Google challenges Internet censorship in China. It invests in solar power, electric cars, geothermal energy and the smart grid, and runs an array of programs to help its employees become more “green.” It’s consistently voted one of the best places to work. And it has an inspiring mission: to organize all of the world’s information.
Yet Google doesn’t even come close to making the 2010 list of 100 Best Corporate Citizens put together by CRO Magazine, now known as Corporate Responsibility Magazine.
Nor does Timberland, a pioneer in corporate responsibility, which monitors its global supply chain, provides employees with generous benefits including time off to volunteer and experiments with labels on its shoes and boots that disclose their social and environmental impact. General Electric, meanwhile, has won praise from environmental groups like the World Resources Council and Environmental Defense for its EcoMagination campaign, and it has led the battle for climate change legislation in Washington. But GE, too, didn’t make the cut.
Who did?
Oil companies Hess Corp. (No. 10 on the list) , ExxonMobil (No. 51, which for years sought to delay action to deal with climate change, says Greenpeace), Occidental Petroleum (No. 26, accused of contaminating the Amazon) and Chevron (No. 56, targeted in a landmark class action suit for creating en environmental catastrophe in Ecuador).
The Southern Co. (No. 71), a coal-burning utility which led the fight against the administration’s climate change bill.
And the Newmont Mining Corp (No. 16)., whose gold mines in Nevada have been major sources of mercury pollution.
One last example. Whole Foods Market, which has done more to promote organic agriculture than any company in America, doesn’t make the list but Yum! Brands (No. 62) does. Yum!’s contributions to corporate responsibility include KFC, Pizza Hut and Taco Bell.
If nothing else, all this proves that it’s not easy to make a list of the 100 Best Corporate Citizens. In fact, it’s really hard. How do you compare HP (No. 1 on the list) with Kimberly-Clark (5), Wal-Mart (21), Nike (23), Green Mountain Coffee Roasters (39), Duke Energy (43), Citigroup (57) and Ford (88). They’re in disparate businesses, with different issues.
Simply deciding whether a single company is “good” or “bad”or somewhere in the middle involves a slew of value judgments. If you think nuclear energy will help solve the climate crisis, you’ll applaud the Southern Co. which is pushing new plants; if not, you’ll feel differently. Coca Cola (No. 
has a great track record on water and packaging issues but the company’s core product is a sugary soft drink. Newmont Mining has an ugly history, but it’s working hard to clean up its act–how far should we look back when ranking citizenship? Merck (17) has evidently been forgiven for the Vioxx scandal, while Pfizer is in the penalty box after paying a record fine for illegal drug marketing last fall.
Still, while some debate is inevitable, this list strikes me as way off base. My initial reaction was to wonder whether the people in charge were unethical–the magazine that publishes the “100 Best” also runs a trade association of corporate responsibility officers and organizes conferences, and you could imagine its corporate backers getting an inside track–or merely inept. As it happens, CRO’s corporate friends seem to do well on the list, but that seems coincidental. The methodology for the 100 Best list is transparent, so there’s almost surely no funny business going on.
So what’s wrong? Essentially, the list takes a mechanistic approach that rewards structure and transparency — enacting policies, reporting and measuring data and publishing all of that on a website — at the expense of substance. Jay Whitehead, the magazine’s president and publisher, acknowledged as much when we spoke last week.
The list “heavily weights disclosure on the theory that sunlight cleans,” Whitehead says. Only with a corporate culture of disclosure and transparency can other people–customers, suppliers, partners, employees–to evaluate how well a company is performing, he says.
This explains some of the surprises on the list. Hess Corp.? “They go to extraordinary lengths to disclose,” Whitehead says. Google? “Google was way, way down at the bottom of the list,” he says. “Their slogan is ‘don’t be evil’ but their practice is ‘don’t be transparent.’” (That, by the way, has never been my experience with Google. While they are secretive about operational details, the company’s blog is often informative.)
But even allowing for the heavy weight given to transparency, the list has other problems. Here are a few that came up in my research, and I’m sure there are others:
Climate change: In this category, as well as in the overall ratings, Hess and paper-maker Kimberly Clark (No. 5 overall) rank well ahead of Johnson Controls (No. 22). This is nonsensical. Johnson Controls has been a leader for decades in the building-efficiency business, and it makes batteries for electric cars. Substantial chunks of its business are helping to solve problems caused by Hess and K-C.
Philanthropy: The list gives credit for donations from corporate foundations, but not for in-kind contributions by the company or for corporate decisions to match employee giving. Microsoft matches all employee donations dollar for dollar, and contributes $17 per hour for volunteer time, up to a total of $12,000 per U.S.-based employee per year. This is a great program, but it’s ignored by the list.
