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The 100 "Most Sustainable Companies," 2006 Edition
Joel Makower, 28 Jan 06

The 2006 Global 100 Most Sustainable Corporations, the second annual such rankings, has just been released at the World Economic Forum conference in Davos, Switzerland. The list was compiled by Corporate Knights and Innovest Strategic Value Advisors.

I was critical of last year's initial rankings -- not the rankings themselves, but aspects of the methodology, and the transparency behind them. Among the questions I raised:

Were the Global 100 companies really all that much better than the next 100? Were some of the Global 100 (beyond the three companies singled out) far better than some of the others? (Should it really have been, say, a Global 63?) What about sectors -- did some of the sectors perform much better than others? Are there some that are missing altogether?

Not all of these questions have been answered in the 2006 version, but I think the organizers have done a better job in providing context.

Say the organizers, in a helpful FAQ section:

The Global 100 companies are therefore sustainable in the sense that they have displayed a better ability than most of their industry peers to identify and effectively manage material environmental, social and governance factors impacting the up (opportunity) and down (risk) sides of their business.

Innovest says its methodology compares companies to their sector peers on a "best-in-class basis," rather than appraise them on absolute performance. For the Global 100, it selected 100 leaders from the MSCI World Index "that demonstrate exceptional capacity to address their sector-specific environmental, social and governance risks and opportunities." Innovest says that the Global 100 represent "approximately the top five per cent performers in each of the industry groups making up the MSCI World Index."

It's still far from perfect. For starters, there are lots of great leadership companies not included in the MSCI index, especially smaller firms that are setting high bars on sustainability. And it's unclear how a single "best of" list can include a bank, a mining company, a food retailer, and an electronics manufacturer, even though each was rated relative to others in its own sector. Each of these companies has different environmental and social impacts and different pressures from stakeholders, the two main drivers of companies' sustainability efforts.

Still, I'm feeling less critical this year. There's more background information, some interesting insight on who was added and deleted from last year, and some other useful information. With all their imperfections, the Global 100 ratings are probably the best indicator of which large companies around the world are leading the race to the top.

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Comments

The Limits of Davos [click here]


Posted by: MKD on 29 Jan 06

I would be interested to see if the ongoing impacts of the products that these firms produce are also considered. For example, I notice that Coca-Cola are featured - what are the ongoing sustainability impacts from the worldwide consumption of sugary soft drinks and the increase in childhood obesity and diseases like diabetes (from our obsession with fast food convenience), or the implication sof disposing of the waste bottles particularly the PET variety (not all are recycled, and many find their way into rivers, streams and oceans as litter, or get mashed into landfill). And have these factors been considered in the assessment of that company's approach to sustainability.

Similarly with mining - the ongoing impacts can be long lasting and significant, particularly if social costs and rehabilitation conditions are glossed over, or ignored completely (as may well be the case in less developed nations where the benefits of the resource are seen to outweigh the cost of their extraction).

And how many of these companies also demand that their suppliers and customers demonstrate a commitment to sustainability in either the provision of raw product, or the end use and/or recycling of the final product once it has been consumed in the market?

In my quick (and I do mean quick) browse through the list, without delving into the 'devil in the details', I wasn't absolutely convinced that all those names deserved to be there, particularly when compared to what some smaller companies are doing to advance sustainability.


Posted by: Michael on 29 Jan 06

Who should be on the list? What smaller companies should we know about because they are advancing sustainability?


Posted by: Will on 30 Jan 06

Their methodology section is really weak, and you have to purchase all the company reports. After reading through their site, this list raises a greenwashing red flag for me.


Posted by: Katherine on 30 Jan 06

Will,

Even a quick look through these pages at all that is happening out in the world of WorldChanging provides much greater examples of advancement of sustainability - and all of them much more significant and far reaching that a company who's latest product is yet another can of soda which purports to be hipper, cooler, tastier, and have less sugar than the last company selling cool, hip, non-sugary lollywater.....


Posted by: Michael on 31 Jan 06



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