Last week in Davos, Corporate Knights announced its eighth annual Global 100 list of the most sustainable large corporations in the world. The Global 100 is a leading sustainability ranking and the number one ranked company is considered by many the most sustainable company in the world. This year it was Novo Nordisk, the Danish pharmaceutical firm.
This announcement is quite surprising. I doubt many people would name Novo Nordisk as the “most sustainable company in the world.” So it got me wondering – how does Corporate Knights actually determine which company is the most sustainable one, and is Novo Nordisk really entitled to be awarded with this title, at least for 2012?
It’s never been easy to integrate metrics into sustainability or translate environmental and social issues to a business language. It’s even harder to create a credible list comparing sustainability practices between companies. First, there’s the question of what to include under sustainability. Second, how to measure sustainable practices and third, how to create a comparison between companies from different sectors.
Corporate Knights has been dealing with these challenges in an impressive way. The 2012 Global 100 tapped intelligence from top sustainability research firms to isolate the top 10 percent of companies from a universe of 3,500 global stocks, which were then transparently ranked based on 11 indicators. As you can see from the following list, the 11 indicators were carefully chosen to reflect and evaluate various dimensions of sustainability:
Energy productivity (sales/total direct and indirect energy consumption), carbon productivity (sales/ CO2 emissions), water productivity (sales/total water use), waste productivity (sales/ total amount of waste produced), leadership diversity (% women board directors), CEO-to-average worker pay, % tax paid, safety productivity (sales/ lost-time incidents x $50k and fatalities x $1M), sustainability remuneration (whether or not at least one senior officer has his/her pay linked to sustainability), innovation capacity (R&D/sales) and employee turnover.
For each of these indicators, companies received a score, ranging from 0-100 percent. The score was usually based on two sub-scores: a group percentile score, comparing the company to its industry group peers, and an improvement factor score, measuring the trailing two-year improvement in the entity’s group percentile score. The final score is a simple average of the 11 indicator scores.
My first thought when I saw the list of indicators was that it looks like someone from the Occupy Wall Street movement prepared it with all of the attention it gives to fairness, diversity and good citizenship parameters. My second thought was that it’s no wonder there are only eight American companies on the list, and the first one, Intel, is only ranked in 18th place. What chance do American companies have to stand out in a list that gives so much weight to social principles against companies from Europe and Asia? Not much, and that’s even before we start looking at the environmental indicators, where European companies are also generally more progressive. Comparing countries, the UK leads with 16 companies on the list, followed by Japan with 11 and France and the US with eight.
Although the list of indicators looks very comprehensive, there are still few important indicators that are missing. There is no mention of human rights, what happens on the supply chain, level of engagement with stakeholders other than employees, existence of climate change policy/goals and transparency (Does this company publish a verified sustainability report? Does it report to the CDP?). Of course, you need to stop somewhere as the list of parameters could be endless, but these are still important sustainability issues that should be taken into consideration in a list that is proud to be a leading standard of sustainably ranking.
Interestingly, Novo Nordisk excels not just in the parameters that landed it in 1st place, but also in the ones that are not included. The company scored top quartile performance in energy productivity ($4,851 in revenue generated per unit of energy consumption, compared to a pharmaceutical sector average of $3,603), carbon productivity ($68,585 in revenue generated per unit of carbon emitted, compared to a pharmaceutical sector average of $56,414) and pay equity (CEO/average employee remuneration ratio of 15 vs. a pharmaceutical sector average of 93). The company is also the only pharmaceutical company in the Global 100 to report linking CEO remuneration to corporate performance in sustainability measures.
What other impressive practices weren’t been taken into consideration in the ranking process? First, Novo Nordisk is on record proclaiming that access to essential medicines is a human right, and it sells human insulin (the most basic kind) to 33 of the world’s poorest countries at no more than 20 percent of the average price in the western world. Another one? Their sustainability report has been integrated, since 2004, into their annual report. One more? As my colleague Kara Scharwath reported here last December, the company ceased the practice of using live animals for quality testing of existing products.
It’s interesting if it is just a coincidence that Novo Nordisk performs so well with regards to sustainability indicators that weren’t taken into account. It’s hard to say, but I believe that in this case it shows that Novo Nordisk has truly integrated sustainability into its business model and has become what John Elkington calls a “corporate honeybee.” Are they number one in the world? It’s hard to tell, but they’re definitely one of the most sustainable companies around.
Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.