Corporate governance: Most shareholder advocates agree that it’s poor practice for one person to serve as both chairman of a company’s board and CEO. How do you supervise yourself? Mark Hurd of HP (No. 1) and Kendall Powell of General Mills (No. 3) serve as chairman and CEO, yet their firms get the highest rating possible in governance. The fact is, anyone who is serious about assessing corporate governance goes deep, analyzing executive compensation and the track records of individual directors, as the Corporate Library does.
Does this list matter? Surprisingly, some say it does. Several CSR execs told me their companies put a lot of time into checking the data. “We’ve had long discussions inside our company about the CRO,” a GE insider tells me. And, just as colleges try to game the U.S. News list, companies that understand the CRO list do their best to hit the right data points. Campbell Soup Co. moved from the 400s to No. 12 this year because Dave Stangis, the firm’s vice president of corporate responsibility, made sure the company did all it could to improve, he told me.
Whitehead would like people to think that the list has big impact. Announcing this year’s results, he said: “Company stakeholders from investors to customers to employees to regulators watch the 100 Best Corporate Citizens list closely, and are using it now more than ever to make important decisions. As a result, making the list is worth millions or even billions in increased shareholder and brand value.” [emphasis added]
All I can say is that anyone who uses this list to make an important decision ought not to be in a position to make important decisions.
{ 16 comments… read them below or add one }
We agree that most annual, top-down rankings (and the CRO Best Corporate Citizens list in particular) are difficult to understand in light of the commentary and stories we read every day about how the likes of Google, GE, Exxon Mobil, Microsoft and others affect our world. That’s why we took a very different approach to measuring company reputation by using influential stories and commentary on how companies treat their customers, employees, communities, the environment and society in general as the source data for our rankings and trends. And by focusing on the most talked about companies on the Web, we can collect enough data in each area to generate not just yearly rankings, but more real-time trends.
Take Google, for example. They rank 15th overall and 8th for the environment on Vanno. But their social responsibility rankings have historically been poor (outside the top 100) for quite a while due to well-publicized privacy and intellectual property concerns. But that is trending upward because of the more principled human rights stance they have been taking relative to China.
If you want a more nuanced, real time view into the non-financial aspects of company reputation – particularly for those companies that get the most online buzz, check out Vanno ( http://www.vanno.com/ ) and the Vanno blog ( http://blog.vanno.com/ ).
The truth about the 100 Best Corporate Citizens List is that the data doesn’t lie. The results are 100% based on publicly-available data, and a publicly-debated methodology. It’s in its 11th year. And it is one of the 3 most important lists to CEOs and companies according to PR Week (following 2 Fortune lists, the Most Admired Companies and Best Companies to Work For). Now, even your list-making colleagues at Fortune will admit that each ranking has its flaws. Yet often these rankings’ greatest value is to spur debate among stakeholders, including media pundits. Thank you for your contribution to the conversation. Keep up the good work.
Marc,
Agreed that deeper thinking should have gone into this list on the part of CRO Magazine. “No list” is better than this, a “nonsense list,” looking good if only in the terms of its artificially constructed benchmarks. Giving credit to corporations for gaming the system makes a mockery of what responsibility and ethics are all about.
Viewed more widely, this illustrates the problems that arose when corporations appropriated the green agenda. Has the movement been corrupted by its own success?
Corporations diluted the question of ethics, of doing “the right thing,” even as CROs proliferated. For them, it’s been a successful strategy, to weaken the green agenda as it impacts their corporations, to mediate rather than oppose the movement.
Imagine if corporations introduced their slick CR reports with, “Yes, we’re messing up the planet, but here’s what we all should do about it….” Back up your words with actions!
Ethics means setting a principled course of action, supported by persistently creative thinking, in addition to a consideration of the benefits that transparency can provide.
I completely concur with your point that the merits of this list reflects upon how we, the consumers and users of this list, value it. Your post raises a very important point for discussion.
well done Marc.
Humility is called for whenever anyone links companies with responsibility. And yet the marketing of these lists seem to require superlatives. No one with a straight face can claim that these companies are the ‘best’. Good in some ways, yes; substantially challenged in others, yes; inconsistent across the board — absolutely.
Any list that claims comprehensive ‘best-ness’ is a list that is best ignored.
Thanks for all your comments. Nick and Jay, I agree that flawed rankings are probably better than no rankings at all. If nothing else, they spark debate.
