2017 Newsweek Green Rankings: Methodology
The methodology for the 2017 Newsweek Green Rankings is designed to rank large public companies on environmental metrics in a rules-based way that meets the test of being replicable by a third party.
With this in mind, the methodology is designed to be consistent with the following six principles.
Principle 1: Transparency
The precise methodology of the ranking and the results of the process are fully disclosed.
Principle 2: Objectivity
Eligible companies will only be assessed using quantitative data and performance indicators.
Principle 3: Public availability of data
Only data-points that are part of the public domain are used.
Principle 4: Comparability
Companies are compared to their industry group peers based on performance indicators for
which the underlying data are reasonably well disclosed by their industry group globally.
Principle 5: Engagement with eligible companies
Companies eligible for the ranking will be informed prior to the ranking, so as to have an opportunity to ensure the necessary data is made available publicly.
Principle 6: Stakeholder inclusion
Feedback from broader stakeholder community is actively solicited via rankings web site.
Scope:
The U.S. 500 consists of an assessment of the sustainability performance of the 500 largest publicly-traded companies headquartered in the U.S. by revenue as at 31 December 2016.
The Global 500 consists of an assessment of sustainability performance of the 500 largest publicly-traded companies in the world by revenue as at 31 December 2016.
#1 in Industry Award:
The highest ranked company in each GICS “Industry Group” was determined. In order to be eligible for the #1 in Industry Award, there must be at least two companies in the industry on the ranking and the company must have an overall rank higher than 250.
Assessment of Sustainability Performance:
Sustainability performance is measured using all key environmental performance indicators (KPI), which are disclosed by at least 10% of industry peer group companies.
KPI Definitions and Scoring Weight
1. Combined Energy Productivity Score (Weight: 15%)
In the first step, each company's Energy Productivity is calculated for 2015, with Energy Productivity defined as Revenue ($US) / (Total Energy Consumption (GJ) - Renewable Energy Consumption (GJ)). Each company’s Energy Productivity is then percent-ranked against that of all Industry Group peers in the CK research universe and multiplied by 0.75. The Global Industry Classification Standard (GICS) definition of “Industry Group” is used.
In the second step, the change in each company’s Energy Productivity from 2013-2015 is calculated and percent-ranked against that of all same-Industry Group peers within the CK research universe. If the company’s percent-ranked 2015 Energy Productivity is top quartile, their percent-ranked change in Energy Productivity for 2013-2015 is multiplied by 1 and then by 0.25. If the company’s percent-ranked 2015 Energy Productivity is second quartile, their percent-ranked change in Energy Productivity for 2013-2015 is multiplied by 0.75 and then by 0.25. If the company’s percent-ranked 2015 Energy Productivity is third quartile, their percent-ranked change in Energy Productivity for 2013-2015 is multiplied by 0.5 and then by 0.25. If the company’s percent-ranked 2015 Energy Productivity is bottom quartile, their percent-ranked change in Energy Productivity for 2013-2015 is multiplied by 0.25 and then by 0.25.
In the third step, the values from the first and second steps are totaled.
2. Combined GHG Productivity Score (Weight: 15%)
In the first step, each company's GHG Productivity is calculated for 2015, with GHG Productivity defined as Revenue ($US) / Total Greenhouse gas (GHG) Emissions (CO2e). Only Scope 1 and Scope 2 emissions are included according to the GHG Protocol. Each company’s GHG Productivity is then percent-ranked against that of all Industry Group peers in the CK research universe and multiplied by 0.75.
In the second step, the change in each company’s GHG Productivity from 2013-2015 is calculated and percent-ranked against that of all same-industry group peers within the CK research universe. If the company’s percent-ranked 2015 GHG Productivity is top quartile, their percent-ranked change in GHG Productivity for 2013-2015 is multiplied by 1 and then by 0.25. If the company’s percent-ranked 2015 GHG Productivity is second quartile, their percent-ranked change in GHG Productivity for 2013-2015 is multiplied by 0.75 and then by 0.25. If the company’s percent-ranked 2015 GHG Productivity is the third quartile, their percent-ranked change in GHG Productivity for 2013-2015 is multiplied by 0.5 and then by 0.25. If the company’s percent-ranked 2015 GHG Productivity is bottom quartile, their percent-ranked change in GHG Productivity for 2013-2015 is multiplied by 0.25 and then by 0.25.
In the third step, the values from the first and second steps are totaled and then multiplied by 0.9.
In the fourth step, if the company disclosed Scope 3 GHG emissions in 2015, a score of 100% is attributed and then multiplied by 0.1. Otherwise, a score of 0% is given.
In the final step, the scores from the third and fourth steps are added.
