List Methodology

What we do—and why we do it that way

By The Editors

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 about these companies and their behaviors.

In that way, we move us all closer to a world where markets function more effectively and everyone has the information they need to effectively judge who they are doing business with.

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

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

CROA stewards the methodology through its Ranking and Rating Committee, which is composed of a cross-section of corporate responsibility experts, including active practitioners, academics, NGOs, investment firms, and other relevant communities. CROA does this to ensure the methodology’s relevance, transparency, and efficacy. The Association plays a vital role as a convener, consensus builder, and promulgator of standards and practices. Together the CROA and CR Magazine regularly 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 Magazine Corporate Citizenship database encompasses 298 data elements in seven data categories (outlined in the table). The methodology weighs 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 example: Does the company disclose the total amount of energy conserved through its energy conservation programs?
  • Policy example: Are incentives given to employees for meeting company energy conservation goals?
  • Performance example: 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. In this way, we value the worst ranked company’s willingness to be transparent and accountable to the larger community over any companies’ unwillingness to do so.

Data Collection and Analysis
• 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), 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 27 data elements in the Climate change disclosure subcategory, 27 data elements in the Climate change policy subcategory and 2 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
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 soccer—a yellow card for a caution, a 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 Lists
CR Magazine publishes several additional lists that derive from the Corporate Citizenship Methodology and database. All of these lists share the exact same methodology as the 100 Best Corporate Citizens listing, but include additional data slices or processes as outlined below.

Corporate Citizens in Government Contracting: The methodology for the Corporate Citizens in Government Contracting list is the same as that of the 100 Best Corporate Citizens list with one additional data slice. The Corporate Citizens in Government Contracting list further refines the database universe by identifying the overlap between the top 100 government contractors for the current fiscal year (according to USASpending. gov) and the Russell 1000. That universe of contractors is then ranked according to the same methodology as we use for the 100 Best Corporate Citizens.

Best Corporate Citizens by Industry: The methodology for the Corporate Citizens in Government Contracting list is the
same as that of the 100 Best Corporate Citizens list. Using that methodology, we identify the top 10 companies by industry sector in the following sectors:
Automobiles & Automotive Components

Consumer Items (non-staple)
Consumer Staples
Energy
Finance / Insurance / Real Estate

Health Care
Industrial Conglomerate

Industrials
Information Technology

Materials

Media/Entertainment/Hospitality Services
Telecommunications Services

Utilities

Posted April 27, 2014 in 25115