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

This is the final post in a 3-part series on expanding sustainability data. 

By Bahar Gidwani

One often-cited approach to broadening the availability of corporate social responsibility (CSR) information is via “reporting groups.”  Three examples of these organizations are the Global Reporting Initiative (GRI), the UN Global Compact (UNGC), and the Corporate Register.  (Note, CSRHUB is an Organizational Stakeholder of the GRI, works closely with the UNGC, and refers its users to the Corporate Library for copies of company CSR reports.)  GRI helps companies organize their social reporting.  UNGC encourages conformance to a small set of social principles. Corporate Register stores and organizes corporate CSR reports. The work of all three groups encourages both public and private organizations to publicly disclose various aspects of their social and sustainability performance.

Even after years of patient effort, these three organizations have only induced about 11,000 companies to reveal information.  Only about 6,000 companies participate in two of the three programs and only about 1,000 are in all three.  Yet, without a lot of data (at least all of the information that all three of these bodies might receive), it is hard to generate a rating of a company’s performance.

Further, when one examines the 1,000 organizations that are in all three programs, many have already been rated by the SRI community.  We estimate that only about 600 ratings could be added using the data these three groups have collected.  As a result, we won’t find the answer to our rating needs just through the efforts of the reporting community.

Fortunately, some new ratings sources are emerging that show promise of rising from the grass roots and filling in the lawn.  They include companies we’ve spoken about before such as:

• GoodGuide:  Using independent test methodologies and direct samples of consumer opinion, GoodGuide has been able to estimate the social impact of thousands of products.  Many of these products come from private or otherwise un-rated companies.  GoodGuide has invested the necessary time and energy to dig out data on these companies and produce its own ratings of them.  It now covers 100,000 products from more than a thousand companies.
• Glassdoor:  When employees want to look for a new opportunity, they turn to the company ratings on Glassdoor. These ratings have been created by aggregating employee opinions about companies. Like TripAdvisor for travel or Yelp for services offerings, Glassdoor has used the power of the crowd to discover how employees feel about their employer.  It now covers 110,000 companies.
• WikiPositive: Volunteer contributors have built profiles on the social performance of more than 900 smaller companies. Using wiki-style shared editing, each contributor’s view is ingested and added to a page. Editors review the data and ask for help refining and improving it.

Doing external research—either directly via a paid staff, via crowd source collection of comments, or using a group of wiki contributors—is time consuming and expensive.  The data gathered is useful for the particular need of the researcher, but may not cover the broad range of issues that are included in sustainability.

Other groups are seeking to address these issues by providing new self-driven ratings opportunities. Some of these are verified by a third party—some are not. Most allow contributed data to be kept private, but reward companies and organizations for agreeing to make some or all of it public.  Three examples are:

• B Corporation: More than 400 companies have self-administered the B Corporation certification process (including CSRHUB!). B-Corporations commit to being socially responsible on a variety of dimensions. Recently, B Corporation has integrated its system with that of the Global Impact Investing Rating System (GIIRS).  This system is intended to help both investors and companies better understand the impact of their operations and investments.
• Underwriters Laboratories Environment (ULE): With its many years of experience certifying product safety and quality, Underwriters Laboratories (UL) is a natural candidate to provide help with sustainability ratings.  The Environment branch of UL has launched several product certification efforts. ULE is developing a company certification process that will measure and verify many aspects of environmental and social performance.
• The Sustainability Consortium (TSC): TSC was launched by WalMart, and is now jointly administered by Arizona State University and the University of Arkansas. Its 75 members are trying to expose the social performance of the companies in various supply chains, and more accurately quantify and communicate the sustainability of products. For example, the Consortium works with the Carbon Disclosure Project (CDP) and uses the CDP’s methodology for measuring carbon. Those who participate in the Consortium disclose the carbon content of their products privately to CDP.

