The events of the past year have demonstrated the growing relevance of the indicators used by Corporate Knights to determine its annual list of corporate leaders in sustainability.
The landmark China-U.S. climate change agreement, rising awareness and interest in the concept of “unburnable carbon,” and global momentum behind carbon pricing mean increased risk for organizations with low carbon productivity.
At the same time, populist anger is escalating against corporations that avoid paying taxes in countries where they operate, whether legal or not. British lawmakers, for example, are toying with the idea of a “Diverted Profits Tax” that would charge a 25 per cent tax rate on profits declared or discovered as diverted.
The Boardroom Accountability Project, spearheaded by New York City comptroller Scott Stringer, has rallied some of the largest pension funds in the United States to pressure large companies in their portfolios to embrace a longer-term perspective regarding executive compensation, board diversity and climate change issues.
The list goes on.
Faced with these increasingly material trends, leading companies around the world have taken remarkable action to get their proverbial house in order.
For Unilever chief executive Paul Polman, whose company is ranked 22nd in this year’s Global 100 ranking, it’s the only choice available.
“Companies that understand this and become part of the solution will have a bright future,” he told a business audience in Toronto last year. “Those that don’t will be dinosaurs – outdated, outmoded and out-of-business.”
Topping the Global 100 Class of 2015 is Biogen, a Massachusetts-based biotechnology firm that finished second last year (click here to see the company profile).
Biogen edged out fellow American pharmaceutical company Allergan, which found itself in second place in its Global 100 debut. German sportswear company Adidas finished third, followed by Singaporean real estate corporation Keppel Land and Finnish retailing conglomerate Kesko, which complete the top five.
A careful examination of the results demonstrates that no single sector has a monopoly over corporate sustainability leadership. Each company in the top 10 represents a different GICS Industry, with 42 separate industries represented throughout this list.
Patterns do begin to emerge, however, once the list is broken down by country. Jurisdictions known as sustainability heavyweights outperform other similarly sized countries, a group that includes Germany (with five companies on the list), Sweden (four), Norway (three), Netherlands (three) and Denmark (three).
The United States, with 20 companies on the list, had its best showing in the 11-year history of the Global 100. The impressive economic performance of the American economy in the face of global headwinds likely played a factor here.
|Country||Number of G100 companies|
|Belgium, Brazil, Hong Kong SAR, China, Japan, Portugal, Spain, Switzerland||1|
The Global 100, in part, rewards corporations that maximize value creation from scarce resources (click here to see the full methodology, click here to see the Global 100 financial performance). It does so by calculating resource productivity for water, waste, carbon and energy.
This means that when economic fortunes decline and a company fails to make the necessary adjustments, resource productivity suffers. This same phenomenon contributed to the presence of only one Japanese firm on the ranking this year, despite being the third-largest economy in the world.
Perhaps the most interesting pattern emerges when one begins to account for the impact of substantial domestic regulatory shifts around corporate social responsibility reporting. The Global 100 ranking is structured to reward the transparent disclosure of sustainability data almost as much as the actual performance of individual companies.
Both France (12) and Singapore (four) have taken bold steps in recent years to expand CSR reporting practices through a mix of voluntary and mandatory requirements.
“French lawmakers, through provisions in the Grenelle II Act, have had a real impact on reporting practices within France,” says Corporate Knights Capital lead analyst Michael Yow. “Singapore, meanwhile, has gradually tightened reporting guidelines towards obligatory sustainability reporting, which is expected sometime in 2017.”
China’s continued weak showing in the Global 100 could be seen as evidence of complacency regarding corporate sustainability, but separate research conducted by CK Capital suggests that Chinese disclosure practices are improving dramatically.
The Corporate Knights Capital 2014 Sustainable Stock Exchange Report documented rapidly improving levels of sustainability disclosure at Chinese companies listed on the Shanghai Stock Exchange over the past five years. Based on this finding, it’s reasonable to expect that a Chinese breakthrough on the Global 100 is likely to occur in the near future.
What’s certain is that industries are changing in a positive way. Leaders one year cannot afford to rest on their laurels as once sleeping rivals wake up to the importance of improving, measuring and disclosing sustainability performance. The fact that 34 companies on the Global 100 are new to the list this year, including three newcomers to the top 10, illustrates this well.
Simply put, more companies are realizing that they won’t rank if they don’t reveal, and this has made the Global 100 an increasingly competitive place to be.
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