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
The subject of this post could be summarized as (for those who know Latin) scientia potentas est. This is a quote from Francis Bacon that means, “in knowledge is power.” We recently contributed knowledge from our sustainability information system to help substantiate some ground-breaking research. Both studies showed a connection between strong social performance and a commitment to sharing data and knowledge. We hope these research studies will be powerful tools for influencing corporate behavior.
On March 6, Cora Lee Mooney, in conjunction with the BrownFlynn team, published a report called “GRI Application Levels: Why Strive for an A?” Brown Flynn is a both a well-known sustainability consulting firm and one of only a few GRI-certified training partners. They wanted to understand if companies benefit from receiving the A level for their Global Reporting Initiative (GRI) report. Do they get credit for the hard work this accomplishment requires, from outside stakeholders? With a lot of hard work, they confirmed that there was a positive relationship between GRI application level and CSRHub’s sustainability rating score.
The folks at Brown Flynn were careful not to claim that the simple act of reporting information caused companies to be more positively viewed. It is possible (and perhaps even likely?) that companies that adopt GRI reporting are good corporate citizens, even before they start the reporting process. For instance, the following graph shows that the distribution of ratings on the CSRHub system for companies who commit to the UN Global Compact, is much better than those who do not.
Still, establishing a connection between GRI ratings and perceived sustainability performance is important. Those who want to find good companies to work with, buy from, supply to, or serve can start with those who participate in GRI. Further, showing that each higher level of GRI participation is associated with a higher average sustainability score may encourage companies to push to report more.
About a week ago, we learned that Christopher J. Hughey and Professor Adam J. Sulkowski at the University of Massachusetts Dartmouth had used CSRHub data to study the relationship between the amount of information companies release and their perceived social performance. The authors used standard statistical tools to prove a correlation between the amount of data that companies in the oil and gas industry disclose and their sustainability score on CSRHub. The idea that more data leads to a better score is one we’ve looked at in several ways. (The chart below shows the correlation between number of sources of data and overall rating across our entire coverage universe.) This paper was the first we’ve seen that nailed things down scientifically.
Over the past year, we’ve supplied data for and supported studies by several of our partners, including NGOs, research houses, and publications. As our database grows (we now have more than 10 million data elements), our coverage widens (we have partial data on 83,000 companies), our number of sources increases (we will soon have more than 150 sources), and our time scale lengthens (we now have 17 months of ratings history) we should be able to empower many types of research, in many fields. It is great to see how seriously firms like Brown Flynn and academic groups such as UMass are probing and analyzing sustainability performance. Thanks to their work, we are starting to see our field move away from arguments based on what should be right, to arguments based on what we can prove is right. A sound basis in well-studied facts should allow us to win over those who doubt and question the importance of corporate social responsibility.
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 nearly 5,000 companies from 135 industries in 65 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 140-plus data sources. Our data comes from six socially responsible investing firms, 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, CSRHub has created a broad, consistent rating system and a searchable database that links each rating point back to its source.