We hope these new sources can eventually fill in the data we need to complete our ratings matrix.  It appears to us that the most progress at first will be in the US—we know of few bottoms-up approaches being pioneered in Europe or Asia. However, all of these efforts are closely tied to Web-based technology and therefore all should be easily moved into other economic areas.

It is hard to estimate the time needed to complete this process. Ten years?  Progress may move quickly if and when countries make environmental and social reporting mandatory. There may not be an initial economic benefit for participating in rating systems, but companies and organizations who spend time and money completing the rating process will likely uncover new business opportunities and insights into their brands and markets.

At some point, a tilt will occur and it will become costly not to participate. From that point on, we believe the quality and depth of ratings data will grow rapidly. At least the frameworks we have built so far will become the basis for this future system.  Therefore, we who are pushing this area now should hope to benefit from the investments we have made and will continue to make.

By Bahar Gidwani

As promised, we’ve talked in previous posts about the wide array of information that is available on corporate social responsibility (CSR) and sustainability subjects.  The big financial research firms, standards organizations, not-for-profits, and government sources each offer their own top-down, carefully organized version of how companies are performing socially.  What about bottom-up measures?  Are there “crowd-sourced ratings” for CSR?  If you are like me and you use the travel reviews on TripAdvisor or the product reviews on Amazon, you know how valuable this type of data can be.

We’ve been able to integrate three crowd sources so far, into our giant database of ratings information.  One of our earliest partners was a company called Jigsaw.  (Jigsaw was bought last year by Salesforce.com for $142 million!)  Its members volunteer data on the companies and people they work with.  In return, they get back information on other companies and people they are interested in.  As the data flows in, Jigsaw uses special programs to cross-check names, addresses, and descriptions.  The result is an ever-growing address book of information on thousands of companies.  This address book helped us figure out which companies to track and gave us a head start on their industries and locations.

Glassdoor is another example—and a good one—of how crowd sourcing can help with CSR analysis.  An employee who joins the Glassdoor site can upload her or his comments on the company she or he is working for.  The employee can comment on the work environment, pay scale, and on the performance of the management team (including the company’s CEO).  After a while, Glassdoor builds up enough data on a company to allow it to publish a rating of how it treats its employees—and scores for things like the performance of the company’s CEO.  Glassdoor members get to see this data, comment further on it, and then use it in their job search and career planning.  We’ve started integrating this bottom-up score into the Labor section of our data—and hope to soon have comments about how the inside view via Glassdoor compares to how company labor policies are seen by external sources.

Wikis represent a different, more collaborative approach, to crowd sourced data.  The best-known example of a Wiki is Wikipedia—one of the most-visited sites on the Web and everyone’s favorite modern-day encyclopedia.  We’ve now partnered with a Wiki called WikiPositive, that was built by the folks at 3 Sisters Sustainable Investments.  (BTW, 3 Sisters recently decided to also support and invest in our CSRHUB enterprise.)  Over the past two years, WikiPositive has recruited a large and growing group of contributors who are interested in helping investors (and others) discover the positive value that is being created by smaller publicly-traded companies.  This group felt too much emphasis was being put on the CSR activities of the top 1,000 or 1,500 public companies, when many of the most interesting new approaches to sustainable business management were being developed by smaller companies.  Their site represents a great example of how crowd input can be used to change the focus of a discussion and bring new information into a discussion.

A number of other interesting models and concepts are being explored.  For instance, MoxyVote allows individuals to get involved in the proxy process—a long-standing method for influencing corporate behavior.  Greenwala gives its users the opportunity to form communities of interest and then recommend green and sustainable products to one another.  Alonovo and other responsible shopping sites capture feedback on the products they sell from their user base of socially aware consumers.  Goodguide offers carefully researched ratings on the products it covers—and then encourages its users to add their views and advice.

We need to organize the feedback we get on the ratings we offer and help our users learn from each other.  We are working on our own system for integrating feedback from users directly into our scores.  By adding this data to the data we get from a growing list of crowd data sources, we should ensure that our ratings accurately include the views of the people who work in, buy from, and serve the companies we rate.

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.