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CSRHub's Big Data Approach to 360-Degree Assessments

In our previous post, we defined “Big Data” and showed how we feel it could help address some problems that exist in collecting corporate social responsibility (CSR) and sustainability data on companies. We also further described the problems with the currently dominant method of gathering this data — an analyst-based method.

CSRHub uses input from investor-driven sources (known as “ESG” for Environment, Social and Governance, or “SRI” for Socially Responsible Investment), governmental and non-governmental organizations, and “crowd sources” to construct a 360-degree view of a company’s sustainability performance. To better understand this process, let’s consider an example.

Hewlett Packard is a heavily tracked company. We have 56 sources of data for this company that together contribute 494 different rating elements, and we map each of these elements into one of twelve different CSR subcategories. For instance, here are mappings for 20 of the elements that contribute to the Hewlett Packard rating:

Table 1

Some of these data elements could map to more than one subcategory. For instance, a company that is on the list of “Best Workplaces for Commuters” would get credit both for its energy saving effort (in “Energy & Climate Change”) for the benefit its programs bring to its employees (in “Compensation & Benefits").

The list above includes examples of each of the three main contributors to the system: Investment-related sources (Asset4/Thomson Reuters, Carbon Disclosure Project, GovernanceMetrics International/Corporate Library, IW Financial, MSCI, Trucost, Vigeo); Activists and NGOs (Accountability, BSR, CorporateRegister, CR 100, EIO, FCPA, Top 50 Socially Responsible); and Government & Consumer (Better World, Black Engineer, EICC, EPEAT, UN Global Compact, UNODC, Working Mother). The completed mapping process connects the 494 data elements from the 56 sources for HP into our twelve subcategories in 971 different ways.

Table 2

While investment-related sources contribute more data elements than the other types, there are at least some of each type present in each subcategory. Another way to look at this is to see that many sources contribute to each subcategory:

Table 3

Each value from each data element is converted into a zero to 100 rating (zero = lowest, 100 = highest). These scores are then adjusted by comparing them to each other. In the example above, there are 11 sources for HP’s board performance. Suppose three of them gave it a great rating, six a medium rating, and two a poor one. Computer analytics would guess that the six scores that agree are correct and that HP’s board rating is in the medium range. The assumption is that three sources tended to be biased towards high scores and two towards low scores. This chart shows the actual distribution of scores at the subcategory level, along with a calculation of the “normal” error curve that results.

When the analysis is repeated across thousands of companies, a picture emerges as to which sources tend to be overly positive or negative and which tend to predict the “mean” of the other sources. All sources can be adjusted, based on this feedback — moving them up or down so they more accurately match the opinion of all other sources. After a large number of iterations in this process, there is a consensus score for each subcategory for each company analyzed. By making a few assumptions about how the errors in data are distributed, one can assess the accuracy of ratings.

In a previous post, we showed that CSRHub’s overall rating accurately represents the values that underlie it to within 1.8 points at a 95% confidence interval. In our next post, we will discuss the benefits and drawback of using this complex and data intensive approach to measuring company CSR performance.

Bahar Gidwani was 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,… [Read more about Bahar Gidwani]

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CSRHUB is a corporate social responsibility (CSR) ratings tool that allows managers, researchers, consultants, academics and activists to track the CSR and sustainability performance of major companies. CSRHUB aggregates data from more than 125 sources to provide its users with a comprehensive source of CSR information on nearly 5,000 publicly traded companies in 65 countries. CSRHUB is a B Corporation and is offering Sustainable Life Media readers a 40% one month membership discount when they subscribe with discount code “SLMFRIEND40”.