But I think a magazine like Corporate Responsibility can and should do a much better job. You might even think about adding a subjective component that will allow experts to offer their ideas and insight. This would put you “beyond data” and invite controversy, but the list would end up being smarter.
Right now, you are confusing transparency with responsibility, in my opinion.
A naked body is not necessarily a well-toned body.
Traditionally, publishers introduce such rankings as a gimmick to raise their own profile. My decades in B2B PR has taught me that in any given market, it is usually the ‘Hertz’ publisher, that is, the #2 or #3 trying harder that makes this move. Isn’t desperation at being #3 what drove US News & World report to start its college and university ranking report in 1983? It’s great for the publisher. They run the contest; they play kingmaker. No so great for whatever market it is inserting itself into:
To quote Kevin Carey of Education Sector: [The] U.S. News ranking system is deeply flawed. Instead of focusing on the fundamental issues of how well colleges and universities educate their students and how well they prepare them to be successful after college, the magazine’s rankings are almost entirely a function of three factors: fame, wealth, and exclusivity. How much are the rankings responsible for this headline from today’s paper: “Cornell suicides raise concerns across Ivies”? Some.
Is a publisher ever qualified for this kingmaker role? IMO, ‘No.’ They are good at publishing the results and throwing banquets to celebrate their choices; but, they never have the $$$ to hire/train/retain the best talent in a given market to fulfill their ‘supreme court’ mission. Is Search Engine Result Analysis going to eliminate the need for such human talent? Don’t think so.
Great title and post Marc. I also always enjoy reading the comments. While I can’t speak authoritatively about 98% of this list, I can say that I have a little authority when speaking about 2 companies, one that’s been in the top 20 since the list’s inception and another that debuted this year at #12. This of was over the course of more than a decade, with two different assessment methodologies – KLD and IWFinancial, and two different overseers – Boston College and CRO.
I can say, and show evidence of, conversations, considerations, debate and improvement that has resulted at two Fortune 500 companies based on engagement of and input to this and other “lists” over the years. Are any of these “end all, be all”?, No. Do they have flaws and potentially reward the wrong things due to their methodology?, Yes.
Are they entirely a CROc? Not for at least 2 of the 100 companies. You give me a list; I take one of two courses of action. If bad, I contact the overseer and try to improve. If good, I study for a nugget of intelligence to drive improved performance. And in most cases, I do both.
While I agree with the idea that these lists are flawed and with the overall spirit of your post, I choose to take a more optimistic viewpoint. We all know these lists aren’t perfect, but at least they spark conversation within companies. A tempered CSR manager will be able to use the list to move forward strategic CSR initiatives and hopefully avoid making “important decisions” SOLELY on this or any other ranking.
For what it’s worth, my two cents: http://csrinpractice.blogspot.com/2010/03/ratings-game.html
Very important post Marc, and from the perspective of an organization that advises corporations on sustainability matters, I can say that this rating and others cause a good deal of consternation within the corporate community (and joy to some which make these lists).
To Jay’s point about the data not lying, most rankings do have utility, and in the CROs case, I would posit that it is valuable in pushing for greater transparency (and less so on performance). Companies that have been long-time, strong reporters on sustainability are well represented in this list, and vice versa.
There is a broader trend which gives me pause, and that is the movement towards the standardization and quantification of sustainability performance. Pundits have cheered as the likes of S&P, Bloomberg, etc. have started to offer sustainability products and indices, and these players have pushed for standard data sets on sustainability performance (because this is the model in the financial realm). However, sustainability is a highly subjective topic which requires analysts and evaluators of companies to dive deep into the underlying context to properly understand the risks and opportunities posed by issues such as climate change, human rights, access to health, etc. As some in the responsible investment world have put it, sustainability (or ESG) is really about management quality, and in my opinion, management quality cannot be standardized and quantified, but rather is covered in the MD&A sections of financial reports.
This is not to say that we should not strive to develop metrics and ratings by which we can evaluate corporate sustainability performance. However, for starters, these metrics and ratings need to be industry-specific. And, we need to rely on analysts to do their jobs and interpret and evaluate the data.
I like your insight Marc. I have been thinking about this and gathering a list of all monitoring schemes.
In health care today there is a term that is being that is inviting a lot of negative response and I have been thinking about this term and how to measure ethic and responsibility. The term is called “meaningful use.”
It seems to me that any sustainable change has to capture a story of “meaningful use.” In fact I am starting a blog called, The Story of Meaningful Use and looking at how very technical issues that are science based can be applied into meaningful use.
