Top Green Companies: Why Do the Largest Corporations Always Win?

Claire Moloney's picture
Claire Moloney
Consultant
June 26, 2014

Top green company rankings have consistently selected the largest corporations as the winners and have ignored smaller, more sustainable businesses in the sector.

Interestingly, a quick Google search of “greenest companies” or “best green companies” reveals lists of some of the world’s largest publicly traded companies, ranked from greenest to least green. (See examples from Newsweek, Climate Counts, and Interbrand below). These companies may be considered “green” for a number of reasons: ambitious climate action plans, investment in renewable energy or green power, manufacturing eco-friendly products, a socially conscious approach to labor, powerful sustainability marketing, and others.

 

However, there are a number of incredibly sustainability-focused companies that don’t show up on these lists - or even in my Google search. For example, Tesla Motors produced the first fully electric sports car, and is now building a network of "super" fast electric car chargers. In another example, Interface FLOR is a highly vertically integrated manufacturer of recycled carpet.

 

Whole Foods, of course, is another prime example - it just introduced the first transcritical refrigeration system, which uses the ozone-friendly carbon dioxide as a refrigerant. Of course, they don’t make the cut because they have much smaller revenues.  However, as you can see from the graph below, Whole Foods (WFM) has had stronger growth than IBM or Walmart (WFM) on the stock market - so while it's revenues are smaller, it's still producing a great deal of value for shareholders.

 

 

 

 

These firms are pioneers in their industries, selling some of the most sustainable goods on the market, and have some of the most advanced and innovative social responsibility measures.

 

Does this mean that consistent winners on these “greenest companies” lists like IBM, Siemens, Hewlett Packard, and Dannon aren’t worthy of the positive PR? No. Many of these are older companies that have been around for a long time, and are taking ambitious steps to not only reduce their impacts, but also to perform innovative research and develop new green technologies. For example, in a Swiss data center, IBM recycles the heat from its machines to heat its buildings, which helps it produce zero carbon emissions. The company also doubled its IT capacity in three years without increasing energy consumption, and 27 of their data centers have been recognized by the European Union for their their energy efficiency. For the last 20 years, IBM has voluntarily reported its environmental impact and has worked to cut its electricity consumption by 5.4 million kilowatts. IBM has consistently ranked on the tops of these lists - and I’d argue that they deserve it.

 

I’d also argue that these lists are an important “slap on the wrist” to companies that hit dead last every year. I say “slap on the wrist” because there’s no real penalty to these slacking corporations, especially since the majority of their customers probably don’t pay attention to these rankings. However, the negative PR, no matter how ineffective, could inspire them to take at least some action - and to look to green “winners” in their industry to see exactly what steps they can take to improve.

 

So, how can the public’s perception of the “greenest” and “least green” companies be improved to give a fair representation of the world’s sustainable business leaders, no matter how large or small? We need a way to compare the industry giants to smaller, innovative green companies, because it will inspire these monoliths to learn from the pioneering players. Rankings that consider companies with the highest profit margins or best stock performance, rather than just sheer size in dollars. For example, over the last ten years, Whole Foods has outperformed IBM and Walmart on the stock exchange. This metric, among others, would introduce new players to the “greenest” company arena, but would still focus on successful, profitable companies. (Green companies that can’t turn a profit aren’t sustainable by definition.)

 

We also need to give as much negative PR to the least green companies as we do positive PR to the greenest companies. Green initiatives and CSR are not just gravy, they should be bread and butter, and the media should treat it as such. We need as many exposes and case studies on these severe underperformers as we have on the environmental leaders, and we need to tell consumers if they can switch to a greener, but also cost-effective, competitor.

Greenest Company Rankings

Many organizations have attempted to define what it means to be a green company, and have ranked the world’s businesses accordingly. The following are examples of green company rankings, and how their “greenness” was defined: Newsweek For the last four years, Newsweek has published its “Green Rankings”, which gives each of the 500 largest publicly traded companies a “Green Score”. The score is a combination of the company’s environmental impact (45% weight), environmental management (45% weight) and disclosure (10% weight). The companies were then ordered by score. In 2012, Newsweek found that these 10 companies had the highest Green Scores in the world:

  1. Santander Brasil
  2. Wipro
  3. Bradesco
  4. IBM
  5. National Australia Bank
  6. BT Group
  7. Munich Re
  8. SAP
  9. KPN
  10. Marks & Spencer Group

Climate Counts Climate Counts, a nonprofit dedicated to climate change action and awareness, releases an “Annual Company Scorecard Report”, which scores companies based on their review of their greenhouse gas emissions (22 points), reducing emissions (56 points), energy and climate change policy (10 points), and reporting and disclosure (12 points). Then, companies are ranked based on this 100 point total. Companies in the 85-100 point range are considered “soaring”, while those with fewer than 12 points are considered “stuck”. “Soaring” companies included Unilever, UPS, Nike, Levi Strauss & Co, L’Oreal, AB Electrolux, IBM, Bank of America, Stonyfield Farm, Hewlett Packard, Coca-Cola Company, Groupe Danone, Sony, Siemens, and Reckitt-Benckiser. The organization also selected the “winner” in each industry, such as Nike for apparel, Starbucks for food services, and IBM for technology.

 

Interbrand, a brand consulting agency, took a different approach to create the “Best Global Green Brands” ranking system. This system ranks companies based on a combination of their perception score, which was based on a survey of 10,000 consumers in 10 economies, and their environmental performance. The environmental performance is was determined by data from Deloitte, which included things like products and services, transportation, and stakeholder engagement. In 2012, the top 10 global green brands were:

  1. Toyota
  2. Johnson & Johnson
  3. Honda
  4. Volkswagen
  5. Hewlett-Packard
  6. Panasonic
  7. Dell
  8. Siemens
  9. Dannon (Danone)
  10. BMW

The study also showed the difference between the companies’ perception score and environmental performance, which showed that some companies, like Toyota, appear greener than they actually are because of their marketing and branding efforts. Others, like Johnson & Johnson, are more green than they appear, which shows a marketing gap.

 

Therefore, if your company is green, whether because of CSR efforts or green product or service offerings, make sure that you market these features well and avoid this "gap".  You don't want the money and time you spend on sustainability to be a secret.  It's a good idea to target a sustainably-minded audience when marketing green features.  For example, professionals can list their companies on Poplar's company page and describe their sustainability mission and products or services.  Since Poplar is an online community of green building professionals, this is a great target audience that will understand and appeciate the company's sustainability efforts, and will perhaps choose that company over another because of them.

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