The 100 Most Sustainable Global Companies

from Corporate Knights

Every year the Canadian-headquartered firm Corporate Knights (publishing, research) ranks “the world’s most sustainable companies,” from a universe of 4,000 global enterprises with market cap of at least US$2 billion each. The research team applies 14 metrics in its analysis of “corporate sustainability” to evaluate the management and governance of the sustainability journey.

This year’s list was unveiled at the annual meeting of the World Economic Forum in Davos. Among the top 100 “most sustainable companies” are firms headquartered in the USA, the Netherlands, Germany, Switzerland, Norway, Denmark, France, the United Kingdom, Finland, Brazil, and other nations. The firm ranked #1 by Corporate Knights is Siemens (Germany’s giant industrial manufacturer); #2 is Storebrand ASA (Sweden-insurance); and #3, Cisco – IT leader — USA. In the Top 10 rankings, there are two US firms (Cisco and Johnson & Johnson); in the next 10 rankings, there is one (McCormick & Co); and in the next 10 (#20 to #30) there is one – Allergan (healthcare). Overall, the USA had the most companies in the rankings: 19.

Among the key metrics for this important Global 100 ranking by Corporate Knights: the level of executive compensation. The ratio of CEO pay to average worker is considered. This is interesting to note going forward; in 2017 under Dodd-Frank rules (unless the rule is rescinded in some way) American companies will have to start publishing the ratio of CEO pay comparisons to the median worker. The Glassdoor web site in August 2015 stated that this ratio is 204 times (CEO to median pay). That ratio will be reported by US public companies beginning this year.

Below is an article on The Global 100 Most Sustainable Companies list and background information by Forbes staffer Jeff Kauflin, who writes on management and leadership. He’s written for Fast Company and Business Insider in the past.

With 2016 being the second-warmest year on record, and with issues like high executive pay and diversity gaining more awareness, you may be curious to know what companies care most about sustainability. Since 2005, Toronto-based magazine and research firm Corporate Knights has put together the Global 100, an annual list of the world’s most sustainable companies. Using publicly available data, Corporate Knights rates large firms on 14 key measures, evaluating their management of resources, finances and employees.

For the ranking, Corporate Knights considers about 4,000 companies with market values of at least $2 billion (methodology details below). It’s an intensive research undertaking, taking about 1,000 hours each year to produce. Corporate Knights just released the 2017 edition and will present the results today at the World Economic Forum in Davos, Switzerland.

Siemens, the German industrial conglomerate whose businesses range from power plants to medical imaging machines, took the top spot. It was the most energy-efficient firm in its sector, producing more revenue per kilowatt used than any other industrial corporation. Siemens scored highly on nearly every metric in Corporate Knights’ ranking, such as having a low carbon footprint and low employee turnover. The conglomerate is also dedicating a growing portion of its business to creating environmentally friendly infrastructure, with products like green heating and air conditioning systems.

Norwegian insurance company Storebrand ASA came in second. Across all measures, it performed strongest on executive pay. Storebrand’s CEO gets paid just 12 times more than the average Storebrand employee. That may sound like a huge gap, but among firms in the MSCI All Country World Index (ACWI), a basket of stocks designed to represent a wide range of companies across the globe, CEOs make 115 times more than their firms’ workers.

“Scandinavians tend to be more rational about many business practices,” says Corporate Knights founder Toby Heaps, who’s critical of firms with sky-high CEO salaries. “I have yet to see compelling academic evidence that you generate additional shareholder returns by paying CEOs excessive salaries.”

American networking technology company Cisco ranked third on the Global 100 and fared particularly well on Corporate Knights’ diversity measure: 38% of Cisco’s senior executives are women, compared with 21% for ACWI companies, according to Heaps. Corporate Knights doesn’t currently track racial diversity. Heaps says the available data isn’t as reliable, but thinks it’s just a matter of time before it becomes standard.

Heaps points out several ways in which Global 100 companies differ from the ACWI basket. At 80% of Global 100 firms, top executives receive higher bonuses if the company meets sustainability targets. Across the ACWI, only 23% of companies offer such bonuses. Global 100 CEOs make eighty times the salary of average employees, while ACWI company CEOs make 115 times the rank and file.

For pension payments, Global 100 firms contribute almost twice as much per employee compared to all ACWI companies. 28% of board seats at Global 100 firms are held by women compared with 21% for the broader ACWI. And Global 100 organizations are 25% more energy efficient.

You might think companies that invest heavily in sustainability might incur higher costs and become less profitable. But the Global 100’s stock returns suggest otherwise. If you had invested $100 in Global 100 companies in 2005, it would have been worth $232 at the of 2016. If you did the same for the ACWI, you’d have $208. In other words, the Global 100’s cumulative return is 24 percentage points higher than the ACWI benchmark.

The countries with the biggest share of Global 100 companies were the U.S. (19), France (12), the U.K. (11), Canada (6), Germany (6) and the Netherlands (5).

The World’s Most Sustainable Companies 2017 – See Full List Here – http://www.corporateknights.com/magazines/2017-global-100-issue/2017-global-100-results-14846083

 

Article Sources: G & A Institute, Forbes and Corporate Knights

Methodology details – www.corporateknights.com/wp-content/uploads/2017/01/2017-Global-100_Methodology-Final.pdf

There is more information at Corporate Knights (“the Magazine for Clean Capitalism”) at: http://www.corporateknights.com