By Graham Sinclair
On August 20, Fortune Magazine released its first companies’ Change the World (CTW) ranking of “businesses that are doing well by doing good." The Fortune cover story aims to answer the small question: Is capitalism a good thing? It’s a huge ask, and hats off to Fortune for attempting to add to their rankings franchises.
Fortune’s approach lists 51 companies that made “sizable impact on major global social or environmental problems as part of their competitive strategy.” The timing for the project is attributed by Fortune editors partly to the Pope’s calls for a rethink of consumption capitalism and the role of business in society and the planet, highlighted in Vatican's encyclical. No doubt it's also in time for the Pope’s visit to the U.S., around the U.N. Sustainable Development Goals launch in New York in late September 2015.
Fortune is a dominant brand in business rankings, at least in OECD markets. Fortune lists include annual rankings of “the world’s top companies and executives” and are often their best-selling issues on newsstands. Adding CTW is a calculated risk, shared with FSG, a consultancy, and Harvard Business School professor, Michael Porter, best known for his strategy work (Porter's 5 Forces) and lately for a pivot into shared value, leading to the Shared Value Initiative.
Reaction to CTW has been mixed. Fortune did a decent job marketing the rankings using its channels, to audiences on CBS, Facebook and Fortune.com, if not always coherently. The ranked companies (for example, Starbucks and Discovery) have been tipping their hats to CTW, as one would expect from company PR professionals and as expected in any companies ranking business model: Any ranking relies on the PR multipliers.
Some company mentions have made more, and some less, of the Porter and FSG input. All sustainability practitioners may need to reference it in some way going forward. Opinionistas have ranged from “where’s the ranking?” by Andrew Winston in HuffPo, to “only seven European companies” flagged on Reddit, to the comments section weirdness on Fortune editor Alan Murray’s LinkedIn post at launch. Murray may have sparked that with his followership by throwing in an Ayn Rand reference or his hyperbolic close: “The future of capitalism — and the future of mankind — depends on it." It's probably part of the journey of the former deputy managing editor at the Wall Street Journal, who has had a convoluted history on the topic of materiality of environmental, social and governance (ESG) factors as material to business strategy (remember Will 'Social Responsibility' Harm Business?).
Everyone reading TriplePundit has moved well beyond the idea of profit motive as the sole factor for business or professional success. Sure, we want to test the ROI of sustainability, but stakeholders have replaced shareholders in the last decade. In fairness, Porter’s shared value pivot only found full voice in his 2013 TED Global. But how many sustainability practitioners today are convinced by the contention in the Porter and Kramer 2011 HBR article that “most companies remain stuck in a 'social responsibility' mindset in which societal issues are at the periphery, not the core”? Yet firms lacking strategic citizenship remains the “big idea” for CTW in 2015. Is this new? Is it innovative? Is it representative?
Strangely, the 50 companies became 51 when the adjudicators could not break the tie for first place, split between London- and Kenyan-listed telecoms majors Vodafone and Safaricom, respectively. Dale Buss, posting on Brandchannel, spotted that there is no big oil or big manufacturers, and the shocker: Ikea and Nike are on the list, but Apple is not.
Kramer claims the combination of doing good business and society is “the magic to getting on this list.” CTW claims that the world mostly has U.S.-headquartered firms that get it right: 24 of 51. This U.S. overweight may reflect the familiarity of Fortune’s readership or FSG’s influence base, but if CTW seeks to be changing the world, a more global lens makes sense. Geographic diversity would increase the opportunity for alternative ideas from other business cultures, models or widgets. My experience in frontier and emerging markets suggests more CTW answers will be ideated, developed and/ or executed by companies headquartered outside the U.S. in future years.
What are the criteria that reveal to us these role models? Not clear, and that undermines this valiant effort. The "magic" is lost. Rankings are all about leveraging the intrinsic competitive instinct in firms, and their employees. The 1997 American romantic comedy for which Jack Nicholson and Helen Hunt won the Academy Award, As Good as It Gets, has an iconic scene in which Nicholson’s (disagreeable) character Melvin Udall fumbles his way to that famous compliment: “you make me want to be a better man”. Does CTW 2015 make companies want to be better companies, or professionals want to work for them, with them or consume their products? Maybe, maybe not. CTW methodology is opaquely described in a classic black box of barely 240 words. Murray claims “academics and thought leaders were involved, with 19 journalists credited led by Erika Fry." The list’s adjudication vagueness is also unhelpful in assessing the overlap with members of the Shared Value Initiative or clients of FSG or the advertisers on Fortune properties.
Designing new ratings, rankings or indexes is never easy. My advice in 2014 to the Gates Foundation as they reviewed their funding of aspirational indexes (Access to Medicine Index, Access to Nutrition Index) and industry reviews like SustainAbility's Rate The Raters Project offer advice for the CTW brain-trust. The three critical components of any successful (read: influential and long-standing) index are:
So what’s the critical optimist to make of this -- is this as good as it gets? Fair play to Fortune and partners for getting this up. Sustainability is hard work and incremental change almost always deserves a round of applause. But is this as good as it gets for a list of companies with “innovative strategies that positively impact the world”? We do not need another index. We do need any insightful index to review and rank companies, governments, cities or citizens making stuff happen on one planet. Will CTW get closer to an Oscar-winning performance in 2016? In a competitive world, here’s hoping CTW -- and the threat of substitutes -- sharpen the picture of new models and new companies that change the world.
Image credit: Flickr/Paul Bica