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Austin Reagan and Victoria Mills headshot

The Missing Ingredient in Corporate Sustainability Rankings

In the corporate responsibility space, lists or rankings can help stakeholders assess ESG performance and identify leaders from among those making environmental commitments – and can also help companies evaluate their own performance and attract top talent.

Companies spend countless hours every year applying to appear on elite lists, such as Fast Company’s “50 Most Innovative Companies” list, Fortune’s “Change the World” list, Forbes’ “The World’s Most Reputable Companies” list, or Glassdoor’s “Best Places to Work,” to name a few.

After all, who wouldn’t want to claim, “voted the best/most [fill in the blank] company for three years in a row!”? 

In the field of corporate and social responsibility, these kinds of lists or rankings can help stakeholders assess corporate environmental performance and identify leaders from among the hundreds that have made environmental commitments – but they can also help companies assess their own environmental performance and attract top talent.

Yet as a new report reveals, these lists should be taken with a grain of salt, because by leaving out corporate lobbying activities, top-tier rankings provide stakeholders an incomplete picture of a company’s sustainability ambitions and performance. And because they neither recognize support for nor penalize opposition to climate policy, they don’t actually measure leadership.

The urgency and magnitude of the climate challenge demands a much bigger response than cutting greenhouse gas emissions within a company’s facilities or even its entire supply chain. Only public policy can deliver the pace and scale of reductions necessary to avoid the worst impacts of climate change, which is expected to cost the U.S. economy between $280-520+ billion annually by the end of the century.

As the co-founder and executive director of InfluenceMap notes, “Judging companies solely based on operational and product emissions is insufficient.” Or as the Harvard Business Review has noted, “Green ratings ought to include political transparency scores to get a fuller picture of corporate greenness.”

Why, then, does only one of the top corporate sustainability rankings recognize businesses for lobbying for pro-climate policies? 

The short answer is a lack of transparency around lobbying activities, whether related to climate change or anything else.

Fortunately, this is starting to change. Shareholder resolutions demanding transparency on corporate lobbying activities continue to grow in number, as do shareholder resolutions demanding analysis of climate risk. As these pressures converge, it will create a clear opportunity for business leaders to show leadership by making sure their political activities match their sustainability rhetoric.

In the meantime, ranking entities could improve transparency by recognizing or even requiring disclosure of corporate engagement in climate policy. This would enable ranking entities to give their audiences ‒ consumers, investors, employees and companies themselves ‒ a more complete picture of a company’s sustainability performance.

This is of course easier said than done, and many questions remain, such as how to evaluate and score lobbying activities consistently across rankings. The new report, The Blind Spot in Corporate Sustainability Rankings: Climate Policy Leadership, recommends that as a starting point, rankings entities ask companies questions drawn from the U.N. Global Compact Guide for Responsible Corporate Engagement in Climate Policy. The important thing is to begin collecting this information in some form.

The most powerful tool companies have to fight climate change is their political influence. Only when sustainability rankings reflect how companies are using that influence can they truly show what leadership in sustainability looks like. And that’s a list worth striving to be on.

Image credit: Jeremy Goldberg/Unsplash

Austin Reagan  and Victoria Mills headshotAustin Reagan and Victoria Mills

Victoria Mills is a managing director at Environmental Defense Fund. She leads EDF’s work with companies to advance public policies consistent with their climate and energy goals. Austin Regan is an outreach coordinator at EDF He provides research and support for corporate climate policy engagement.

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