Whenever Corporate Knights releases its rankings of corporations, we inevitably receive letters complaining that specific companies selling “sin” products made the cut.
The most controversial companies are those making tobacco products and weapons of war – military contractor Raytheon, for example, ranked 8th on our S&P 500 ranking of clean capitalism leaders this year. But even the inclusion of certain mining and petroleum companies draws the ire of some readers.
And so it should. But it’s important to emphasize that our rankings are intentionally designed to be product- and service-agnostic. This means no subjective indicators or exclusionary screens are used to separate the so-called sinful from the virtuous. We prefer to avoid the Star Chamber approach.
Corporate Knights believes a much more instructive and ultimately impactful approach is to use resource- and social-productivity metrics, increasingly available through corporate disclosure, to rank the world’s clean capitalism leaders.
This means a company is measured by how efficiently it uses energy and water, how much waste and greenhouse gas emissions it generates relative to the economic wealth it creates, and whether its leadership structure reflects the diversity of the society and marketplace in which it operates.
We look at employee turnover rates, which are an indication of worker happiness, and we look at what CEOs are getting paid relative to the average worker. Is workplace safety an issue? Are corporations paying their taxes and keeping up with their pension fund obligations? Is the compensation of senior officers tied to these metrics?
If such metrics are not disclosed, corporations in our rankings are penalized. Maybe next year they’ll think twice. Corporate Knights believes that even resource-productive and responsible companies should only be rewarded if they choose to be transparent about these metrics in the public realm.
“Our theory of change is that if you can objectively score companies on meaningful criteria and those scores can be used to influence market forces, it will be possible to divert capital away from inefficient, irresponsible firms and toward more resource-productive and responsible ones,” says Corporate Knights president Toby Heaps.
This approach isn’t perfect. It doesn’t capture contamination of ecosystems, land grabs in Africa, underhanded lobbying tactics, or poor treatment of civilians in foreign countries (not yet, anyway). But we can always shine a light on those behaving badly in different areas.
What the approach does is set some objective and transparent ground rules on which to measure and recognize progress.
As Heaps points out: “There are few big firms that do not have at least a few serious downsides.”