Hosted by Rosemary Lapka of the GSC and Louis Coppola, GSC Board Member and Co-Founder & Executive VP of the Governance & Accountability Institute (G&A)
This conversation is about how reverse engineering ESG Investor Datasets is an effective tool that can help to inform a strategy to improve your ESG supply chain policy. The work at G&A focuses particularly on providing advice to corporate and investor clients related to ESG sustainability strategy, disclosure/reporting, investment, and performance. Lou Coppola is the Chair of the US SIF- Social Investment Forum – Company Calls Committee (CCC), which serves as a resource to companies by providing a point of contact into the sustainable investment analyst community and is an active NYSSA- New York Society of Securities Analyst, Sustainable Investing Committee steering member.
The G&A Institute was founded 12 years ago with the concept of helping companies do the right thing for the right reasons. They operate at the intersection of ESG issues, the capital markets, and publicly traded companies. With reputations and evaluations being increasingly impacted by ESG factors, G&A helps companies identify material ESG issues and helps companies to proactively measure, manage and disclose on these issues in a standardized way. The G&A Institute serves as the data partner for the Global Reporting Initiative (GRI) in the United States, United Kingdom and The Republic of Ireland. In this role, they collect and analyze every sustainability report published by companies headquartered in these countries and publish reports on reporting trends to create a greater awareness of best practices in sustainability reporting and sustainable investing.
To identify and extract ESG data points that investors use to assess supply chain, sourcing and procurement policies, G&A conducted a study evaluating the data points collected by 4 respected and often-cited sources that feed the capital market: Thomson Reuters Eikon ESG Data, Bloomberg ESG Dashboard, MSCI ESG Research, and Sustainalytics ESG Research. What they found was that up to 30% of the data points were inaccurate or incomplete because most of the time, the company itself did not disclose their activities in a standardized or easily accessible format for the analysts at these organizations to identify. This lack of standardized ESG disclosure negatively influences the company’s ESG investor profile. The analyst helps to identify how the capital markets and investors assess company’s supply chain policies and identifies best practices. The primary focus of the study examined the subset of ESG data points related to supply chain procurement, purchasing policies and codes of conduct.
G&A grouped the various providers ESG Data points and identified 6 key stages of supply chain policy ESG integration:
Stage 1: Commitments (Environmental, Social, Governance)
Stage 2: Target Setting
Stage 3: Monitoring and Reporting
Stage 4: Engagement and Training
Stage 5: Systematic Consideration and Incentivization
Stage 6: Termination for Non-Compliance
These stages are often done in a continuous cycle. Some of these stages may also overlap. For example, companies should go back to review their commitments each year and improve them based on engaging with stakeholders, evaluating what has become more important to society and customers, and they may set new targets and expectations.
By including specific language and data identified in each of these categories data points, it will provide a more accurate picture of a company’s policies and practices and make it easier for ESG Data Providers’ analysts to assess the company, leading to improved investor ratings in these areas. This is the information ESG data providers are looking for when they go through CSR or other company reports that is then input into their evaluation databases.
Human rights and employee safety policies are examples of key data points that are weighted and evaluated based on how they meet recognized standards and conventions as set forth by policy leaders such as the UN’s Sustainability Development Goals and the International Labour Organization (ILO). As a UN agency that sets internationally recognized standards on human rights, the ILO’s 1998 declaration on fundamental principles and rights at work set out 8 core conventions whose principles are binding on all ILO-member states. As several of these minimum labor rights are not currently achieved within international supply chains, especially in the developing world, it’s increasingly common to include codes of conduct based on these ILO minimum standards into contracts with suppliers.
