Guest Post - Visualize That: The Impact of Source Documentation and Data Visualization on CSR Analysis
When it comes to connecting the environmental and business sides of sustainability, ultimately it's a numbers game.
by Reynard Loki
Staff Writer, Sustainable Finance
November 2, 2011 (New York) -- In the first part of this two-part interview, I discussed with Benjamin Whitney, Lead Analyst at Justmeans, how the new program Justmeans Insights is changing how we understand corporate ESG (environment, social and governance) performance and global rankings. The following second part dives deeper into the true power of data visualization and demonstrates the impact of this new tool. I've also included some of the graphics that I made using the tool.
Reynard Loki: Data has got be one of the most important linkages here because ultimately, in order to avoid the various "perfect storm" scenarios when it comes to climate change, for example, what we're trying to do is very data-specific: get the Earth's atmospheric carbon dioxide level back to 350 ppm to prevent the planetary surface temperature from increasing more than 2 degrees Celsius. Fundamentally, it's a numbers game.
Benjamin Whitney: Absolutely. In terms of true environmental sustainability, it's a thermodynamic process with a very scientific base that's driven by data, data analysis and numerical computation. So somehow, we have to bring together the business side and environmental side of sustainability. We already have a numerical, analytical process for environmental sustainability. Now that's got to carry over to environmental and CSR performance in the market.
Fig. 1.1: Total CO2 Equivalents, Absolute Comparison
RL: I see that the Insights program reveals data in two ways -- "absolute" (Fig. 1.1) and "intensity" (Fig. 1.2). Can you explain these terms?
BW: The "absolute" value is what the company is reporting. For example, it could show that such-and-such a company produces x amount of carbon per year. The "intensity" value, on the other hand, is that absolute value divided by revenue for the reporting year, normalized to $1 million. So, let's take IBM, for example. In 2010, IBM produced 2.7 million metric tons of carbon per $1 million of revenue. When you're in the program, you can mouse-over the bars in the graph to get the exact figure, pulled directly from the company's publicly reported data.
RL: So the intensity figure is an efficiency metric?
BW: Yes, definitely. And it puts the data more in the context of its operational size.
RL: So now we can easily measure the environmental efficiency of a smaller company against that of a larger company.
BW: Right. You might see, for example, a smaller company that is aggressively pursuing environmentally sustainable practices having a lower intensity value than a larger company that isn't pursuing similar initiatives. On the other hand, you might find a small company with a higher intensity value, meaning that, relative to its size, they are not getting the same efficiency that a larger company is able to achieve.
Fig. 1.2: Carbon Intensity Comparison
RL: Can other divisors/factors be added?
BW: In future updates, we can definitely add other kinds of normalizing values. For example, we could look at a company's carbon emission data or their waste–recycling ratio relative to the number of full-time employees or square-footage of real estate–really anything that would make sense by which to divide a particular environmental metric.
RL: So this project is all about transparency and accessibility, basically seeing through data visualization–the impact that the world's biggest companies are having on the global environment and society in general.
RL: So, on this carbon intensity chart (Fig. 1.2), for example, it looks like Dell is doing a bang-up job and IBM needs to step it up a little bit.
BW: As the data shows, IBM's annual revenue is about double that of Dell's, but IBM emits three times the amount of carbon.
RL: Well, that's certainly useful information for investors to know. This makes it very easy to see the environmental efficiency of one company versus another just by visually showing the data they have provided in a particular way. What about pulling out a little bit for a more macro view of the industry?
BW: OK, let's look at the competitive landscape (Fig. 1.3). We see that a lot companies have a lot of stated environmental initiatives. Almost all of the companies in the computer sector have reported their initiatives except a couple of years when NEC didn't report. And this is Western Digital's first year for reporting CSR. So overall, this is a very positive looking chart.
Fig. 1.3. Lots of Initiatives...
BW: But when we look at these same companies' actual environmental expenditures (Fig 1.4), most of them do not disclose those figures. Among the top computer firms, only IBM has regularly disclosed this information, with NEC disclosing last year for the first time.
Fig. 1.4. ...but not a lot of financial disclosure
RL: OK, so IBM and NEC score points for transparency in this department. If I were a socially–responsible stakeholder, being able to measure a firm's environmental initiatives against its environmental expenditures would be key. But what about the rest of the field? Are they just saying they are pursuing such-and-such initiatives but aren't really spending money on them? Or do they not have records of that?
BW: Typically, they provide explanatory comments. Dell, for example, says, "Dell facilities are very small sources of emissions and waste. Costs for 'traditional' environmental compliance, pollution prevention and green programs are not a significant expense relative to overall operations costs and are not tracked to this level of detail." You see a lot of that type of disclosure. Or simply, they just don't have the means to track it. Whatever the reason, they're not reporting on it. They're informing the public of what they're doing, but they're not disclosing the associated amounts. It's one thing to say you have an aggressive waste remediation program, for example, but it's another thing to fully disclose the financial impact of that.
RL: Well, because this program can quickly and easily bring this kind of information to the forefront, and now everybody can clearly see that IBM stands out from its competition by being transparent in this regard, do you think that this will make other companies step up to the plate and do it as well?
BW: Yes, that's one of the goals — to motivate and incentivize companies to be more transparent. We're putting the data out there is such an easy and digestible way that it makes sense for all companies to just disclose it. At some point, companies that don't disclose will realize that the ones that do are performing better because of it. There is definitely a link between financial transparency and market performance.