Corporate Sustainability Leaders
How Georgia Public Companies Stack Up
Putting strong sustainability principles into practice is good for business as well as the planet, as more Georgia companies and their stakeholders are discovering. Even a tough economy has not deterred the state’s top corporate citizens from working to strengthen their environmental, social and governance policies.
Six Georgia companies top the list of the state’s sustainability leaders, accord-ing to the 2011 Southeastern Corporate Sustainability Rankings, a study of the region’s public companies prepared by GreenBusiness WORKS, a nonprofit organization that promotes environmental responsibility in business.
Leading Georgia’s corporate sustainability pack is The Coca-Cola Company, followed, in order, by UPS, Coca-Cola Enterprises, Interface, Inc., The Home Depot, Inc. and Mohawk Industries.
Thirteen other Georgia companies have demonstrated commitment and improvement in their sustainability efforts and are listed alphabetically on page 43. Rankings and listings were determined by CRD Analytics, using information from annual reports, regulatory filings and the companies themselves. (See “Methodology” sidebar, page 45.)
Other Georgia companies are making strides in sustainability, as well. Some did not have the necessary environmental, social and governance (ESG) data available to achieve a ranking or listing at press time. Additional information will be available at www.Green-BusinessWorks.net.
The Georgia public companies are included in the Southeastern Corp-orate Sustainability Rankings, which were initiated in 2010, for two reasons: to show which public companies in the region are doing the most to reduce their carbon footprint, and to help investors measure a company’s “corporate responsibility” in sustainability terms.
“It demonstrates values,” Stephanie Armistead, General Manager of Green-Business WORKS, says of the list. “We have senior classes from universities asking for it, because it matters to them who they work for.”
Mark Callaway, co-founder of Green-Business WORKS and an investment consultant and member of the Green-Business WORKS Advisory Council, believes the list is particularly valuable to investors. Callaway helped establish the rankings in coordination with GreenBusiness WORKS, which holds an annual expo for sustainability each fall, and the Reznick Group, one of the top 20 accounting firms in the U.S.
Leading Edge
“If you accept the notion that all publicly traded companies will be required in the near future to report on ESG [Environment, Social and Governance] criteria,” says Callaway, “at least to my thinking, then you want to invest in companies that embrace that and are early on that curve – in the leadership position and recognized as on the leading edge, not dragged into it,” says Callaway, who has a background in investment banking.
“There may be sectors of your portfolio that are passive or active,” says Callaway. “Passive investors don’t want to have anything to do with a company that’s done anything wrong. More active investors may be interested in a company that has shown an effort to improve policies. The passive investor wouldn’t bother until the company gets it perfect, while an investor that wants to encourage them to move the needle – and we’re talking about huge institutions [such as] teachers’ retirement funds – they’re the ones that get companies to pay attention.
The conversation, he says, is how do you qualify company A from company B, a company that has embraced the ESG criteria.
“The answer is that company B doesn’t exhibit as much market fluctuation due to the fact that they are making positive environmental and labor decisions. As you track that market value over time, there is not as much volatility. There is less risk if growth is shown without that volatility. If we can prove and quantify it, why would you invest in Company A instead of Company B?”
The same argument can be made to check a company’s investments, he says.
“Take a foundation that is mandated to support the Sierra Club, which refuses to take contributions from a company with investments in their portfolio that they don’t approve. It’s a real eye opener because a company has never been challenged like that. But it goes back in history to the Quakers and Christian foundations that wouldn’t support a company with liquor, gambling or tobacco interests; now, it’s environmental issues, social relations and women’s issues. Ten years ago, we wouldn’t be having this conversation.”
Technology has played a critical role in creating a more accountable world, says Callaway. “Plenty of studies have shown that if a company holds itself up to making the right decisions, the consumer is drawn to that,” he says.
“Now there are applications to show you who is more environmentally friendly, and I will choose the higher score to support that company. It’s a matter of being proactive and accountability.”
Localized Rankings
“Prior to the ranking, the only way to form your investment list was to extract this data from national rankings. This way gives you an easier way to determine [local] companies al-ready making investments in sutainability as well as those who are poised to continue to do more,” says Lee Peterson, senior manager of the At-lanta office of Reznick Group, which is a Corporate Sustainability Partner, along with Grubb & Ellis.
“What interests me more is that the companies who have made the list are coming to us asking how they can do more,” adds Peterson. “When we sat down and went through their options, we found Georgia policy impediments that prevented the companies from doing what they needed to do – and they really want to do it. Their ability to gain in the listings is hampered by state law, which is unfairly weighted toward traditional power [sources] rather than alternative.
“We were hoping for new legislation,” Peterson says, “but it’s a complicated thing, and special interests in the energy sector are very powerful and extremely well financed.”
Still, Georgia companies are in-creasingly interested in improving their rankings, says Peterson. “It’s a combination of finding ways to help their bottom line and simultaneously meet customer expectations. It’s a perfect alignment of corporate and public interests.”
Government funding and the recession have also played a role – companies are looking to economize in the slow growth period, and the government is trying to put people to work.
“It’s a perverse dynamic, but one of the best things to happen to sustainability has been the economic collapse, because it’s forced people to become more efficient and save money, and the first thing they look at is renewable energy. It’s not quite a perfect storm, but it is a positive environment,” says Peterson.
A complete listing of the South-eastern Corporate Sustainability Rank-ings is available at www.georgiatrend.com.
About The Methodology
This year’s sustainability rankings were prepared by CRD Analytics, the leading provider of independent sustainability investment analytics. Using its proprietary SmartViewTM 360 Platform, CRD Analytics measures companies using large sets of complex data including financial, environmental, social, governance, brand perception and reputational risk.
To qualify, a company must be publicly traded on a major global exchange; must have a minimum market capitalization of $100 million USD as of June 30, 2010; and must have produced a publicly available sustainability or corporate responsibility (CSR) report with a full year of environmental, social and governance (ESG) data for their 2009 calendar year before Dec. 31, 2010.
Companies that meet the criteria are force-ranked by total Sustainable Performance Value (SPV) calculated as the average of three performance dimensions: environmental, social and governance. Each dimension consists of five key performance indicators listed below with a total of 175 underlying quantitative and qualitative performance metrics that are either numeric or Boolean.
The five key performance indicators are as follows:
• Environmental Performance Indicators (EPIs): Waste, Energy, Water, Emissions, Risk Mitigation
• Social Performance Indicators (SPIs): Product Responsibility, Community, Human Rights, Diversity & Opportunity, Employ-ment Quality
• Governance Performance Indicators (GPIs): Board Functions, Board Structure, Compensation, Vision & Strategy, Shareholder Rights
In the event of a tie, the company with the higher total environmental score receives the higher rank. All derived values, scores and ranks were provided by CRD Analytics and powered by SmartViewTM 360. The underlying data was aided by information provided by Thomson Reuters & Asset4.
The SmartViewTM 360 Platform is a proven methodology that powers several other global sustainability indexes, rankings and investment portfolios such as the NASDAQ OMX CRD Global Sustainability Index (QCRD), the Global 1000 Sustainable Performance Leaders and now the Southeastern Corporate Sustainability Rankings. – Ben Young
