The following is part of a series by our friends at CSRHub (a 3p sponsor) – offering free sustainability and corporate social responsibility ratings on over 5,000 of the world’s largest publicly traded companies. 3p readers get 40% off CSRHub’s professional subscriptions with promo code “TP40“.
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.