Corporate Knights (CK), the Canadian corporate sustainability reporter, has published its 10th annual Global 100 Index, which attempts to rank the 100 Most Sustainable Corporations in the World.
This year marked the first that the Global 100 Index fell behind its benchmark. From its birth in February 2005, through to December 31, 2014, it delivered a return of 90.76%, lower than its benchmark, the MSCI All Country World Index, which returned 96.98%. CK has attributed this to the rising US dollar, since 81 percent of Global 100 companies traded in non-US denominated currencies, versus only 50 percent in the MSCI Index.
Selection of the Global 100 starts on October 1st each year and begins with companies establishing themselves in the starting universe. To be included, companies must be publicly trading and have a market capitalization of at least US$2 billion.
To be included on the Index shortlist, companies must go through a four-stage screening process:
- The first stage eliminates companies based on their sustainability reporting within their specific industry. Companies who fail to disclose at least 75 percent of the “priority indicators” identified for their Industry Group are eliminated at this first stage.
- The second stage analyzes companies based on their economic performance and sustainable cashflow through nine criteria.
- The third stage screens the company’s product categories. Those with a sub-category of “Tobacco” are eliminated, as are those that generate the majority of their revenue from the “Defense” group.
- The fourth stage eliminates based on sanctions: Companies whose sustainability-related fines, penalties and settlements as a percentage of their revenue in the bottom quartile of their industry group are removed.
Global 100 companies on the Index from the previous year are added if they are not in the bottom quartile of their industry group in the fourth stage.
The remaining companies comprise of the Global 100 Shortlist. The final stage of deliberation assigns each company a percentage ranked score for each of the 12 Key Priority Indicators (KPIs) in their respective industry. The companies’ final score is the average of these 12 percentages.
The final Global 100 are those companies with a top overall score in their sector. The number of slots from to be filled from each sector in the Index is based on its benchmark; if the MSCI ACWI has 10 percent from the Pharmaceuticals industry, then the Global 100 will have ten slots for this sector.
Biotech giant Biogen Idec topped the Index with a score of 73.50%. The US-owned pharmaceutical producer came close to topping the list in 2014, clocking in at second, but has pushed its efforts on sustainability to take the crown this year. The company recognizes, however, that the job doesn’t end here: “What we need to do is take a look at where we are and see how can we do sustainability better than that five years from now, and five years after that,” Biogen chief executive George Scangos said in an interview. “We’re on track to do that.”
American pharmaceutical company Allergan (in its Global 100 debut) placed second, followed by German sportswear company Adidas, Singaporean real estate corporation Keppel Land and Finnish retailing conglomerate Kesko, which complete the top five.
The United States had its greatest showing on the Index in its 11-year run with 20 companies — including Sustainable Brands members Johnson & Johnson, Coca-Cola, Cisco Systems and Campbell Soup— making the cut. Other showings include France’s L’Oréal (#14) and the UK’s Unilever.
“Companies that understand this and become part of the solution will have a bright future,” Unilever CEO Paul Polman told a business audience in Toronto last year. “Those that don’t will be dinosaurs – outdated, outmoded and out-of-business.”
The Index touts agreement from the China and US on a climate deal, increasing awareness of “unburnable carbon” and growing confidence in a global carbon price as reasons that corporations are taking active steps in sustainability, for fear of being left behind.