Metrics
List methodology

CR Magazine ... The methodology used for Corporate Citizenship Lists

Burgess COMMENTARY

Peter Burgess

CR Magazine Corporate Citizenship Lists Methodology

Why we do what we do the way we do it

Our overarching mission is accountability. We believe it’s vital for investors, regulators, customers, suppliers, employees, and neighbors to know as much as possible about the companies they invest in, do business with, and work for.

CR Magazine’s Corporate Citizenship Methodology fulfills that mission by calling upon companies to make information available. Through this process, we put hard data into the hands of the people who have the most direct influence over these companies – and the most to gain or lose by their good or bad behavior.

By advancing accountability and transparency through this research we empower those closest to these companies to make better decisions and ultimately judge these companies and their behaviors. In that way, we move us all closer to a world where everyone has the information they need and markets function more effectively.

A group effort – CR Magazine, CRA and the CR community

CR Magazine and the Corporate Responsibility Association (CRA) share a common purpose in advancing corporate accountability and responsibility. Together within direct input from the CR community we’ve developed and manage a fully transparent, objective, fact-based methodology for evaluating corporate accountability and responsibility.

Through its Ratings and Rankings Thought Leadership Council (composed of a cross-section of corporate responsibility experts, including active practitioners, academics, NGOs, investment firms, and other relevant communities), the CRA stewards the methodology to ensure its relevance, transparency, and efficacy. The Association plays a vital role as a convener, consensus builder, and promulgator of standards and practices. Together the CRA and CR Magazineregularly open the discussion up to public comment. CR Magazine independently verifies the data and publishes it for all to see and use. This simultaneous breadth of input and separation of powers forms the very foundation of our commitment to our own transparency and to advancing accountability and responsibility.

Research universe

The current corporate universe for all CR Magazine corporate citizenship lists is Russell 1000 companies. The 100 Best Corporate Citizens database is built on publicly-available data sources; all data must be publicly available in order to be included in the data set.

The data

The CR MagazineCorporate Citizenship database encompasses 298 data elements among seven data categories (outlined in the table at the right). The methodology weights the seven data categories differently to account for different relative values, as determined by the Methodology Committee.

Data in each category fall into one of three subcategories:

• Disclosure ex: Does the company disclose the total amount of energy conserved through its energy conservation programs?

• Policy ex: Are incentives given to employees for meeting company energy conservation goals?

• Performance ex: What is the disclosed total water use?

• Data also take one of two forms, binary or numeric:

Binary “True” counts as a positive value; “False” and blank fields count as zero values.

Numerical Numerical values are compared with all other companies’ numerical responses answers in order to generate a ranking. Non-reporters in these numerical cases rank worse than worst numerical respondent in any group.

CATEGORY SUBCATEGORY # OF ELEMENTS WEIGHT (% OF TOTAL)

Climate change 58 16.5

Climate change disclosure 28

Climate change policy 27

Climate change performance 3

Employee relations 65 19.5

Diversity disclosure 15

Diversity performance 5

Employee benefits disclosure 45

Environmental 116 19.5

Environmental disclosure 60

Environmental policy disclosure 50

Environmental performance 6

Financial 11 9.0

Performance 11

Governance 15 7.0

Performance 15

Human rights

22 16.0

Disclosure 22

Philanthropy and Community Support 16 12.5

Disclosure 15

Giving 1

TOTAL 303 100

Data collection and analysis

All data in CR’s Corporate Citizenship database are collected and analyzed by IW Financial, a Portland, Maine-based financial analysis firm serving the Environment, Social, Governance (ESG) investment community. IW Financial collects companies’ data from several sources.

Company web sites, sustainability reports, company 10-Ks IW Financial reviews the entire company web site, starting with any CSR/sustainability or similar page or section and branching out across the entire web site to collect all data publicly available there. IW Financial further searches both the company’s own site as well as other sources to find any reports the company has published to gleans additional the database. IW Financial reviews companies’ 10-K reports filed with the Securities and Exchange Commission (SEC) for additional publicly available information.

Other public sources Finally, IW Financial regularly reviews other publicly available sources of information in collecting data for the database, including the Toxic Release Inventory, the Emergency Response Notification Systems), the EPA EnviroFacts data set. It also uses Governance Metrics International (GMI), Morningstar, the Carbon Disclosure Project (CDP), Glass, Lewis & Co and The Foundation Center.

Calculating the rankings

The calculations that ultimately build to the overall ratings start out at the most basic level, the data element. Within any subcategory, each individual data element is equally weighted. For example, all 27 data elements within the Climate change disclosure category are equally weighted.

While the number of data elements within any subcategory may be different, the subcategories are equally weighted. For example, there are 28 data elements in the Climate change disclosure subcategory, 27 data elements in the Climate change policy subcategory and 3 data elements in the Climate change performance subcategory, but each subcategory is equally weighted at 33.3%, or a third of the total of three subcategories. For categories in which there are no subcategories, all data elements are equally weighted.

Once IW Financial has calculated the underlying score for each category, they rank order the full Russell 1000 within that category, with 1 being the best rank. When all categories are ranked, IW Financial applies the category weightings to generate an overall weighted average ranking for each company, again with the lower ranking being the better score.

Loose ends

Tie gaps A “tie-gap” happens when several companies are tied for the same score, creating a gap between that score and the next closes score. As in the In the Olympics, for example, when two competitors tie for the top score, each gets a gold medal, and the next-highest score earns a bronze medal. The silver medal is sacrificed for the “tie-gap.”

Within our ranking, for example, if 26 companies tie for the #1 rank, the company(ies) in that category that earned a #2 rank would actually be placed at #27, the next “available” ranking after the gap. In the spirit of transparency, the listing shows the “tie-gap equivalent” score—shown as (T-XX) next to the mathematical rank.

Yellow/red cards Each year, based on the numbers, some companies make the Best 100 List despite some self-caused reputational damage, which usually appears as a pending or completed administrative or official legal sanction. To address those kinds of issues, we’ve turned to a two-level system akin to that used in European football—the yellow card for a caution, the red card for expulsion.

A yellow card icon next to a company’s listing indicates a caution — a significant but pending investigation/situation initiated in the research year by a recognized authority. Yellow carded companies remain on the list without impact on their ranking unless and until the investigation/situation is resolved. Red cards recognize a significant adverse event or judgment in the research year against the company, an event so widely recognized that no reasonable person would expect to find the company on a listing of the best corporate citizens. These companies are excluded from the list for at least one year, and an explanation is included with the full listing.

Derivative list

Beginning in 2015, CR Magazine will publish category leaders for each of the following categories: Climate change, Employee relations, Environmental, Governance, Human rights, Philanthropy and Community Relations. This list shares the exact same methodology as the 100 Best Corporate Citizens listing, but include additional data slices or processes as outlined below.