When David Roberts was growing up near the oilfields of West Texas in the early 1960s, it never got dark. Back then, oilfields were lit 24/7 by the gas flares used to burn off natural gas, a byproduct of oil drilling. The flares released massive amounts of CO2, and over time, oil companies halted that harmful practice in the U.S. But gas flares remain the norm in the developing world—and today Roberts oversees a team at Marathon Oil that's trying to end the practice. In 2007, Marathon opened a $1.5 billion liquid-natural-gas plant in Equatorial Guinea to capture the natural gas that once went up in smoke. The plant is one factor that helped Marathon, No. 100 in NEWSWEEK's Green Rankings, cut its CO2 emissions by 40 percent between 2004 and 2008—and the plant earns a profit.
It's a small example of how the economic case for going green is becoming more compelling. Economists view environmental damage as a classic "externality"—a cost that impacts society but isn't imposed on producers or consumers. But with scientific consensus that carbon emissions threaten our climate, there's growing political will to curb them, particularly with the global powers set to meet in Copenhagen in December. The Obama administration is pushing for a cap-and-trade system that would turn companies' emissions into a bottom-line cost. Smart companies are working to better understand—and cut—those emissions ahead of new regulations.
The inaugural NEWSWEEK Green Rankings recognizes those efforts. For more than a year, the magazine worked with leading environmental researchers KLD Research & Analytics, Trucost, and CorporateRegister.com to rank the 500 largest U.S. companies based on their actual environmental performance, policies, and reputation.
Ranking companies based on sustainability is a huge challenge. That's largely because comparing environmental performance across industries is a bit like analyzing whether Tiger Woods or LeBron James is the world's greatest athlete—there's an inevitable apples-and-oranges element. Some industries are far dirtier than others: a typical financial-services company exacts a smaller environmental toll than even the best-run utility or mining company. Also, many corporations are secretive about key environmental data, if they track the numbers at all. Even among companies that do report green data, there's no uniform standard, so their numbers often aren't comparable.
Despite those obstacles, we worked hard to design a ranking system that makes sense. More than half of companies' overall Green Scores are based on their environmental policies and reputation, industry-neutral metrics that help even the playing field for companies in carbon-intensive businesses. To overcome limited corporate emissions numbers, NEWSWEEK used data from Trucost, which has created a widely acclaimed system for estimating emissions of companies that fail to provide them. (Note, however, that among our Top 100 best-performing companies, 70 voluntarily disclosed the data.) Over time, we hope NEWSWEEK's rankings will become more precise as more companies begin to report their numbers. "One of the purposes of this is to improve the transparency of corporations…and encourage them to provide an even higher level of disclosure," says Thomas Kuh, KLD's managing director.
Many of the companies that finished in our Top 100 are recognized leaders in sustainability. Intel, No. 4 in NEWSWEEK's ranking, recently launched an initiative in which every employee's annual bonus is tied, in part, to how well the company does in meeting sustainability goals. Wal-Mart, No. 59, recently announced plans to create a Sustainability Index that will help consumers better understand which products sold in its stores are greener than others.
Rankings inevitably provoke controversy—and we welcome that. Our hope is to open a conversation on measuring environmental performance—an essential first step toward improving it. The NEWSWEEK Green Rankings for 2009 on the pages ahead provide a snapshot of companies poised at this most important starting line.