3. Combined Water Productivity Score (Weight: 15%)
In the first step, each company's Water Productivity is calculated for 2015. Water Productivity is defined as Revenue ($US) / Total water use (m3). Each company’s Water Productivity is then percent-ranked against that of all Industry Group peers in the CK research universe and multiplied by 0.75.
In the second step, the change in each company’s Water Productivity from 2013-2015 is calculated and percent-ranked against that of all same-industry group peers within the CK research universe. If the company’s percent-ranked 2015 Water Productivity is top quartile, their percent-ranked change in Water Productivity for 2013-2015 is multiplied by 1 and then by 0.25. If the company’s percent-ranked 2015 Water Productivity is second quartile, their percent-ranked change in Water Productivity for 2013-2015 is multiplied by 0.75 and then by 0.25. If the company’s percent-ranked 2015 Water Productivity is the third quartile, their percent-ranked change in Water Productivity for 2013-2015 is multiplied by 0.5 and then by 0.25. If the company’s percent-ranked 2015 Water Productivity is bottom quartile, their percent-ranked change in Water Productivity for 2013-2015 is multiplied by 0.25 and then by 0.25.
In the third step, the values from the first and second steps are totaled.
4. Combined Waste Productivity Score (Weight: 15%)
In the first step, each company's Waste Productivity is calculated for 2015. Waste Productivity is defined as Revenue ($US) / [Total waste generated (metric tonnes) – waste recycled/reused/composted (tonnes)]. Each company’s Waste Productivity is then percent-ranked against that of all Industry Group peers in the CK research universe and multiplied by 0.75.
In the second step, the change in each company’s Waste Productivity from 2013-2015 is calculated and percent-ranked against that of all same-industry group peers within the CK research universe. If the company’s percent-ranked 2015 Waste Productivity is top quartile, their percent-ranked change in Waste Productivity for 2013-2015 is multiplied by 1 and then by 0.25. If the company’s percent-ranked 2015 Waste Productivity is second quartile, their percent-ranked change in Waste Productivity for 2013-2015 is multiplied by 0.75 and then by 0.25. If the company’s percent-ranked 2015 Waste Productivity is third quartile, their percent-ranked change in Waste Productivity for 2013-2015 is multiplied by 0.5 and then by 0.25. If the company’s percent-ranked 2015 Waste Productivity is bottom quartile, their percent-ranked change in Waste Productivity for 2013-2015 is multiplied by 0.25 and then by 0.25.
In the third step, the values from the first and second steps are totaled.
5. Green Revenue Percent Range (Weight: 20%)
In the first step, each company's total revenue for 2015 is broken into its RBICS sub-industry segments as provided by FactSet Data; the percent revenue from each RBICS sub-industry segment is obtained. In the second step, each RBICS sub-industry segment is assigned a green revenue percent based on a taxonomy derived from by (1) Statistics Canada Clean Technology taxonomy, (2) Eurostat, (3) U.S. Bureau of Labor Statistics Green Goods & Services and (4) Climate Bonds Taxonomy. This enables the calculation of a green revenue potential. The annual and sustainability reports of all companies with potential green revenues greater than 10 percent are manually inspected to verify the actual green revenue percent, which then classified in one of five ranges (0-20%, 21-40%, 41-60%, 61-80%, 81-100%).
6. Sustainability Pay Link (Weight: 10%)
A mechanism to link the remuneration of any member of a company's senior executive team with the achievement of environmental performance targets. The existence of such a link is awarded a score of 100%. A score of 0% is attributed if there is no such mechanism in place.
7. Sustainability Board Committee (Weight: 5%)
The existence of a committee at the Board of Directors level whose mandate is related to the sustainability of the company, including but not limited to environmental matters. A score of 100% is awarded if such a committee exists, and a score of 0% is given in cases where such a committee is absent.
8. Audited Environmental Metric (Weight: 5%)
The company provides evidence that the latest reported environmental metrics are audited by a third party. A score of 100% is awarded if such an audit has been performed, and a score of 0% is given in cases where such an audit was not performed.
Monetary fines paid or payable (Maximum deduction of 5%)
The company's monetary fines, penalties, and settlements (if any) as a percentage of sales (2013, 2014 and 2015) is calculated. If that ratio is in the bottom quartile against same GICS Industry peers, a deduction of 5% is applied.
Products/ services category (Maximum deduction of 5%)
Companies which are deriving a majority of their revenue from coal operations, tobacco and weapons manufacturing receive a deduction of 5% due to the harmful impacts of such products/services.
Sources: Data is obtained from Bloomberg, FactSet, Thomson Reuters and the Carbon Disclosure Project (via Bloomberg).
All companies are contacted for data verification once all available items of data have been obtained, subject to the public availability of an electronic form of contact.
The Newsweek Green Ranking is produced in partnership with Corporate Knights.
Thank you to HIP Investor who acted as the Expert Reviewer for the 2017 Newsweek Green Ranking methodology updates.
