When Jeff Swartz, CEO of Timberland, was buying computers for his footwear-and-apparel company a few years ago, he had questions for a salesman from Dell. “I told him that part of how we decide is based on environmental stewardship,” recalls Swartz. “The salesman said, ‘Our founder is very serious about running our business that way. I’ll ask him to call you.’?” Right, thought Swartz. Michael Dell is going to call me.
But that’s exactly what happened. Dell called Swartz and explained his theories of environmentalism and frugality: that minimizing waste is good for the bottom line. “I was impressed,” Swartz says. So much so that Timberland gave its business to Dell.
It’s an example of the kind of commitment that helped Dell earn the No. 1 spot in NEWSWEEK’s 2010 Green Rankings. Dell got high marks for its strong environmental policies, including free recycling of products worldwide and a ban on the export of e-waste to developing countries. But while feel-good policies may win the trust of potential customers, offering more efficient products closes the sale. And Dell has figured out how to do both, designing desktops and laptops that consume 25 percent less energy than systems produced in 2008. Dell figures these efforts, along with others, have saved its customers more than $5 billion in energy costs over the past few years.
Tech companies dominated this year’s Green Rankings—in part because they make low-impact products, like software, that inevitably have a smaller environmental footprint than, say, a utility (though PG&E did hit No. 20 on the list, thanks to a commitment to renewable energy). But bottom-line considerations are a big part of what’s driving tech companies in the green direction. In their quest to create products that are cheaper to manufacture and operate, tech firms are devising solutions that have the added benefit of saving energy or reducing waste. Hewlett-Packard, No. 2, says its current IT systems use 66 percent less energy than those designed in 2005. “A lot of the innovation in this space is coming out of business pressure,” says Michael Mendenhall, HP’s chief marketing officer.
For many tech companies, cooling their data centers requires enormous amounts of energy. Yahoo, No. 9, has been a leader in designing environmentally sustainable data centers, including a new facility in New York that consumes 40 percent less electricity and 94 percent less water—enough to provide drinking water for 200,000 people for a year—than conventional data centers.
NEWSWEEK’s goal in these rankings is to quantify companies’ actual environmental footprint, policies, and reputation. To accomplish this, we joined forces with top environmental researchers: MSCI ESG Research, which tracks environmental, social, and governance data; Trucost, which specializes in quantitative measurements of environmental performance; and CorporateRegister.com, the world’s largest directory of sustainability and environmental reports. Our editorial partner, ASAP Media, founded by Peter Bernstein and Annalyn Swan, coordinated the project.
We started with the 500 largest publicly traded U.S. companies, as measured by revenue, market capitalization, and number of employees. Then we gave each one of them a Green Score, which is calculated using the following three component scores. The Environmental Impact Score, compiled by Trucost, is based on more than 700 metrics, including greenhouse-gas emissions, water use, and solid-waste disposal. The Green Policies Score is based on data collected by MSCI ESG Research, and reflects an analytical assessment of a company’s environmental policies and initiatives. The Reputation Score is based on a survey of academics, environmental officers, and CEOs. To calculate a company’s overall ranking, the three component scores were standardized, combined using a weighted average (45 percent for the Environmental Impact Score, 45 percent for the Green Policies Score, and 10 percent for the Reputation Survey), and mapped to a 100-point scale.
We made two important changes to the methodology this year: we included a measure of how much data each company discloses in its Environmental Impact Score, and for financial-services firms we considered the environmental footprint of companies in their investment and lending portfolios. Because of these changes, the scores are not comparable to the 2009 rankings.
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The methodology was created in consultation with an advisory panel, whose members served independently of their respective organizations. Panelists include John Elkington, executive chairman of Volans and cofounder of SustainAbility; Daniel Esty, Hillhouse professor of environmental law and policy at Yale University; Majorie Kelly, senior associate at the Tellus Institute and cofounder of Business Ethics; Tom Murray, a managing director in the Environmental Defense Fund’s Corporate Partnerships Program; Wood Turner, executive director of Climate Counts; David Vidal, research director of Global Corporate Citizenship at the Conference Board; and Deborah Wince-Smith, president and CEO of the Council on Competitiveness.
For the 2009 Green Rankings list go to greenrankings2009.newsweek.com