By Bahar Gidwani
Part 4 of our 5-part series.
In the last post in this series, we examined our finding that brand strength and sustainability are correlated. We found evidence that the relationship we have discovered between Brand Finance’s Brand Strength Index and CSRHub’s corporate social responsibility and sustainability ratings are not due to random chance. Let’s assume the relationship is real. How has it changed over time?
Both Brand Finance and CSRHub have used consistent methods to evaluate companies over the past five years, from 2008 through 2012. Because we wanted to see how the brand-sustainability relationship changed for each year, we included all of the available company pairs for 2012 and then for each year, used only the companies that were also present in the following year. While the number of companies studied in the earlier years is less than that in the latest data set, all years include more than 350 company data set comparisons.
Five Years of Data
The correlation between the BSI and CSRHub’s overall rating averaged about 0.11 for the first four years of our study (2008 through 2011). The jump to 0.22 in 2012 is quite dramatic.
The 12 factor analysis for 2011 gives a 0.19 correlation. This is again lower than the 0.28 correlation we get for the twelve factor analysis in 2012. This confirms that there has been a strong improvement in the relationship we are studying.
We believe there are several reasons consumers may be increasingly aware of corporate responsibility and sustainability performance:
- More coverage of sustainability in the popular press;
- Outreach and advocacy from a wide range of non-governmental and governmental organizations;
- Inclusion of CSR issues in MBA and other educational programs;
- The growth of informational web sites such as TriplePundit, Greenbiz, JustMeans, 3BL Media, SustainableBrands, EnvironmentalLeader, 2DegreesNetwork, and of course, CSRHub.
We would expect this correlation to continue to grow, although there should be a natural limit on how much of brand strength can be driven by social performance factors. We look forward to repeating our study in 2014, when we have a new year of data from our partners at Brand Finance.
Our next and last step will be to see which parts of sustainability seem most closely related to brand strength.
Part 1 The Tie Between Brand Value and Sustainability is Getting Stronger
Part 2 There is a Strong Link Between Brand Strength and Sustainability
Part 3 Is the Correlation between Brand Strength and Sustainability Due to Random Chance?
Bahar Gidwani is CEO and Co-founder of CSRHub. He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. Bahar is a member of the SASB Advisory Board. He plays bridge, races sailboats, and is based in New York City.
CSRHub provides access to corporate social responsibility and sustainability ratings and information on 7,300+ companies from 135 industries in 93 countries. By aggregating and normalizing the information from 230 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices and seek ways to change the world.