Are Green Rankings a True Guide To Sustainability?

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For the time-constrained, my answer to the question posed by the headline of this article is a clear “No, but.”

For the less pressed, I believe well-constructed rankings can play a critically important role in triggering Top Team conversations in business that might otherwise not happen—or will only happen on the fly in corporate restrooms, rather than as part of well-prepared debates in C-suites and boardrooms.

Used in the right way, green rankings help management assess progress and prioritize actions and investment. For the wider world, they help us think through how best to gauge whether particular business units, corporations, supply chains, or economies are headed broadly in the right direction. As a judge or panelist in literally dozens of ranking and rating initiatives over the decades, I’m particularly proud to have been a member of the Newsweek Green Rankings advisory board since the get-go, even if the process has periodically left my right-brained head spinning.

That’s partly because of the brute methodological issues that inevitably pop up when you try to assess the preparedness and performance of very different companies and sectors in the context of an emergent, complex, uncertain, and often disputed agenda.

GreenBiz chairman Joel Makower spotlighted some of the changes that had happened both in the methodology and in the consortium of organizations driving the process, Newsweek included. He usefully summarized the changes in methodology that had led to companies like Coca-Cola, Eaton, Johnson Controls, Nike, and Pacific Gas & Electric variously slumping and plummeting down the rankings in 2011.

For example, in 2011 a disclosure score replaced a “reputation survey score” used during the two previous years, which had been based on an opinion survey of corporate social-responsibility professionals, academics, and other environmental experts. As Makower explained, this meant that 2011’s analysis was “largely devoid of thought-leader opinion about companies, focusing instead on more tangible measures of performance.”

The resulting falls (and rises) intensified pressures for transparency on how the Green Rankings are calculated. While understandable, and increasingly addressed, such concerns also link to the issue of companies “gaming” the rankings by selectively improving their reported performance in areas that just happened to be prioritized in the rankings. Given such challenges, my overall sense is that the Newsweek team has been both open and receptive to criticism and has worked hard and effectively to refine the analytical process over the first four iterations. It strikes me that the 20 sector pages represent a big step forward—and one that has been called for by key commentators like Makower.

While many imperfections no doubt remain, Makower also commented that, based on his conversations with business leaders, “Newsweek’s rankings seem to have ascended to the top of the list of measures many executives watch closely.” True, not everyone will be happy with the results, or with their own rankings, but at a time when we have no option but to urgently engage what I dub the “Global C-Suite” (which Bob Eccles of Harvard Business School has begun to map with his 1,100 publicly listed corporations that control 49 percent of world-market cap) that Top Team mindshare is likely to prove invaluable.

But at least for me, the mind-spinning quality of the Green Rankings process has also reflected another critical question in all of this: while we should celebrate the high scorers, and encourage them to push the envelope even further, a number of us on the advisory panel have asked the question that a world of 7 billion people and counting has no option but to ask: would we be sustainable, or well down the path to sustainability, if all of the U.S. and global companies covered in these rankings were scoring 100 percent against all measures? Or, indeed, if companies were getting top marks in any of the relevant rankings, among them the Dow Jones Sustainability Indexes? (Full disclosure: I was on an advisory panel for nine years.)

My sense is that the answer, unfortunately, is no. As it happens, this is a question that Peter Lacey and his team at Accenture sensibly addressed in successive rounds of their CEO survey work for the U.N. Global Compact. The first time around, in 2010, their conclusion was that there was an “implementation gap,” in that even companies with clear sustainability targets would struggle to meet them. Later, though, their analysis suggested that there was an even bigger problem, what they called the “transformation gap.” Even if all 766 CEOs in their original survey managed to hit the most ambitious of their stretch targets, there would still be systemic conditions and challenges that would be unaddressed.

Even the best of today’s rankings do not link back to the ultimate system conditions and capacities that are central to the sustainability agenda.

In the wake of the pretty disastrous Rio+20 sustainability summit earlier this year, Volans has been conducting in-depth interviews with key people in the field to get a better grip on where we are in all of this—and what the C-Suite dynamics look like in some of the companies making the most ambitious pledges on where they will get to by 2020, or similar. The outcomes will be summarized in the report we plan to launch early in 2013 as part of our Breakthrough Capitalism program. Suffice it to say, the picture is pretty mixed.

There’s no question that progress is being made. For example, former TNT CEO Peter Bakker’s steering of the World Business Council for Sustainable Development into a fascinating new partnership with the Stockholm Resilience Centre, with the goal of testing WBCSD’s Vision 2050 projections and targets against the SRC’s nine Planetary Boundaries. Way to go, as they seem to say.

But to return to the sort of question that Accenture asked, I wonder where we would be in terms of sustainability if all the companies analyzed in the Green Rankings hit the 100 percent mark? Or if all the 1,100 Boards and C-Suites in the Global C-Suite met the sort of stretch targets set by companies like Unilever or business coalitions like that pursuing Zero Discharges of Hazardous Chemicals in China?

We would have made significant progress, no question, with companies cascading new environmental, social, ethical, and governance requirements through their supply chains. But even the best of today’s rankings do not link back to the ultimate system conditions and capacities that are central to the sustainability agenda. Until they do, they will successfully—and interestingly—help us distinguish between those trying hard to operate at the leading edge of today’s capitalist system and those content to be laggards. But the next generation of rankings will have to link out to the sustainability context.

As an indication of the direction of travel, it’s fascinating to see the World Business Council for Sustainable Development linking up with the Stockholm Resilience Centre to test WBCSD’s Vision 2050 trajectories and targets against SRC’s assessment of nine planetary boundaries. As a result, my sense is that the Green Rankings analysis will need to be rather more sophisticated in future years—and, as a result, like it or not, we will see further shuffling in the rank orderings.