Newsweek released its 2016 Green Company rankings last week, which assess the top 500 companies by market capitalization, both globally and in the U.S., for corporate sustainability and environmental impact. The rankings, which are based on the year 2014, are interesting for a number of reasons.
The highest ranked company in the world is Irish pharmaceutical giant Shire PLC, which received a score of 87.7 percent out of a possible 100. In the U.S., however, Hasbro, the toy company, was ranked No. 1 with a slightly higher score of 88.1 percent. Hasbro did not make the global list because it isn’t big enough.
These two companies fared well elsewhere, though not necessarily at the top of the heap. Hasbro was ranked third in CR magazine’s list of 100 Best Corporate Citizens, coming in behind Microsoft and Intel (PDF). Meanwhile, Shire was ranked No. 2 among pharmaceuticals in Global 100 Sustainability Index.
These small discrepancies show that the rankings are pretty consistent, though not an exact science. Of course, it all depends on the criteria used and the weighting of those criteria.
The Newsweek poll was developed in collaboration with Corporate Knights, HIP (Human Impact + Profit) Investor Inc., and leading sustainability minds from nongovernmental organizations and the academic and accounting communities including L. Hunter Lovins and William McDonough.
While the partners this year were new, the criteria remained the same. They were based on eight indicators, listed here with their respective weightings.
- Combined energy productivity (15 percent)
- Combined greenhouse gas productivity (15 percent)
- Combined water productivity (15 percent)
- Combined waste productivity (15 percent)
- Green revenue score (20 percent)
- Sustainability pay link (10 percent)
- Sustainability board committee (5 percent)
- Audited environmental metrics (5 percent)
More details of the scoring methodology can be found here. The largest item, the green revenue score, was determined by HIP (Human Impact + Profit) Investor. It relates to the portion of each company’s overall business, in terms of sales, that can be considered green.
The ratings are based on the core principles of transparency, objectivity, public data, comparability, engagement and stakeholder feedback.
When comparing the U.S. and global rankings, it’s interesting to note that only one U.S. company, second-ranked Nike, made the global top 10. Rounding out the U.S. top 10 were: Hershey, NVIDIA, Biogen, Ecolab, Rockwell Automation, MetLIfe, Coca-Cola and Oracle. Global sustainability leaders were: Shire (Ireland), Reckitt Benckiser (U.K.), BT Group (U.K.), Swisscom (Switzerland), Essilor International (France), Nike (U.S.) Unilever (Netherlands), Sky PLC (Multiple), Siemens AG (Germany) and Schneider Electric (France).
Of course such a list cannot be without contention. Assumptions must be made as to what to include and what to ignore. This list normalizes a company’s consumption and waste as a percentage of sales. That means that if a company sells enough product, it can use a tremendous amount of energy and generate copious amounts of waste and still be considered green.
Also overlooked are controversial topics like genetically modified foods, or for that matter, a company’s reputation. Monsanto ranked 22nd in the global ranking and 12th in the U.S., beating out companies like Apple, PG&E, CVS Health, Autodesk, Microsoft, HP, Novo Nordisk and numerous others that might more readily come to mind when it comes to sustainability.
That’s why rankings like this will always be somewhat subjective, since there will never be absolute agreement about what matters most.
The fact that energy efficiency and greenhouse gas productivity only account for 30 percent of the total score, when in the same issue of the magazine is a story entitled, “Melting Permafrost is Turbocharging Climate Change,” might strike some as ironic. If we could travel ahead in time and see how things will be 20, 30, 50 years from now, we’d have a better idea whether they got these ratings right. My sense is that there is a little too much business-as-usual thinking and too much weight on revenue, compensation and board composition. Not that these things aren’t important, but they are primarily tweaks that are really only needed if the company doesn’t already get it.
Still, there is potentially great value in the fact that many companies will aspire to achieve a higher rank and will modify their behavior accordingly. Participation in the survey is not optional, which means that if you’re big enough, you’re going to get ranked — like it or not. With the rising importance of reputation, that’s definitely leverage.
Image credit: Flickr/Mike Flemming