Newsweek Green Rankings: Frequently Asked Questions

Marga Buschbell Steeger

What is unique about the Newsweek Green Rankings?

The Green Rankings comprehensively assess the environmental performance of the largest publicly traded companies in America and around the world. Published annually since 2009, this project is the first effort by a major media organization to rank companies based on their actual environmental footprint, management of that footprint, and sustainability communications. The rankings provide a reliable, cross-industry framework for comparing the environmental commitment and performance of major companies.

Whereas most sustainability rankings are anecdotal in nature or limited in scope, Newsweek's is the result of a rigorous, peer-reviewed research process, including both quantitative and qualitative data from some of the world’s leading environmental research organizations. Given the ranking’s visibility, it presents a strong incentive for companies to work on improving their environmental impact and multi-stakeholder dialogue.

Who are Newsweek's research partners?

Newsweek produced the Green Rankings in collaboration with two leading environmental research organizations, Trucost and Sustainalytics.

Trucost specializes in quantitative measurements of environmental performance and holds the most extensive data available on corporate environmental impacts. The company calculated an Environmental Impact Score for each company based on over 700 metrics, including greenhouse-gas emissions, water use, solid-waste disposal, and acid-rain emissions.

Sustainalytics is known for its credible and independent environmental, social and governance (ESG) analysis and its vast universe of research coverage (including U.S., global and emerging markets companies). Its assessment of each company’s environmental policies, management systems, and programs informed the Environmental Management Score for this year’s Green Rankings.

Who are the Advisory Panel members this year?

The Green Rankings methodology and weightings were formulated in consultation with an advisory panel convened by Newsweek, whose members served independently of their respective organizations. This year’s panel includes: John Elkington, executive chairman of Volans and cofounder of SustainAbility; Marjorie Kelly, senior associate at the Tellus Institute and cofounder of Business Ethics; Tom Murray, managing director of the Environmental Defense Fund’s corporate-partnerships program; Michael Toffel, associate professor of business administration at Harvard Business School, and David Vidal, research director of global corporate citizenship at The Conference Board.

How do you determine which companies to consider?

The Green Rankings assess the largest publicly traded companies in America (the U.S. 500 list) and the largest publicly traded companies based in developed and emerging markets worldwide (the Global 500 list, expanded from 100 to 500 companies this year). A number of U.S.-based companies appear on both lists. Company size was evaluated according to revenue (most recent fiscal year), market capitalization, and number of employees.

Can companies opt out of inclusion in the rankings?

No. Companies were selected on the basis of their revenue, market capitalization, and number of employees. They were not able to opt in or out of inclusion.

Can companies participate in the research process?

Yes. All companies that we evaluated were invited to submit any relevant company data for consideration and engage in the research process in consultation with Trucost and Sustainalytics.

The Rankings provide a reliable, cross-industry framework for comparing the environmental commitment and performance of major companies.

How are the rankings calculated?

Companies were ranked by their overall Green Score, which was derived from three components: Environmental Impact Score (weighted at 45 percent the total), Environmental Management Score (45 percent), and Disclosure Score (10 percent). The weightings were determined in consultation with our advisory panel.

Environmental Impact Score: Based on data compiled by Trucost, this is a comprehensive, quantitative, and standardized measurement of the overall environmental footprint of a company’s global operations. More than 700 metrics—including emissions of nine key greenhouse gases, water use, solid waste disposal, and emissions that contribute to acid rain and smog—are factored in to this score.

Environmental Management Score: Derived from analysis compiled by Sustainalytics, this score is an assessment of how a company manages its environmental footprint. The Sustainalytics scoring model measures the quality of each company’s environmental policies, programs, targets and initiatives, on the basis of company operations, suppliers and contractors, as well as products and services.

Disclosure Score: New this year, the Disclosure Score assesses company reporting and transparency on environmental data. This score evaluates the quality of company sustainability reporting and involvement in key transparency initiatives such as the Global Reporting Initiative and Carbon Disclosure Project.

What’s new about this year’s methodology?

This year, the global Green Rankings list has been expanded from 100 to 500 companies, many of which are from emerging markets such as China, India and Brazil.

To reflect trends in the sustainability arena, we’ve introduced the Disclosure Score in place of the Reputation Score used in previous years. A company’s environmental disclosure to key stakeholders is considered to be a key signal of its commitment to sustainability.

Finally, this year’s methodology has been improved to increase the transparency of the ranking calculation. While they remain on a 100-point scale, the individual component scores and overall green score are now expressed in absolute terms, allowing for direct comparison with future Green Rankings lists. Furthermore, a simple 45-45-10 weighted average of the three component scores will result in the Green Score—unlike in previous years where the actual calculations were carried out on underlying z-scores that were not publicly available. This year’s scores also better reflect where there is room for companies to further improve: the highest green score on the U.S. list, for example, is 83—not 100, as it would have appeared in past years.

Can we compare the 2011 rankings to the historical Newsweek rankings, to benchmark company performance?

Though we recognize the importance of scoring continuity, the methodological changes cited above coupled with the change in research providers will limit the comparability of rankings. Despite all of these changes, it is noteworthy that most of leaders and laggards have remained fairly consistent.

That said, we have made an effort to position this year’s scores as a baseline for benchmarking company performance moving forward. The changes we have made to the ranking calculation should allow this year’s scores to be readily and meaningfully compared against scores in future years.

How is each company classified by industry?

Newsweek’s research partners have developed a proprietary classification system which includes 19 distinct industries on the basis of their unique set of impacts and exposure. These industries are broadly consistent with global classification systems used by the investment community. While the overall ranking compares companies across each of these industries, the online version allows you to filter by industry. In that way, readers can distinguish industry leaders from industry laggards based on a common set of underlying criteria and weightings.

When were the Green Rankings released this year?

The Green Rankings appeared in Newsweek magazine, and online, on Oct. 17, 2011.

Can I be sure the rankings are fully accurate and reliable?

Given the high level of public visibility, the Newsweek Green Rankings are subject to considerable external scrutiny from companies, key stakeholders, and the general public. Similarly, a high level of internal due diligence and quality assurance supports these rankings. Trucost is a recognized leader in measuring and quantifying corporate environmental impact, and Sustainalytics has a strong reputation as an independent and credible research provider with nearly 20 years of experience in the socially responsible investment market. Moreover, the Green Rankings are overseen by an independent advisory panel of esteemed academics and practitioners, committed to supporting the integrity of this initiative.