The Trucost Research Process
Providing a Robust and Comprehensive Lens on Corporate
Environmental Performance
Despite growing demand for companies toprovide transparency about their environmental
performance, corporate reporting remains
inconsistent. Where there is disclosure, it isoften published in incomplete or non-standard
ways, making it difficult for market participants
to compare the liabilities of different companies.
Reporting errors can also be prevalent.
Trucost provides a robust and comprehensive
lens on the environmental performance of morethan 14,000 companies, representing 99% of
global market capitalization, through its fourstep research process.

A FOUR-STEP RESEARCH PROCESS

1

Research the Environmental Reportingof Companies

2Standardize Reported Data and Correct
Reporting Errors

3Complete Environmental ReportingGaps

4

Engage With Companies to Verify Their
Environmental Performance Profile

MINIMIZING THE REPORTING BURDEN ON COMPANIES, WHILE ENSURING
TRANSPARENCY
The Trucost research process has been developed to minimize the environmental reporting burden
on companies—also known as “survey fatigue”—while providing a transparent system forcompanies to verify their environmental performance profile and, at any time, contribute their mostrecently available data.

1 Research the Environmental Reporting of Companies
Every year, Trucost analysts research the published environmental performance information ofcompanies in annual reports, sustainability reports, websites, and other publicly disclosed sources.
Data on more than 450 environmental issues are collected, encompassing carbon and otherpollution emissions, water dependency, natural resource efficiency, and waste disposal. To makethe best use of company reporting, Trucost became a CDP Gold Data Partner in 2012, enabling
environmental data provided to the CDP Disclosure Programs to be incorporated in this step.

2 Standardize Reported Data and Correct Reporting Errors
Trucost analysts standardize disclosed environmental performance data to best practice guidelines,
including the GHG Protocol Corporate Accounting and Reporting Standard, GRI Standards, andSASB, so that it can be compared across companies, regions, and business activities. To correct
reporting errors, vigorous data control procedures are applied, from sector specialist data reviews toautomated outlier identifications and year-on-year comparisons.

3 Complete Environmental Reporting Gaps
To complete disclosure gaps in environmental reporting, Trucost supplements its research with its
proprietary economic modeling, founded on environmentally extended input-output (EEI-O)
modeling principles. Trucost’s core environmental profiling model estimates corporate

The Trucost Research Process

August 2018environmental impacts across company operations and supply chain tiers, right back to raw material
extraction and processing. An additional benefit of this step is that Trucost analysts are able toassess reported data against modeled expectations to further identify potential reporting errors forin-depth checking. There are a wide range of EEI-O models with many being publicly available, but
this can lead to a trade-off on data quality; see what sets Trucost apart below.

4 Engage With Companies to Verify Their Environmental Performance Profile
Finally, Trucost engages annually with all companies in its research universe, either by email orletter, providing the opportunity to verify their environmental performance profiles and provide
additional, as yet unreported, information. Companies are further welcomed to contact Trucost
analysts at any point in their environmental reporting cycle to provide their most recently availabledata.

WHAT SETS TRUCOST’S MODEL APART?
 Quality of Data Sources
Trucost applies best-in-class scientific literature to calculate the environmental impacts ofdifferent business activities, including industry “top-down” data from the World Bank and U.S.
Environmental Protection Agency, as well as sector-specific “bottom-up” data from the U.N. andpeer-reviewed academic studies.
 Granularity of Analysis
Many publicly available EEI-O models may cover only a small proportion of business activities.
Trucost’s global model is derived from the U.S. economy, due to its broad economic scope. To
further ensure the model is representative of dispersed company operations, Trucost applies
global environmental factors and expands its scope to cover approximately 500 discretebusiness activities. In particular, Trucost splits up high-impact business sectors, such as utilities
and agriculture, to account for variations within the most environmentally significant businesssectors.
 Regularity of Updates
A frequent criticism of publicly available EEI-O models is that they are out of date. Every year,
Trucost updates its environmental impact data and engages with companies to incorporate thelatest disclosed and non-disclosed environmental performance information.
 Scope of Environmental Indicators
Some models only estimate GHG emissions, but Trucost’s approach calculates theenvironmental performance of companies across more than 450 environmental indicators.
What Is EEI-O Modeling?
A traditional input-output (I-O) model is a standard business tool used by economists worldwide, including the U.S.
Bureau of Economic Analysis and the European Economic and Social Committee, to measure the interdependencies ofsectors in an economy. EEI-O modeling extends the traditional I-O model by applying sector-level environmental
emission factors. In its most basic form, the framework quantifies the economic transactions between industries thatboth produce goods (outputs) and consume goods from other industries (inputs) in the process of producing eachindustry’s own output. In other words, for a single unit of revenue in a given sector, an I-O model quantifies the amountof expenditure required in other sectors across its entire supply chain—from raw material sourcing to company
operations. When a traditional I-O model is extended to include environmental information, the framework can be used
to estimate resource use, land use, pollutants, and other environmental issues for each sector contained within theunderlying model.
Consider the example of the automobile manufacturing industry. In order to produce a single automobile, inputs will berequired from other industries, including energy, steel production, and tire manufacturing. In addition, the energy, steel
production, and tire manufacturing industries each require their own inputs, and so on, throughout the supply chain. Atraditional I-O model is able to estimate the economic transactions that are required to produce a single automobile
across the supply chain. When these economic transactions are extended to include sector-level environmental
information, it is also possible to estimate the environmental impacts and dependencies associated with the productionof the same automobile throughout the supply chain.

The Trucost Research Process

August 2018

NOTICE
Copyright © 2018 S&P Trucost Limited (“Trucost”), an affiliate of S&P Dow Jones Indices LLC. All rights reserved. Redistribution orreproduction in whole or in part is prohibited without written permission. All information provided by Trucost is impersonal and not tailoredto the needs of any person, entity or group of persons. This publication and related materials are not intended to provide and do notconstitute financial or investment advice.

DISCLAIMER
Copyright © 2018 S&P Trucost Limited (“Trucost”), an affiliate of S&P Dow Jones Indices LLC. All rights reserved.
This publication and related materials are not intended to provide and do not constitute financial or investment advice. The information inthis publication should not be construed or relied upon in making, or refraining from making, any investment decisions with respect to aspecific company or security or be used as legal advice. Trucost is not an investment advisor, and Trucost makes no representation
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