Earlier this week Corporate Knights (CK) announced its Global 100 list of the world’s most sustainable corporations for 2013. This year the first company on the list, and hence, perhaps, the most sustainable company in the world, was Umicore, the Belgium-based materials technology and recycling company.
Every time a new sustainability ranking is released, questions are raised about the value of these rankings and what we can really learn from them. This year’s Global 100 is no different. While one obvious question is whether Umicore is really the most sustainable company in the world, other interesting questions arise, such as if it is possible to compare companies from different sectors like the Global 100 does, can we learn anything from this ranking on the current state of sustainability in business and who reads it anyway.
Today we will answer all of these questions and some more. Here we go.
In the next step, companies in the shortlist are assessed against a list of 12 key performance indicators (KPIs), including energy and water productivity, innovation capacity, CEO-to-employee pay ratio, percentage tax paid and leadership diversity. For each KPI, companies are ranked and then percent-ranked against all same-industry group peers within the ranking coverage universe. Finally, the Global 100 is comprised of the highest ranking companies in the shortlist subject to each industry group's cap.
The main disadvantage of such a comparison is that, because it is based on the ‘best in class’ principle, it is biased towards companies that do relatively well in a sector where many others lag behind. As Doug Morrow, VP of research at Corporate Knights Capital told Marc Gunther: “In some industries, the industry mean is going to be lower than others. If you happen to be a company with outstanding performance and your peers are way behind, you’re going to come out like a star.”
What we’re missing here is the sort of objective benchmark that Deloitte offers with its Zero Impact Growth Monitor. Deloitte also compares companies from different sectors, but by comparing companies’ performance to a common benchmark that tries to define what a ‘good performance’ is rather than to one another it achieves more meaningful results in my opinion. Just look at the ranking of Unilever in both cases (#1 on Deloitte, #82 on Global 100) and you’ll see what I’m talking about.
Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and Parsons the New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.
Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.