This year’s expansion of the Green Rankings to include the top 500 global companies presents a timely opportunity to reflect on some compelling regional trends. Is the same value assigned to being “green” in Europe, North America, and Asia-Pacific? What are the key sustainability drivers for companies in each of these regions? Ultimately, which countries are taking the lead?
Though sustainability has gained prominence worldwide, there are some noteworthy regional distinctions. First and foremost is the issue of disclosure, where Europe takes the clear lead. Of the top 100 global disclosure scores featured in the 2011 Green Rankings, Europe accounts for 65% (though it only represents one-third of the companies ranked), compared to 19% for North America and 10% for Asia-Pacific. These figures are broadly consistent with those published by the Global Reporting Initiative (GRI), the leading international standard for sustainability reporting. Europe accounts for 45% of the world’s GRI certified sustainability reports, compared to 14% in North America and a noteworthy 24% in Asia-Pacific.
Recognizing the value of sustainability disclosure to their stakeholders, many European companies have been releasing detailed corporate social responsibility (CSR) reports for many years. North American companies have been slower to come on board, but there has been a significant increase here in recent years. In 2010 alone, U.S. reporting in accordance with GRI guidelines increased by 22 percent, accompanied by a notable 53 percent increase in Canada. Of the 500 U.S. companies surveyed for this ranking, more than half released sustainability reporting in the past two years, 30 percent of which were at some level of accordance with GRI guidelines. Finally, we note strong transparency in key emerging markets including Brazil (where GRI reporting increased by 68 percent in 2010), South Africa and Korea, among others.
European companies, most notably Northern European companies, have also taken the lead in environmental management, though the regional discrepancy is much narrower in this category. Interestingly, however, North America has taken a slight lead in environmental impact. At the same time, according to Sustainalytics’ Global Platform, U.S. companies appear to be somewhat more prone to high-profile environmental controversies (notwithstanding BP): 45 percent of the significant environmental controversy assessments assigned to the global 500 list implicated U.S. companies alone, which represent less than one-third of the global list. The silver lining there is that some of the most innovative environmental initiatives to date have been launched in reaction to controversies, paving the way for long-term strategic approaches to sustainability that would outlive tarnished reputations.
So what drives European companies to be more-sustainably minded? One could point to cultural values and the legacy of consumer activism that pushes companies to act as “corporate citizens.” A more probable explanation is its tighter regulatory environment. Sustainability strategies are often triggered by the need for compliance with environmental policies, with climate change regulations among the most noteworthy. Ambitious targets by the European Union have been set for 2020 to reduce greenhouse gas emissions by 20 percent to 30 percent below 1990 levels, to reduce energy consumption by 20 percent, and to increase the use of renewables. In turn, companies operating in this region, especially in the extractive sectors, have implemented rigorous internal targets and deadlines to comply with these standards.
Meanwhile, in North America, the Clean Energy and Security Act was approved in June 2009 but never made it through the Senate. Regulatory support for sustainability is lacking and companies tend to be divided on emerging regulatory changes. Yet the sustainability trend appears to be moving in the right direction. In 2010 a decision was reached by the U.S. Securities & Exchange Commission (SEC) to issue definitive guidance to companies on disclosing climate change risks to investors. This represents a strong incentive for environmental transparency, though company uptake to date has been somewhat underwhelming.
Investors are recognizing the material impact of non-financial performance, and are proactively engaging companies on their long-term sustainability strategies.
Moreover, in the aftermath of the recent financial crisis, there is a growing understanding of the need to balance short-term profit and consumption with long-term sustainability. Mainstream investors are recognizing the material impact of non-financial performance, including environmental impacts, and are more proactively engaging companies on their long-term sustainability strategies. In 2010, the U.S.’s responsible investment community had $3.07 trillion total assets under management (AUM) using socially responsible investment (SRI) strategies. Europe surpassed this figure, with an unprecedented €5 trillion in SRI-related AUM that same year. Meanwhile in emerging markets such as Brazil and South Africa, socially responsible indices have been launched on national stock exchanges. These developments are expected to drive greater corporate take up of these issues globally.
Continued support for sustainable alternatives by companies, consumers, shareholders and policy-makers throughout the recession are testament to the reality that green is here to stay. Moreover, as is clear from the broad country representation among the top-ranking international companies, green is global.
How we calculated this year’s Green Rankings.
Frequently asked questions about our fourth annual environmental ranking.
As part of a continued effort to improve our transparency, we are providing a deeper dive into scoring.
Back in June, Newsweek and its research partners presented an online workshop about the methodology behind Green Rankings. Re-watch it here.
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An in-depth look at each of the 20 industry sectors.
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Changes in ranking methodology have led to a shakeup in the results, and have brought welcome transparency and empiricism to a complicated analysis. John Elkington reports.
Many firms that rank high on environmental lists also lobby for non-green policies, say Aaron Chatterji and Michael Toffel.
Even companies with broad and aggressive environmental commitments are neglecting a core component of sustainability: worker health and safety. Heather Lang reports.
The move toward sustainability is upending the old ways of doing business. These days, less really is more, says David J. Vidal.
Several notable companies moved up or down in the rankings since 2011.
We are offering a new rating option for companies not eligible for our U.S. and Global 500 lists.