  To reach our goal, we need your help to encourage all organizations to report their social performance and to make available more of the data that has already been collected in various sustainability tracking systems.

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.

CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,000+ companies from 135 industries in 91 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.