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Shirley Lu has always been curious about how firms integrate social and environmental goals into their business operations, especially how they measure the impact of those efforts. Shortly after starting her PhD program at the University of Chicago Booth School of Business, she began reading through firms’ corporate social responsibility (CSR) reports, trying to understand the data. To get more clarity, she informally chatted with companies’ sustainability officers. When she asked how they measure CSR, their answer surprised her: Ah, measurement is a big problem.

To tackle this complex issue, Lu turned to Chicago Booth’s Rustandy Center for Social Sector Innovation to build a database that makes CSR metrics widely—and transparently—available. This work is timely as investor interest in companies pursuing environmental, social, and governance (ESG) objectives soars.

“What firms do in terms of corporate social responsibility can have incredible impacts on the world. But if we really want to know that impact, we have to be able to measure it,” said Lu. “Those metrics have been a black box. I’m hoping to shed some light.”

Shirley Lu

Some firms choose to publish a CSR report to communicate their environmental and social impacts to their stakeholders. Companies such as Sustainalytics and Asset4 will analyze these reports along with additional sources of information and give firms an ESG score—which takes into account their environmental, social, and governance commitments—to help investors evaluate firm performance. The problem is that while boiling it down to a single-digit score might seem straightforward, it’s anything but.

ESG providers like Sustainalytics make decisions about how they’re going to tabulate those scores, from which metrics they’re going to include and how they’re going to weight them. They also compile data from multiple sources beyond the firms’ own CSR disclosure, such as from surveys and outside analysts. The result is that it’s not always clear where the data came from, which data was used, or how the final score was produced.

“I think there’s value in giving people access to the raw data without all that interpretive overlay, so that people can look at which metrics are most important to them and come to their own decisions,” said Lu, who graduated in June and joined Harvard Business School as an assistant professor this summer. “As a researcher, I’ve seen a lot of papers using ESG scores and I don’t feel comfortable with it because I don’t know how they were constructed. I wanted to find out what the actual measures are.”

The research team at the Rustandy Center collected CSR reports and identified the most common metrics. Their executive report is a detailed account of 69 of the most commonly disclosed CSR metrics across the 2017 set of S&P 500 firms.

They found that of the 327 firms who voluntarily published a CSR report, most measure how many female and minority employees they have, volunteer hours, safety incident rates, greenhouse gas emissions, and water and energy consumption. Firms often aren’t all measuring and reporting the same things, which has made comparison difficult. Seeing what most firms disclose, said Lu, already reveals some consensus that she hopes will get more firms on the same page.

Researchers also found a positive correlation between ESG score and how many metrics a firm disclosed, which supports their hypothesis that ESG scores don’t objectively convey CSR performance. Firms get a score boost for disclosing a greater number of metrics, but the score is not associated with the performance ranking of the firm within their industry.

Lu worked on this report alongside Rustandy Center research professional Jingwei Maggie Li and the center’s director of research initiatives, Salma Nassar.

“Shirley noticed a gap in data on CSR and the evaluation of industry performance,” Nassar said. “This report attempts to bridge that gap. Through this research, we hope to provide a window into CSR metrics and industry performance since many different stakeholders rely on ESG scores, from investors to researchers.”

The CSR report is the latest example of the Rustandy Center’s work to support research on the social impact sector. “Our hope has always been to conduct research and then share findings with practitioners and others who can put those insights into practice,” said Robert Gertner, the John Edwardson Faculty Director of the Rustandy Center and the Joel F. Gemunder Professor of Strategy and Finance. “We hope that faculty, students, investors, policy makers, and others can use the data we’ve collected to further explore and catalyze social change.”

Lu hopes this report and dataset will help investors get a better sense of what’s behind ESG scores and which metrics to consider when comparing CSR performance across firms. Regulators, she says, could use this information to standardize CSR reporting, and firms themselves may look to it as a benchmark to learn which metrics to gather to better align with their peers.

“The spotlight has always been CSR and that we need to measure it. But the spotlight never comes down to the specific metrics,” said Lu. “That’s the missing piece we hope this dataset will fill in, so that it lays the groundwork for more and better analysis and research in the future.”

Interested in gaining access to the data in the CSR report for your academic research? Contact the Rustandy Center.