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New Insights into the Correlation Between CSR and Brand Strength

CSRHUB | Tuesday June 11th, 2013 | 4 Comments

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 7,300 of the world’s largest publicly traded and private companies. 3p readers get 15% off CSRHub’s professional subscriptions with promo code “TP15.″ 

As previously seen on the CSRHub blog.

By Cynthia Figge

An interview with Cynthia Figge and 3p’s Nick Aster follows...

Sustainable Brands 2013Why are we all here? Because we believe that a company that invests in sustainability increases its brand value, right? I’m going to unveil some research that proves the relationship between brand and CSR is even more profound than we thought — around the world, across industry type, and company size.

Even more exciting, last year, that correlation more than doubled in strength.

My company, CSRHub, the world’s largest aggregator of global CSR information, ran five years of our data against the data of Brand Finance, the global brand analyst headquartered in London.

Brand Strength - CSR correlation

With our overlapping datasets, we analyzed over 1,000 companies, and for 2012, we got a .28 correlation between brand strength and CSR. This seemed extraordinary.

So we tested the data. My co-founder at CSRHub is a self-admitted geek with degrees in physics and astronomy, and a Harvard MBA (where we met) and he knows his regression. He looked at F values. He split the data in two groups. Tested the combined effect of outliers. He tested for spurious relationships. He ran regressions with third factors such as enterprise value and market cap. Over all these trials, the correlation holds. Twenty-eight percent of brand strength is related to CSR performance.

Let’s dig in and discover which CSR factors may be driving brand strength.

BSI and 12 CSR Factors

We looked at each of the twelve factors in CSRHub’s model. This chart is ranked by the four categories: employees, environment, community and governance. Look closely at the subcategories in light blue. One of the highest correlations is between brand and Environment Policy and Reporting. This is not at all surprising given the environmental crisis – and companies tend to communicate about this in their sustainability reports. They also tend to communicate about products and leadership ethics, the two bottom blue stripes.  But the highest correlated subcategories are all employee issues. Employee engagement and word-of-mouth seem to be extremely important in creating brand value.

Most astonishing to us was our analysis over time. When we looked back over five years of data, this is what we found:

CSR - Brand Strength Doubled

Brand strength to CSR correlation has suddenly strengthened in the last year, doubling in 2012 over 2011. The relationship stayed relatively constant over the previous four years. Then, in 2012, that correlation more than doubled.

Why? Perhaps we are reaching critical mass. Consumers are more aware of sustainability. It’s been in the press more. More sustainability websites like CSRHub are out there. NGOs are talking more about the role of corporations in their success. My son just graduated from college and he takes sustainability as a driver of business success for granted.

Why is this important?

CSR - Brand implications

 

You’re the one audience that really gets the implications of this data. CSRHub and Brand Finance have proved a deep link between CSR and brand strength. There is DRAMATIC ROI for sustainability. And that ROI is increasing rapidly. My take is that more companies see sustainability as the breakthrough platform for strategic advantage. After strategic sustainability consulting for 17 years, I believe we may be at the edge of big shift.

Nick Aster discusses CSRHub’s findings here:

Cynthia Figge is a forerunner, thought leader and speaker on the corporate sustainability movement. As the co-founder and COO of CSRHub, Cynthia’s team provides free corporate sustainability ratings on over 7,300 publicly-traded and private companies worldwide. In addition to CSRHub, Cynthia is the co-founder of EKOS International, one of the first consultancies to integrate sustainability and corporate strategy. She has crafted corporate sustainability strategies for a host of major organizations, including BNSF, Boeing, Coca-Cola, Dow Jones, and REI. Cynthia also serves as an advisor to SNS Future in Review, Board Director of Compassionate Action Network, and served as President of the Board of Sustainable Seattle. She has an MBA from Harvard Business School. Prior speaking engagements in corporate responsibility have included SRI Basecamp, Future in Review, Sustainable Brands, and SRI in the Rockies.


▼▼▼      4 Comments     ▼▼▼

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  • Marc de Sousa Shields

    Great findings and congrats, this finding is consistent with ours, that for any company the sustainability adds between 3% to 17% (depending on sector and main markets) to brand value! http://www.csrcounts.

    • CSRHub

      Thanks Marc for your good work and for your support. We should talk offline about doing a cross reference between your findings and ours to learn more about how these drivers work. (I’ll reach out directly.)
      Hope that others who have done work in this area will join us as well. We want to make a strong case for brand managers to also become managers of CSR and sustainability issues!

  • Carmen

    Great anlaysis! Would heaving industry such as energy & mining have even higher correlation than financial services, can this analysis tell?

    • CSRHub

      We were interested in this question, too. Our data included companies from 97 industries (out of the 135 that are in the CSRHub web site). We did a separate analysis of the companies in “brand-driven” industries (e.g., packaged goods, consumer services, retail outlets, etc.) vs industries that are not brand-driven (e.g., mining, real estate, transportation, etc.). We had roughly equal numbers of companies in both groups and saw the same pattern of correlation for types of industry.
      We have not yet dug into the details for specific industries or industry groups. Let us know if you are interested in doing more research on a particular sector. We may be able to collaborate and explore how different sectors perform, in greater depth.