Newsweek magazine just announced its first annual Green Rankings of America's 500 largest corporations--a highly subjective list considering the myriad factors that go into a company's overall sustainability So how well do the rankings shape up?
According to the Dow Jones Sustainability Indexes, a 10-year-old series of global indexes tracking the financial performance of sustainability-driven companies, corporate sustainability is based on a company's performance in a number of sectors: strategy, financial, customer and product, governance and stakeholder, and human. The Newsweek rankings calculate performance in these sectors with an environmental impact score that measures a company's total impact of global operations based on over 700 factors. The survey also takes into account a separate green policies score based on an analysis of corporate policies, and a reputation survey score derived from a survey of business leaders around the world.
But despite a commendable effort to quantify every single aspect of sustainability, the Newsweek rankings are still unbalanced. The magazine recognizes that fact, admitting in the Green Rankings overview that "Some industries are far dirtier than others: a typical financial-services company exacts a smaller environmental toll than even the best-run utility or mining company. Also, many corporations are secretive about key environmental data, if they track the numbers at all. Even among companies that do report green data, there's no uniform standard, so their numbers often aren't comparable."
That's why tech companies like Hewlett-Packard, Dell, Intel, and IBM place in the top five while Coca-Cola, the top performer in the food and beverage sector, ranks down at number 36. Tech companies often use components from other manufacturers, so they have a leg up in decreasing their carbon footprints. Companies like Coca-Cola, Kellogg, and General Mills, in comparison, are responsible for a larger portion of their products' manufacturing processes. And while a single oil company, Marathon Oil, squeaked by in the top 100, the company still suffers from a reputation score of 42.53 (out of 100)--not bad, but lower than, say, Kimberly-Clark, ranked at 120 with a reputation score of 54.29.
The rankings make more sense when looking at individual industries. While Marathon may suffer from the bias of being an oil company, it looks like a golden child of sustainability compared to ExxonMobil, ranked at 395 with a dismal (and deserved) reputation score of 8.86.
So no, the rankings aren't perfect. And investors looking to selectively place their savings in only the most sustainable companies should turn to the Dow Jones Sustainability Indexes instead. But the Newsweek rankings give large corporations a benchmark to compare and compete with each other for improved standings on the list. As bragging rights--and as a tool for public humiliation--these rankings can't be beat.