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The methodology for the Best 50 Corporate Citizens is based on environmental, social, and governance indicators found in the public domain. Scores were based on the following indicators when available:

Environmental

  • Energy Productivity: Sales ($USD) per total indirect and direct energy use in gigajoules
  • Carbon Productivity: Sales ($USD) per total CO2e emissions in tonnes (scope 1 and 2)
  • Water Productivity: Sales ($USD) per total water use in cubic metres
  • Waste Productivity: Sales ($USD) per total waste produced in tonnes

Social

  • Ratio of highest-paid executive remuneration to average employee pay
  • Number of no-lost-time and lost-time accidents and fatalities per 1,000,000 hours worked
  • Average per cent of statutory taxes paid over the last four fiscal years
  • Funded status of defined-benefit pension plan benefit obligations

Governance

  • Existence of sustainable development-themed board committee (environment, health, safety, corporate responsibility)
  • Existence of a link between sustainability criteria and a senior executive’s compensation
  • Per cent of women, Aboriginal, and visible minorities on Boards of Directors

Transparency

  • Existence of a GRI report by company; evaluation based on adherence level and declaration level
  • Percentage of voluntary data points (resource productivity and injuries) reported
    Together the above indicators are worth 85 per cent.

Relative core business impact

The relative core business impact indicator is worth 15 per cent. It examines companies based on relevant environmental and social impacts that go beyond strict resource use. Examples include sustainability-related assets under management (Financial Sector) and eco-social product differentiation (Retail Sector).

Sector Indicators

Healthcare
Sustainable Development (SD) innovation and responsible business practices

Communications and Media
SD differentiation of products/media

Financials
Proportion of sustainable assets under managements

Retail, IT
Eco-social product innovation

Oil and Gas, Utilities
Renewable energy portfolio

Transportation and Logistics
Fleet efficiency

Chemicals, Mining
Downstream impact, environmental and human toxicity

Paper and Forestry
Production from sustainable forests

Industrials and Manufacturing
Investment in resource-efficient production technologies, development of energy-efficifient products

Corporate Knights Research Group gathered the following data points which were cross-referenced with Bloomberg’s ESG data feed to ensure maximum accuracy:

Sales in $USD, 2010 fiscal year (Source: Annual Reports)

  • Rationale: Sales were used to normalize all resource data

Total CO2 emissions in tonnes (scope 1 and 2), 2010 fiscal year
Total indirect and direct energy use in gigajoules, 2010 fiscal year
Total water use in cubic metres, 2010 fiscal year
(Source: Sustainability Reports)

  • Rationale: Companies should aim to produce more goods and services while using fewer natural resources to do so

Number of no-lost-time and lost-time accidents and fatalities per 1,000,000 hours worked, 2010 fiscal year (Source: Sustainability Reports)

  • Rationale: Employee safety is of the utmost importance in protecting human capital

Existence of a link between sustainability criteria and a senior executive’s compensation, 2011 fiscal year (Sources: Sustainability Reports, MD&As, Management Circulars)

  • Rationale: Making sustainability part of the formal purview of an executive’s compensation creates an incentive among the company’s top leadership to find innovative ways to reduce the company’s negative environmental and social impacts and seek out related strategic opportunities for profit

Highest-paid Executive remuneration in $CAD, 2011 fiscal year (Sources: MD&As, Management Circulars)

  • Rationale: Companies that divert excessive compensation to just a few executives in relation to the company’s earnings may suggest conflicts of interest and sub-optimal resource deployment. Note: Lowest-paid employee’s salary is assumed to be $20,800: that of a full-time worker (40 hours per week, 50 weeks per year) at minimum wage of $10 per hour.

Per cent of women, Aboriginal, and visible minorities on Boards of Directors (Source: Management Circulars)

  • Rationale: A company that wants to attract and retain the best and brightest must show there are no glass or white ceilings

Existence of sustainable development-themed committee (environment, health, safety, corporate responsibility) on Board of Directors (Source: Management Circulars)

  • Rationale: Making sustainability part of the formal purview of the board helps to provide oversight over broad stakeholder issues from the company’s top leadership, which enhances a company’s ability to both manage risk and seek out related strategic opportunities for profit

Average per cent of statutory taxes paid over the last four fiscal years (Source: Annual Reports)

  • Rationale: Taxes are part of the social contract for operating a business in society. In the current era of large government deficits, and rising long-term commodity prices (underpinned by scarcity of resources and growing global demand/population), tax authorities are reconsidering fiscal regimes, as well as clamping down on legal tax loopholes and other vehicles that permit tax minimization. Against this context, showing which companies pay substantially lower cash tax as per cent of their reported incomes taxes at a statutory rate relative to their industry peers provides insight for a host of risk factors that could impact future cash flows. Limitation: Corporate tax strategies are plotted out over many years. A four-year tax gap calculation is not cumulative, so it may not be a sufficient time frame in some cases to provide an instructive picture of potential risks to future cash flow. This calculation also fails to capture the fact that certain companies and industries for structural, strategic and other reasons are better insulated against these secular trends than others

Funded status of defined-benefit plan benefit obligations (Source: Annual Reports)

  • Rationale: The extent to which a company provides strong pension benefits to the majority of its workforce can influence morale and generate greater loyalty from employees, which helps productivity and reduces turnover rates. The funded status percentage gives an indication of the company’s ability to honour its pension fund obligation

GRI status (Source: Global Reporting Initiative database)

  • Rationale: A company who uses the GRI framework creates a report that can be used to benchmark organizational performance with respect to laws, norms, codes, performance standards and voluntary initiatives; demonstrate organizational commitment to sustainable development; and compare organizational performance over time

TSX60 companies were contacted to verify and augment the data provided to Corporate Knights Research Group and any updates/corrections were made. Verification of numbers was also performed based on anomalous data; corrections were made if necessary.

For all private companies, data was gathered via annual reports, company website, and sustainability reports.

Because some companies have not yet reported their ESG data for 2011, the marking is based on 2010 data for environmental and social measures and 2011 data for all data points that fall under regulatory reporting requirements. All regulatory indicators that are reported regularly are from the latest fiscal year available as of March 31st, 2012.

The scoring methodology for the 2012 list is modelled from the Global 100 Most Sustainable Corporations in the World methodology.

Criteria for inclusion in the Best 50 consideration set:

As of December 31, 2010 to qualify for 2011: In TSX60, Top 50 on FP500 and/or ROB1000. Must be traded on TSX and/or have Canadian headquarters to be considered. Additional companies with significant operations in the following high-impact sectors were also added (communications, financials, forestry, mining, oil and gas, retail, utilities).

Best 50 Research Group:

Michael Yow Tung Shing: Lead analyst

Haiyi Ray Hua: Volunteer researcher

Conall Bolger: Volunteer researcher

Daniel Andrew: Volunteer researcher

Top Foreign Corporate Citizens Methodology:

Selection Criteria: Companies must be listed on the Financial Post 500, and rank among the top 10 per cent of 4,500 global companies according to the Global Sustainability Research Alliance. The Alliance was created to assist the Global 100 Most Sustainable Corporations in the World project, and is the world’s largest sustainability research consortium (formed by Global Currents Investment Management LLC & Phoenix Advisors LLC).

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