Four Different Brand Ranking Systems Show Common Ties to Perceived Sustainability Performance

By Jennifer Saunders and Bahar Gidwani

Introduction

Many aspects of a company’s performance affect its brand value. Marketing spend, distribution strength, and product quality all have proven effects. This study indicates that a company’s perceived sustainability performance may be another important factor.

Our research found that the scores from all four leading brand ranking systems correlated with at least one of CSRHub’s sustainability measures. Further, we found consistent results across the four systems that may help brand managers better understand how to coordinate with and support their company’s sustainability programs. In particular, we found a positive correlation between brand and Compensation & Benefits and Environment Policy & Reporting strength. Success in these areas seems tied to better brand rankings. In contrast, companies that had strong Training Health & Safety, Leadership Ethics, and Resource Management programs tended to have weaker brand rankings. We believe this relationship occurs because these programs are often put in place as a reaction to past controversies and issues. When a company experiences one of these events, its brand image suffers and its brand ranks drop.

Study Scope

In 2013, CSRHub showed that its measures of perceived corporate sustainability performance had a 28% correlation with Brand Finance’s Brand Strength Indicator (BSI). CSRHub recently published an update that showed this correlation continues to persist for financial companies. We have now extended our analysis to include three other independent brand ranking systems:

• RepTrak Pulse Score. The Reputation Institute describes itself as, “the world's leading reputation management consultancy.” Its RepTrak model examines the relationship between the emotional connection, or “Pulse,” with any given stakeholder, alongside perceptions of seven underlying rational connections: (1) Products/Services, (2) Innovation, (3) Workplace, (4) Citizenship, (5) Governance, (6) Leadership, and (7) Performance. The Pulse score is a “measure of the degree of Admiration, Trust, Good Feeling and Overall Esteem that a company stakeholder holds.”

• Interbrand’s Best Global Brands list. Interbrand describes itself as “the world’s leading brand consultancy.” It seeks to provide “a clear picture of how your brand is contributing to business results today.” Interbrand’s research covers major companies in Asia, Europe, and North America, as well as those in emerging markets. Its analysis “seeks to provide a rich and insightful analysis of your brand, providing a clear picture of how your brand is contributing to business results today, together with a road map of activities to ensure that it is delivering even more tomorrow.” It publishes annually a “Best Global Brands” list of the 100 brands it considers most powerful.

• CoreBrand’s CBI. Tenet Partners is a marketing firm that helps “leaders transform organizations through our fusion of strategy, design and technology.” Its CoreBrand Analytics group has a proprietary BrandPower approach to generate an annual Corporate Branding Index (CBI). The CBI reflects the results of continuous surveys of business decision makers. It measures and quantifies the impact of investment in the corporate brand and how brands perform against peers both across and within industries.

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We compared data from these sources with CSRHub ratings and brand strength data from our long time data source in the branding area, Brand Finance. CSRHub provides sustainability information on more than 14,000 companies in 127 countries. CSRHub’s ratings and metrics are drawn from more than 370 sustainability data sources. Each source’s rating information is converted to a 0 to 100 score (zero is worst, 100 is best), weighted and normalized, and mapped into one of twelve different sustainability areas. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

Brand Finance considers itself the world’s leading brand valuation and strategy consultancy. It advises strongly branded organizations on how to maximize their value through the effective management of their brands and intangible assets. Each year, Brand Finance reviews the brand strength and value of thousands of companies. Its rankings shift and change as companies compete to build their brands. Brand Finance’s Brand Strength Index (BSI) uses consumer benchmarking to evaluate the brand support, brand equity and brand performance for each brand, relative to its competitors.

The Study Set

The table below shows how many companies we analysed for each of the brand rank sources. The number of companies available ranged from 86 for Interbrand to 719 for Corebrand. We used a set of 428 companies from Brand Finance that overlapped well with the coverage from the other brand value sources. We excluded companies who were not covered by CSRHub or where CSRHub did not have full ratings information available on all twelve of its sustainability metrics. For Brand Finance and RepTrak we were able to use a continuous rating scale—for the other two sources we used the ordinal rank of the company on those lists.

Brand Value System # of

Companies Considered

# of Companies Analyzed

Correlation R2

F Value

F Significance (probability result

is random) 2014 RepTrak Pulse Score 100 90 0.31 2.79 0.24% Interbrand Best Global Brands list 2014

100 86 0.21 1.64 9.98%

CoreBrand CBI 2014 901 719 0.04 2.42 0.45% Brand Finance BSI 2013-2014

1,700 428 0.19 8.09 0.00%

A simple correlation of CSRHub’s metrics against brand ratings gave correlations ranging from .04 (4%) to 0.31 (31%). The observed F values (a measure of the strength of these correlations) were strong enough for all four sources to indicate a less than 10% chance that our measured correlation was due to random variation.