It seems to me that the issue is not as from the perspective of ‘traditional monitoring’ that implies compliance or banning; the issue in leading change for the environment and health is more on how to apply new advancements in scientific research and how to measure a shift in economic metrics that go beyond the traditional tracking schemes of investments and GDP.
That 88 of the companies are listed on the NYSE Euronext exchange can be attributed at least in part to the fact that companies on the exchange have access to ESG benchmarking data provided by ASSET4 (since purchased by Thomson Reuters). Here’s an article I wrote on the collaboration:
http://www.socialfunds.com/news/article.cgi/2706.html
It may be of interest to those who follow lists of this sort that other lists of top sustainable companies have been published this year, using ESG research data from a variety of analysts:
http://www.socialfunds.com/news/article.cgi/2888.html
I would also like to applaud Marc for raising the debate. We recognize and agree with many of your comments. We neither love nor deplore the companies on the list. The rankings are based on the data. The data is designed as of this moment to drive one specific behavior and that is transparency. To improve a metric you have to measure it and we at CR Magazine want to see measurement and public reporting and if our list can drive behavior by the world’s largest companies we can make a positive impact. Many of the points you make are valid but get into subjective observations that may be intuitive but not rankable and that gives the rated an excuse to ignore the outcome. The absolute objectiviity of the data and transparency of the process is essential to deprive anyone of the opportunity to cry foul. We will begin at some point to measure YOY incremental improvement as a criteria as we will only get economically sustainable improvement (unless illegal or grossly immoral deeds are being done we do not want to add to the ranks of the unemployed). But we will want to see improvement. But the first step was to see reporting which was something that a few years ago was difficult itself and our methodolgy and others like it have had a positive impact. I agree that any methodology could be amended to include other objectives, but this is the battle we are fighting now ant the large caps are our targets and we are seeing great progress. Thanks for your comments.
Thanks for these thoughtful comments. Elliot, I especially appreciate your response. But if as you write, “the rankings are based on the data” and “the data is designed as of this moment to drive one specific behavior and that is transparency,” why not call this the “100 Most Transparent Companies” list? Or if you want to sell your magazine, “Inside: The Secrets of 100 Naked Companies!” You’d be on much firmer ground. But you are hurting your own credibility when you say that Yum! Brands is a better “corporate citizen” than Whole Foods, or that Chevron deserves more praise than Timberland. That’s just crazy.
To Dave Stangis: You’ve done a great job using the list to promote positive change, but that says more about you and your employers than it does about the list.
I’ve had a lot of “off the record” reaction to this column as well, nearly all of it positive. Companies are not happy with the CRO and its methodology, and that includes many companies that did will on the list.
Marc,
Great post that raises some excellent points. Every CSR ranking has some top scorers that see to belong and others..not so much, and debate seems to stir around each one.
Every CSR ranking has some inherent biases, intentional or not. Many apply filters such as evaluating companies only above a certain size, regional location, or that are publicly held, etc. This automatically knocks out some worthy contenders. If each ranking were clear about its filters that would be fair, but they rarely admit how they’ve already culled the field and de facto disqualified some worthy leaders who don’t meet the criteria for consideration.
Every CSR ranking also uses a slightly different method and information sources. Some consider the company’s products and services while others are more agnostic and thus don’t view a store like Whole Foods as better than more conventional grocers, even though their product range is better for people and planet. Some may say consumers drive demand for unsustainable products/services, and companies should not be scored negatively if they meet such demands. Others would say that industry creates such products/services and demand, and has the power to convert consumers, so products/services should be a core factor in assessment. This seems to be a issue we dance around, and that needs to be addressed given the reality of our environmental, social and economic situation….
Some rankings look only at public information, some ask companies to apply (free or or a fee), some poll peers or consumers, etc. Again, rankings rarely state up front how their methods inherently help shape the results, which they should.
Those based on public information like the CRO (or peer/consumer surveys like Reputation Institute Corporate Citizens or Newsweek Green) are as much, or more, a reflection of PR as they are of CSR. Such rankings can blur perception and reality. On the positive side, they do encourage companies to be more transparent, and hopefully encourage stakeholders to remain active in seeking and communicating companies’ full impacts, positive and negative, so the 3rd party information that is available is balanced.
Some more thoughts are in a piece I did for GreenBiz last year, upon the release of another such ranking…http://ow.ly/1qWFp
I d question what impact most of these rankings have in the market. Few consumers seem to be aware of them. Their major audience seems to be sustainability professionals from said companies, media and service providers who pick and pan them annually. Investors do seem to take note to some degree, but savvy investors would seem likely to refer to multiple sources and those focused more on risk/opportunity issues, such as RiskMetrics and the like. or do their own research.