Click on the video to continue learning more about
- What information should go into reports and how to standardize that policy language disclosure
- How to highlight your policies so that your ESG investor data profile is accurate and complete
- Suggestions on how to implement the 6 stages of supply chain policy ESG integration
- Other tools and resources that will help companies design world-class ESG supply chain tools policies
For more information about G&A Institute or if you have any questions for Lou, you may reach out to him directly at firstname.lastname@example.org or visit their websites: www.GA-Institute.com | www.Accountability-Central.com | www.SustainabilityHQ.com
The Role of ESG Evaluation & Resources for Successful ESG Practices
Hosted by Rosemary Lapka of the GSC and Devon Reichelt of Refinitiv
The following is a summary of the attached video examining what the existing ESG data is telling us about successful supply chain policies & practices and how the role of ESG Evaluation & Resources for Successful ESG Practices is evolving. It is hosted by Rosemary Lapka of the GSC and Devon Reichelt, Lead Market Specialist for Lipper and ESG at Refinitiv, which was formerly known as the Financial and Risk business of Thomson Reuters. Devon works on a consultative basis with some of the world’s largest asset managers and banks to assist them in understanding capital flows, performance comparables, fee and expense rational, ESG investing, and market sentiment.
Supply chains often make up the majority of a company’s impact on society and the planet. Companies can begin to evaluate and improve the performance of their supply chains through examining ESG factors of their business. For both financial and market-driven reasons, companies are asking the following questions of themselves and their industries:
- What resources are available for incorporating ESG evaluations into supply chain activity?
- How do companies start to design policies that become best practices for responsible supply chains?
- How does the market evaluate responsible ESG practices?
- Is there now or will there be a single global set of ESG metrics to evaluate this data?
The answer to that last question is no, there is currently no standardized format. Which is why the work at Refinitiv is so critical. It assembles the data, analyzes the information, and has developed a structured, weighted format with specific criteria so companies can be compared to each other in a unified set of standards defining their performance on an ESG basis. This information impacts mutual and pension fund managers who are trying to weed out and guard against investing in any companies that are associated with undesirable business practices such as excessive water use, unfair labor practices, the use of child labor, board and gender equality issues, or any other policy that could be considered detrimental from a social and corporate governance perspective, negatively impacting the performance of their portfolio. Building that value chain progressed from simply avoiding those companies to seeking out businesses with ESG-friendly products and procedures who were determining what best-practices were in each field, to recognizing that implementing those best-practices led to higher market share and corporate value and were therefore the best investments for their portfolios. We now have companies trying to understand what their peers are doing from an ESG perspective to make sure that they are best-in-class.
Refinitiv uses at least 178 comparable measures and over 400 different metrics to develop their comprehensive ESG database, which impacts how the global financial community measures ESG performance. They source data from an ESG content perspective from multiple providers. Some analytical groups are provided information directly from corporations and some scour reports and online sources using artificial intelligence. But since Refinitiv wants to note the exact resource that has provided that data and reference it, map back to it, they use information that is publicly available; no private information is used. They manually process information on over 7,000 public companies using annual CSR reports, data provided on company websites, NGO websites, exchange filings, and publicly available news sources. This is then converted into standardized set of data points noting everything from the measured output of CO2 emissions and water usage to “true or false” values recording who has policies on HIV/AIDS, increasing the percentage of women managers, to methods of responsible sourcing. If vendors make note of how or what a company is doing, both positively or negatively, they will also input that data which can then be authenticated or refuted by the company by clicking on that datapoint in the source document. This unique way of collecting information allows them to audit this information like a financial statement supporting a more holistic due diligence.
Knowing what and how other companies are reporting this type of ESG information will help standardize and guide what goes into CSR reports and improve data analysis. For instance, if you have a water reduction policy but don’t note it in your CSR report, it will likely not be calculated into your overall score. And that means that it’s likely that your stakeholders, your customers and your industry don’t know about your conservation and efficiency efforts. And that can hurt your standing in the market.
The video continues to provide more information on
- How Refinitiv’s data analysis and model works
- Scoring methodology and categories
- Controversies within the categories
- How to use those scores to improve individual company performance and public perception
- ESG Global Coverage
- Seeing the actual platform in use