The next table shows there were few differences in the average ratings for the companies on each list, either at an overall level or at an intermediate “category” level. The RepTrak and Interbrand sets had slightly higher scores because they were smaller and more focused on large companies. Still, we believe each of the four groups of companies were reasonably similar from a geographic, company size, and industry perspective.

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Results

Our third table shows the five areas of sustainability where we found a significant (less than 5% chance of random correlation) connection with a brand-ranking source. As you can see, two areas showed a positive relationship (five examples from three different sources). A stronger sustainability score in these areas seems to relate to better brand ranks. Three areas seemed to have the opposite effect (four examples from three sources).

Discussion

Why would strong sustainability programs in Compensation & Benefits or Environment Policy & Reporting help a company’s brand?

Better-paid employees are likely to be better brand ambassadors. Better benefit programs may reduce turnover and improve the quality of customer support and service.

A strong reputation for environmental protection should help align a company’s brand with consumers who are concerned about environmental issues.

Why would good performance on Training Health and Safety, Leadership Ethics, or Resource Management be connected with weaker brand performance? We suspect that companies with strong programs in these areas implemented them due to past problems. Customers may remember these past issues, long after programs have been put in place, to correct them.

There is obvious variation in how each brand valuation system ties to CSRHub’s sustainability factors. While there is some similarity between how each system measures brand value, there are also major differences. The following chart summarizes the areas that each system emphasizes.

Brand Value System

Overall CSRHub Rating

CSRHub Community

Rating

CSRHub Employees

Rating

CSRHub Environment

Rating

CSRHub Governance

Rating2014 RepTrak Pulse Score 58 55 57 64 54Interbrand Best Global Brands list 2014 56 53 57 61 53CoreBrand CBI 2014 54 51 54 57 53Brand Finance BSI 2013-2014 54 51 54 58 53

Brand Value SystemCompensation

& BenefitsTraining,

Health & SafetyLeadership

EthicsEnvironment Policy

& ReportingResource

Management

2014 RepTrak Pulse Score

Interbrand Best Global Brands list 2014

CoreBrand CBI 2014

Brand Finance BSI 2013-2014

CSRHub Subcategory

Positive correlation for this system with this factor

Negative correlations for this system with this factor

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All four brand value systems include product quality and financial performance in their evaluations. CSRHub has metrics that cover Workplace & Employee activity and Leadership Ethics & Trust. CSRHub’s transparency measures should tie to tests of whether a brand’s information is Publicly Available. CSRHub measures product sustainability, but the sustainability of a product may not relate to its quality. CSRHub does not explicitly include intellectual property or financial performance in its scores.

46 of the companies in the study were rated by all four data sources. We did an additional analysis on just these 46 companies. We found positive correlations again between CSRHub ratings on Compensation & Benefits and Environment Policy and Reporting for this smaller, but more consistent data set.

Next steps

We have shown a correlation between brand value and sustainability across four different brand value measurement systems. However, we have not shown “causation.” To show causation, we must repeat these studies over time, look for predictive patterns, and better define which sustainability programs have the most effect on brand value. With further research, we believe sustainability managers will have more evidence that brand managers should become involved in and support sustainability-related programs.

About the Authors

Jennifer Saunders holds a degree in chemical engineering from Melbourne University, a postgraduate diploma in management from the Melbourne Business School, and certificates in sustainability reporting and stakeholder networks approaches to socio-political risk. She worked for design and manufacturing multinationals for 15 years. Her main focus was on engaging cross-functionally to collect and analyse design performance data, report on sustainability metrics, optimize processes and manage supply chain projects. She recently re-located from Australia to the Pacific Northwest where she has further fostered her career to focus on sustainability working with CSRHub.

Bahar Gidwani is CEO and Co-founder of CSRHub. He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. Bahar is a member of the SASB Advisory Board. He plays bridge, races sailboats, and is based in New York City.

Brand Value System ProductWorkplace & Employees

Intellectual Property

Leadership Ethics & Trust

Financial Peformance

Info Publicly Available

2014 RepTrak Pulse ScoreInterbrand Best Global Brands list 2014CoreBrand CBI 2014Brand Finance BSI 2013-2014

Contributing factorNot evident

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About CSRHub

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information. It covers over 14,000 companies from 135 industries in 127 countries. By aggregating and normalizing the information from 380 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

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