The bandwagon of SRI, CSR, Eco, Ethical and lately ESG rolls on, everybody can join,you don’t need any credentials, the academic world has found a new gravy train. We recently analysed 34 of the so called “top” ESG Ratings practitioners, all with differing methodologies and all relying on corporate self disclosure, the reading of websites, annual reports and similar sources of information. Who the heck are these people kidding?,it’s back to the “trust me we are a big organisation”. Just how credible is self reported information?, its about the same as Enron ,World Com and Aththur Anderson. These large ESG Ratings agencies can only rate large cap companies, mids and smalls do not attract big enough fees, due to reporting time frames ,their ratings are out of date the day they are printed. With roughly 65% of ESG risk contained withion the corporate supply chains, these agencies are unable to rate and identify this risk. Far from doing a good job ,these agencies have clouded the whole issue of ESG by ensuring that Investment Managers are noe thoroughly confused as to what ESG really is.
Interestingly, in six years of study,we have found not one person holding a key role in these agencies who comes from a senior standards background, the total arrogance of the Finacial Institutions is stunning, I have never come across any mention of the global environmental or social standards Industry and yet these have been producing major standards for 20 years. $ Billions are invested against these standards every year. there will be a sub-prime os ESG, we have already seen BP, the darling of the ESG ratings agencies, there are several more to come.
No doubty the agencies will say again, “nobody could predict BP”, oh yes they could and did!. the agencies were just too busy having conferences to bother to listen and they are not listening now. Self reported un verified year old information is simply rubbish, however you dress it up,
Having recently set up GRI’s Focal Point USA here in NY, and having a fairly thorough understanding of these types of lists, I have to say I am hearing continued frustration from the corporate community about the proliferation of such ratings. It seems like every other day there is yet another list to get on, or get off.
If you are a company trying to efficiently and effectively address the complex sustainability issues that face you, there is a risk that limited resources are focused on these lists instead of on reducing or improving impacts and overall sustainability performance.
What is a hopeful sign for all involved is when ratings, rankings and listings reference their use of the GRI guidelines and/or at least specific indicators. Given that GRI has been around and evolving with the input of thousands of stakeholders from around the world (including many of the researchers developing these lists), there is no possible way that GRI doesn’t in some way, shape or form live inside the wide range of methodologies used to create these ratings, rankings and listings.
Why not mention this? It would not only help reward those companies that have been addressing these issues through their GRI reports for many years, but would also help drive voluntary disclosure toward a more consistent and standardized format.
Bloomberg and CRD Analytics both publicly mention their use of GRI in their research and ratings methodologies. GRI reporting is not only of benefit to them, but also to all other stakeholders interested in the topic of sustainability, including all the research and ratings firms promoting their proprietary approaches. If you’re reading thousands of sustainability reports, wouldn’t you like to have consistent and comparable data?
GRI Reporting is also a benefit to the reporting companies. While they are still experiencing survey fatigue from all the new and latest and greatest rankings and listings, GRI reporters do fair better on these lists – the majority of the CR Top 100 are GRI Reporters –
http://bit.ly/cFVZPu. Other studies from research firms and analysts also suggest GRI reporters are outperforming their peers not only on sustainability performance, but also on financial matters.
I would ask that any ranking, rating or listing related activities first look at the GRI Reports List http://bit.ly/cFVZPu and all the reporters that are already in action. Use this information and help us all show recognition for those companies’ sustainability efforts. Determine when and whether your own research methodology references specific GRI indicators and say this publicly when and where applicable.
If you are a company doing a GRI report and facing continual questions that are already answered in your GRI report, reinforce this in your response to the researcher firm. Ask them how they have integrated GRI into their own methodology and ask whether they publicly state this and whether it is done consistent with the same guidelines you are following.
Bob Massie and Allen White created an amazing idea 12-years ago that has become the world’s most widely use sustainability reporting framework. Don’t toss aside the tens of thousands of professional hours of hard work that have gone into making this brilliant idea a reality. For the sake of our field – “sustainability” – reduce, reuse and recycle – reduce the survey fatigue and the market confusion; reuse the freely available GRI Guidelines when and where applicable; recycle the Guidelines and the efforts of reporters by being transparent about and by letting your stakeholders know you’ve used the GRI Guidelines – this goes for reporters and researchers alike.
Finally, get involved – GRI is built around a multi-stakeholder process – now is the time – we are moving toward G4 and we will need your expertise, feedback and support in creating and disseminating the next generation of the GRI Guidelines.
Best;
Mike Wallace
Director Focal Point USA
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