Part II-4 Normalizing Data for More Effective Comparisons Flashcards
serves as a useful tool to assess how well an individual company manages its material sustainability impacts
comparative analysis
Comparative analysis includes three primary components - evaluation against:
Past performance
Peer performance
Benchmarks and target
Certain questions to ask before normalizing ESG data:
Is the data already normalized, as in a percentage or ratio
Are absolute values useful on their own (i.e. in comparing against a regulatory cap, or where 0 is the ideal performance level)?
Does the range of performance on a metric vary widely, such that it would benefit from being on a common scale?
What are the key sources of information to use in normalization?
Financial statements and reports , such as regulatory filings (revenue, net earnings, etc.) SASB standards (activity metrics) Other data regarding the operating context and conditions of the company (e.g. regulatory limits and industry-specific characteristics)
Produce contextual information that is useful for analyzing information disclosed via SASB sustainability accounting metrics
SASB activity metrics
Two types of SASB activity metrics are:
High-level business data - i.e. number of employees; or
Industry-specific data points - i.e. hospital-bed days for Health Care Delivery companies
What is the best normalization metric for Environment?
Revenue basis (i.e. energy consumption as a percentage of revenue) ; or Production basis (energy consumption per ton of steel produced)
What is the best normalization metric for Social Capital?
Company output
What is the best normalization metric for Human Capital?
Generally require less normalization as they tend to be expressed as rates or percentages (e.g. injury rates or % of employees earning minimum wage)
Company’s number of employees can provide content on scale of impact
What is the best normalization metric for Business Model & Innovation?
Usually best normalized by scale of company’s operations or by using financial measures (floor area or EBITDA)
Some metrics are already normalized by revenue - such as a metric that calls for % of products by revenue that contain certain hazardous substances
What is the best normalization metric for Leadership & Governance?
Metrics ask for disclosure of fines, which generally can be normalized in relation to a company’s revenue to better assess cash flow implications
Metrics such as ethical violations don’t need normalization as the ideal number is 0
T/F - when the GHG emissions of peer companies in the industry are also normalized by company revenue, the data becomes far more comparable as users gain insight into the relative economic efficiency related to GHG emissions
True
T/F - the total water withdrawn per total inventory of rooms is a more insightful metric than the total water withdrawn per total occupied rooms for the Hotels & Lodging Industry
F - it is less insightful as it is measuring water intake for empty rooms
What might be a helpful qualitative information to assess water intake of a hotel?
The type of hotel - i.e. family hotel with a pool in a hot climate vs a business hotel
T/F - for a telecom company, normalizing energy use by the amount of data transmitted could yield a more effective rate for comparing its performance with that of its peers over time
True
