By Chea Srun | XQuant
The CSR reports
Most global companies are now publishing a CSR report (also sometimes called a Sustainability report, or ESG report) which informs their stakeholders and customers about the company's goals and achievements on Environmental, Social, and Governance related issues.
Reading those reports, one can be easily overwhelmed by the amount of information available, which often highlights the numerous achievements of the companies. Inside those reports, we can also find many ambitious ESG goals that the company plans to achieve. But what is the takeaway for the stakeholders and customers after reading those reports? It is quite easy to think that the company is an ESG champion, and be impressed by the company's commitment to mitigating climate change, improving social impact, etc.
We believe that by looking more closely at the ESG goals that the companies set for themselves, we can get some insight into the companies' commitments. For example, here are some goals that we can find from the CSR reports:
COCA-COLA - 2021 Business & ESG Report
-By 2030, we aim to have at least 25% of our beverages worldwide by volume sold in refillable/returnable glass or plastic bottles or in fountain dispensers with reusable packaging
-Ensure 95% of direct suppliers achieve compliance with our Supplier Guiding Principles by 2020
-Ensure 98% of bottling partners achieve compliance with our Supplier Guiding Principles by 2020
-Make our packaging 100% recyclable globally by 2025
-Reduce absolute GHG emissions by 25% by 2030
-Reduce our use of virgin PET by a cumulative 3 million metric tons globally by 2025
-Refill or help recover 100% of bottles and cans, or equivalent to what we introduced into the marketplace, by 2030
-Refill or help recover 75% of bottles and cans, or equivalent to what we introduced into the marketplace, by 2020
-Sustainably source 100% of key agricultural ingredients (apples, beet sugar, cane sugar, coffee, corn, grapes, lemons, mangoes, oranges, tea, and soy)
-Use at least 50% recycled material in our packaging by 2030
BMW - Group Report 2021
-20 % reduction of Co² Emissions in the Supply Chain (base Year 2019)
-22 % Proportion of Women in Management Positions in the BMW Group
-30 % Share of fully electrified cars in total deliveries
-40 % reduction of Co² Emissions in Vehicle Use Phase Per Kilometre Driven (base Year 2019)
-50% Share of fully electrified cars in total deliveries"
-80 % reduction of Co² Emissions Per Vehicle in Production (base Year 2019)
-Aim to halve greenhouse gas emissions by 2030 from 2005 levels
Looking at those goals, one can ask the following questions:
-Did the company set precise, numerical targets?
-Are the targets short-term or long-term (therefore less easy to track results)?
-Have they reported the results of previous years' goals?
-Are those targets really material for the company's business?
Our methodology
We've collected over 12,000 ESG goals from the CSR reports of 200 companies from 21 countries, from 2016 to 2022. For each goal, we look at whether there is a numerical target and a due date. We then classify those goals into focuses and subthemes and apply the materiality map of the industry to which the company belongs.
Using those data, we can calculate the following indicators for each company:
A - Numerical target: % of the goals having a numerical target
B - Result reporting: % of the goals having results being reported
C - Deadline: % of goals having a due date
D - Urgency: how short-term are the goals
E - Goal quantity: how many goals are set up by the company
F - Materiality: how material are the goals
Then by combining the 6 factors above together into one, we get a score that we call the ESG Commitment score. The higher the number, the more the company appears to be genuinely committed to ESG-related issues, as seen from their CSR reports.
Results
We've applied our methodology to those 200 companies, and below are some samples we've got for the period 2016 to 2022:
COCA-COLA
Numerical targets: 100%
Results reporting: 91%
Deadlines: 95%
Urgency: 27%
Goal quantity: 44%
Materiality: 74%
ESG commitment score: 72%
BMW
Numerical targets: 60%
Results reporting: 26%
Deadlines: 99%
Urgency: 28%
Goal quantity: 46%
Materiality: 78%
ESG commitment score 56%
SAMSUNG ELECTRONIC
Numerical targets: 56%
Results reporting: 33%
Deadlines: 97%
Urgency: 69%
Goal quantity: 52%
Materiality: 78%
ESG commitment score: 64%
EXXON MOBIL
Numerical targets: 79%
Results reporting: 21%
Deadlines: 71%
Urgency: 14%
Goal quantity: 23%
Materiality: 93%
ESG commitment score: 50%
GENERAL MOTOR
Numerical targets: 97%
Results reporting: 67%
Deadlines: 87%
Urgency: 18%
Goal quantity: 54%
Materiality: 95%
ESG commitment score: 69%
Summary
Although every CSR report might make the company look like an ESG champion, we believe that by looking more closely at the goals the company sets, we can find some more insight into the company's commitment.
The 6 factors (numerical targets, results reporting, deadlines, urgency, goal quantity, and materiality) allow us to quickly visualize the quantity and the quality of the goals set up by the companies. Those factors are combined into the ESG commitment score, which is very handy when we want to compare different companies' ESG-related goals and targets.
In fact, a company that claims to be an ESG champion while actually having a low ESG commitment score can be liable for greenwashing.
If you want to know more about how you can use those data for analyzing the company's ESG goals, please contact us at info@xquant-ai.com