Corporate Social Responsibility Business Intelligence

Size: px

Start display at page:

Download "Corporate Social Responsibility Business Intelligence"

Liliana Scott
6 years ago
Views:

1 Corporate Social Responsibility Business Intelligence Bahar Gidwani CEO & Cofounder, CSRHub Cynthia Figge COO & Cofounder, CSRHub

2 The Next Generation of Sustainability Tools & Data Analysis The first generation of tools were built mostly on selfreported data. The resulting stream of information has been inconsistent and hard to use. Although reporting takes time and costs money, sustainability data is producing net value. A second generation of more rigorously defined metrics is being developed. Implementing these new standards will require new tools and methods of data analysis. 2

3 CSR Reporting Has Been Driven By Both Investors and NFPs 3

4 First Generation Metrics Rely Primarily On Self-Reported Data Wall Street firms read company filings, press releases and CSR reports. They attempt to cross check facts or confirm them through surveys and outreach. However, <20% of the companies covered by Wall Street analysts respond to their surveys. Systems like GRI, CDP, and UN Global Compact lead companies through a data development and disclosure process. However, fewer than 20% of GRI and CDP reporters externally assure their reports. 4

Companies >100 Different Schemas & >5,000 Metrics >200,000

5 The Resulting Metrics System Has Been Confusing and Is Costly to Maintain >1,000 Different Ratings Systems 50,000 Public Companies >100 Different Schemas & >5,000 Metrics >200,000 Private Companies >500 Certifications, 1,000s of Regulations 100s of Standards 5

6 For Instance, Only Modest Agreement Between Major Source Ratings 6

7 Despite These Issues, CSR Reporting Seems to Bring Benefits 7

8 Strong Perceived CSR Performance Benefits Brand, Reduces Risk, Etc. (Average) (RepRisk) (Investis) (Capstone) 8

9 Next Generation Metrics Are Driven By Three Concepts Materiality. Companies are being asked to review lists of sustainability metrics and report on those that are relevant to their business. Integrated Reporting. Companies are being encouraged to include non-financial metrics in their financial reports. Broader, Long-term Goals. For example, the UN announced a set of 17 Sustainable Development Goals (SDGs). While designed initially to drive country-level aspirations, the UN SDGs could become a framework also for company-level aspirations. 9

10 There Is No Consensus Yet on How to Implement These Concepts Materiality. Who decides what is material? SASB says investors. GRI says stakeholders. Integrated Reporting. Should auditors be responsible for assuring the accuracy of non-financial metrics? What happens to all the data that doesn t fit into the financial report? Should companies narrow their reporting? Broader, Long-term Goals. Goals like No Hunger and Good Health are hard to argue with! But, translating these goals into measurable targets for companies has proven difficult. 10

11 Here Are Six Efforts to Translate Second Gen Concepts Into Practical Systems World Federation of Exchanges (WFE). European Union Accounting Directive (2014/95/EU). Sustainability Accounting Standards Board (SASB). Global Sustainability Standards Board (GSSB). Science-Based Targets (SBT). Task Force on Climate-related Financial Disclosures (TFCD). The groups behind these systems believe they will be widely adopted over the next three years. 11

12 WFE and the EU Directive World Federation of Exchanges has recommended that all of its members set up non-financial reporting standards. 63 exchanges 37,083 companies $51.5 trillion of market capitalization 33 metrics (although some exchanges may not require them all) The European Union will require all companies with >500 employees to report policies, outcomes and risks associated with ESG. 11,000 companies Could be different rules for each of the EU s 28 (27?) members 12

13 SASB and the GSSB SASB has completed investor-facing guidance for all 79 of its industry classifications 43 issues; each industry must deal with different topics and each topic has defined metrics >18,000 companies may need to consider SASB s metrics as part of their Reg SK disclosure requirements GSSB was formed by the Global Reporting Initiative (GRI) to enhance the credibility and uptake of GRI G4 39 draft exposure standards Affects both the few thousand companies who report using GRI and other organizations that cite GRI (e.g., CDP, WFE) 13

14 SBT and TFCD The Science-based Targets group was formed by CDP, the UN Global Compact, the World Resources Institute and the World Wildlife Fund. The group hopes to determine how much carbon reduction companies must do to keep global warming below 2 More than 150 companies have already joined and 13 have had their emissions targets reviewed and approved The Task Force on Climate-related Financial Disclosures was formed to help companies better disclose their climate-related risk. The group is backed by the Financial Stability Board a G20-lead group that oversees issues of capital, liquidity, and risk Founded by Michael Bloomberg, the group includes high-profile vice chairs (4), data users (12), data preparers (7), and experts. 14

15 Example: SASB Metric CN /04 Two Metrics Under Raw Material Sourcing & Innovation Topic: Top five raw materials used in products, by weight. Percentage of raw materials third-party certified to an environmental or social sustainability standard, by standard. Steps required to comply: Track weight of all major raw materials. Must involve all suppliers (including those who supply raw materials and those who supply finished goods containing raw materials). Identify which materials are certified and by whom and the weight of each certified material. 15

16 Example: GRI Disclosure Materials used by weight or volume: Total weight or volume of materials used to produce and package an organization s primary products and services. To comply must measure (examples): Raw materials used (ores, minerals, wood). Associated process materials (lubricants). Semi-manufactured goods and packaging (screws, tape). Measurement system must track: Were the above purchased or sourced internally? Are the measurements estimated or direct? What methods were used to measure? 16

17 Failure Can Be Costly--3 Sample Lawsuits Stanwood v. Mary Kay Inc. Salesperson represented products as animal-test free. Court permitted claim under California Consumers Remedy Legal Act (CCRLA). In re Massey Energy Co. Secs. Litig. Class action suit on behalf of shareholders. Court said Massey issued materially false and misleading statements. Case settled for $265 million. Ruiz v. Darigold Inc ESG report said that cattle were treated humanely. Video images showed otherwise. Court dismissed because it wasn t sure report should be treated as a legal representation. 17

18 Most Large Companies Will Be Affected By These Standards 18

19 To Comply With These New Standards, Companies Will Need New Systems Must use data from and integrate with mainstream business management tools. Someone is probably already tracking raw material weights and usage patterns? Need support from Audit and Compliance teams. The CEO and CFO won t sign off on bad data and neither will the auditors or compliance. Need to involve and integrate both suppliers and customers. Have to share the load of collecting data and must find ways to share it without creating privacy or proprietary information issues. 19

20 CSRHub Streamlines & Simplifies CSR Data & Makes It Easier to Use 50 Schemas and 3,500 Metrics 469 Ratings Systems 130,000 Private Companies Most Major Certifications, Regulations & Standards 20,000 Public Companies 20

21 We Harmonize Stakeholder Signals to Drive Improved CSR Performance 90MM Data Elements Convert 3.5K Metrics Map Normalize Weight 460+ Data Sources Ratings on 16,480 companies data on another 134,000 8 Leading ESG Analyst Firms Patented Process Drive Changes In Performance and Reporting 21

22 Corporate Social Responsibility Business Intelligence Bahar Gidwani CEO & Cofounder, CSRHub Cynthia Figge COO & Cofounder, CSRHub

Global Reporting Initiative G4 v. G3.1. Helping you create clean, safe, healthy places for your customers

Global Reporting Initiative G4 v. G3.1 Helping you create clean, safe, healthy places for your customers 1 Tennant Company Public Reporting Mandatory SEC 10-K Proxy Regulatory compliance: emissions, water,