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Intel (NASDAQ:INTC) has passed ModernGraham’s financial analysis, so now I want to know how well Intel manages its internal operations, its people and community relations, and corporate governance. A growing number of investors are examining a public company’s ESG performance data to make to more informed investment and business decisions. ESG data is typically disclosed through a company’s annual sustainability report. Companies are voluntarily disclosing ESG data because stakeholders, especially the capital markets, value the data as a proxy for efficient operations, responsible people and community relations, and sound governance.

Analysis of Intel’s ESG performance. The chart below shows Intel’s ESG disclosures in 13 categories compared to the average industry performance for 10 top performing peers in the high tech sector. The first column provides an aggregate ESG score for Intel of 71, which is very robust compared to the industry average of 34. Note that aggregate ESG scores range between 0 (no disclosure) and 100 (full disclosure). “NA” means the information is not available.

A Snapshot of Intel’s 2012 ESG Performance in 13 Categories

At a glance, you can see that Intel’s 2012 CO2 and GHG emissions and water usage significantly exceed industry averages. On the face of things, it may be that Intel simply produces more product than its competitors, so it uses more natural resources. So we look to Intel’s 2012 Energy and Waste intensity metrics, and they show that Intel uses more energy and water as a percentage of sales versus the industry average. Energy and Water Intensity metrics are also available as a percentage of employees, assets and EBITDA. Bottom line, Intel’s intensity metrics raise questions about operational efficiency. There may be very sound reasons for Intel’s energy and water intensity compared to its peers. More in-depth analysis of Intel’s “E” metrics are available through Bloomberg, and they might explain Intel’s intensity metrics, but this level of analysis is beyond the scope of this blog.

Turning to the “S” of ESG for Intel, note that Intel employs fewer women than the industry average. Intel's Community Spend is only 20% of the industry average. And, Intel's Investment in Operational Sustainability is not available, even though the industry average is almost $10M. As a proxy for responsible people and community relations, these few metrics raise questions for me about Intel’s socially responsible commitment to people.

So given the questions raised above, why is Intel’s aggregate ESG score of 71 so robust? When analyzing big data, I’ve learned it is important to look at trends. Consider Intel’s ESG disclosure trend, which is available from Bloomberg and covers the years 2005-2012.

INTEL’s Composite ESG Score Between 2007 -2012

2005

2006

2007

2008

2009

2010

2011

2012

33

43

56

66

74

75

75

71

The table above shows that although Intel rapidly increased its ESG disclosures during 2006-09, ESG disclosures have flattened out since then, and even decreased. Perhaps Intel’s downward trend is strategic, purposefully backing off ESG disclosures until the competition catches up. Another explanation might be that while the capital markets credit Intel for robust ESG disclosures, Intel’s intensity metrics (which are a proxy for operational efficiency) raise questions, thus contributing to a downward trend. One thing is certain: once a company decides to compete on sustainability through ESG disclosures, it must show continuing improvement year to year to maintain a competitive position.

Lesson: Public companies (and the private companies who do business with them) need to recognize that best practices for sustainability disclosures include standard ESG aggregate data like what is presented above. When companies in an industrial sector first disclose sustainability performance, aggregate ESG scores reflect the level of disclosure. Once ESG disclosures are mature for an industry sector, intensity and productivity metrics can be calculated as proxies for operational and management efficiency. Companies that do not disclose ESG data at all risk being eliminated in a competitive situation because of the appearance of risk and lack of transparency and accountability. For a more detailed explanation of ESG data as a game-changer, read this white paper.

Where does this data come from? Since 2009, Bloomberg Finance has uploaded public company ESG data to its financial service platform. Corporate ESG data is typically released through annual corporate sustainability reports. Bloomberg Finance dashboards now contain public corporate financial and ESG performance data, and this information is available to subscribers via nearly 400,000 Bloomberg terminals installed in investment and financial institutions throughout the world, including Fortune 500 CFO offices, academic settings, and public libraries. Anyone with access to these terminals has access to the information.

Disclaimer: The author has never held a position in INTC and has no intention of changing that position within the next 72 hours.

Source: Intel: Environmental, Social And Governance Analysis