Ratings, rankings and the world’s most sustainable company

I’m skeptical about efforts to rank and rate green or sustainable companies, and I have been for a time. [See 100 Best Corporate Citizens? What a CROck!] It’s terribly difficult to compare big and small companies, retailers with manufacturers, software firms with oil companies, etc. We once tried at FORTUNE, and gave up because we decided it couldn’t be done right.

Having said that, I’m impressed with the rigor and methodology used by a Canadian magazine called Corporate Knights to produce its 8th annual list of Global 100 Most Sustainable Companies, which it calls “the most extensive data-driven corporate sustainability assessment in existence.” The ratings are transparent and they encompass social as well as environmental metrics, among them energy, carbon, waste and water productivity, diversity and employee turnover, safety and, interestingly, the ratio between CEO and average worker pay–a revealing metric that most such rankings do not include. Disclousre: While I played no part in putting the list together, I did write a profile of Novo Nordisk, the top-ranked company, for Corporate Knights.

A couple of things to note about the list. First, US companies perform poorly. There’s not one US-based company in the top 10. Intel (No. 18) Life Technologies (No. 15) is the highest ranked US-based firm, followed by Intel (18), Agilent (59), Johnson Controls (64), Procter & Gamble (66) and IBM (69). Lest you suspect a Canadian bias, our neighbors to the north did no better. The top-ranked Canadian firm was Suncor (48), which calls itself an “oil sands pioneer. Go figure.

Of the 22 countries with companies that made the list,  the UK led the way with 16 Global 100 companies, followed by Japan with 11 and France and the US with eight. Northern European countries (Denmark, Netherlands, Norway, Sweden) punched above their weight, which isn’t surprising.

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P&G: A bold green vision but…

Procter & Gamble, the world’s largest consumer products company, today unveiled a bold new sustainability vision.

Don’t start the cheering yet.

Yes, the company eventually aims to power of all its operations with 100% renewable energy, to use 100% recyclable or renewable materials in all its products and to have no waste from the manufacturing or use of its products end up in landfills.

The vision is unimpeachable.

But the path to get there is not so clear.

And the reason to withhold applause? In the next decade or so, if P&G continues to grow, its environmental impact is more likely to get worse that it is to get better.

This is a fundamental conundrum for consumer goods companies with traditional business models and even the best of intentions: The more stuff they sell (and of course they want to sell more stuff), the more they pollute.

What P&G does matters, a lot. It’s an $80 billion company (annual revenues, for the year ended June 30). Its brands include Tide, Pampers, Crest, Gillette, Bounty, Cascade, Oral-B, Pepto Bismol, Ivory, etc.  It reaches 4 billion–4 billion!–consumers around the world and aims to reach 5 billion in the next five years. And like General Electric, P&G is an executive training machine; many ex-P&Gers (Meg Whitman, Steve Ballmer, Steve Case, many more) have gone on to do big things.

You can read a straightforward account of the P&G sustainability plan here at Greenbiz and a thoughtful (and favorable) analysis from my friend Joel Makower here. This is the latest iteration of P&G’s sustainability commitment, and the company has some meaningful accomplishments, as Joel reports. Just the past six months, P&G has:

introduced to the U.S. its Future Friendly campaign, born in Europe, a multi-brand and multi-platform effort to raise awareness about greener products and greener practices;

created a high-profile panel of sustainability experts to advise on its Future Friendly efforts;

launched a supplier scorecard to measure their environmental impacts;

reformulated a bestselling shampooto reduce toxins;

announced concentrated versions of powder laundry detergentsthat significantly reduce packaging and energy use; and

introduced sugarcane packaging to three of its shampoo and makeup brands.

Another good sign: P&G’s chairman and chief executive, Bob McDonald, joined a conference call with Len Sauers, P&G’s sustainability chief, to announce the new vision. Having the CEO put his stamp on the message tells everyone at P&G that sustainability matters to the company.

So why not cheer?

First, these are all visionary long-term goals. No target dates are attached to them.

Second, P&G has been slow to develop this vision–which is strikingly similar to the the one laid out by Walmart in 2005. Indeed, while comparisons are inevitably imperfect, my impression is that when you measure P&G against Walmart, the world’s biggest retailer, or GE, the world’s most admired industrial company, or IBM, whose Smart Planet work is path-breaking, P&G is moving more slowly and timidly than any of those iconic FORTUNE 500 firms. It’s also trailing innovative competitors like Method (See Revolution in the laundry room) and Seventh Generation. More evidence that P&G is following, not leading? P&G’s Tide, the market leader, trailed Unilever’s All in the race to shrink laundry detergent packaging.

Third, and most important, P&G is mostly talking about eco-efficiency, as Sauers, to his credit, acknowledges. To pick just one example, P&G’s interim goals for 2020 include a commitment to reduce “packaging by 20 percent per consumer use.” This won’t be easy, I’m sure, and it’s admirable. But….let’s assume that P&G grows by a not-unreasonable 25% over the next 10 years. The company will then be producing more packaging, not less, than it does today.

P&G also tends to measure its reductions of  greenhouse gas emissions and water usage on a per-unit, rather than absolute basis. Strictly from a business standpoint,  this makes sense because as the company buys and sells businesses, it needs a consistent metric against which to define progress. But, as I wrote back in 2008 at Fortune.com with respect to P&G (See Buy Toilet Paper, Save the Planet):

Relative efficiency doesn’t matter to the planet. What matters is how many tons of greenhouse gases are emitted, and most scientists say those numbers need to first stabilize and then go down, dramatically.

Like most companies, P&G is still wrestling with the challenge of how to grow revenues and limit its footprint at the same time.

Given that, let’s hope that P&G’s talent for innovation will be focused on making consumption more sustainable. This page on P&G’s website offers a few examples, some impressive, most not so. If P&G can persuade more consumers to use Tide Coldwater or, in Europe, Ariel Cool Clean, both of which eliminate the need to heat water for laundry, we’ll all be better off. Opportunities around sustainability also lie in emerging markets, from which much of P&G’s growth will come.

As Len Sauers told Joel & Greenbiz:

I have a firm belief that all issues of sustainability will be solved by innovation. And at P&G, one of our core strengths is innovation, so as we go down this path to tackle these issues that the world is facing, I believe it’ll be our innovative solutions that are very helpful there. I see this as business opportunity for the company.
At least P&G understands that eco-efficiency, by itself, will not get us where we need to go.

Adam Werbach: Take small steps to go “blue”

person_14272ab1_mediumTo attack big environmental problems, start with small steps.

So says Adam Werbach—activist, author, advertising man and one of the more interesting people working in the sustainability movement today.

Werbach is the former president of the Sierra Club, the author of Strategy for Sustainability: A Business Manifesto and the chief executive of Saatchi & Saatchi S, a sustainability consulting firm that’s part of the global communications giant Publicis. He’s worked for Wal-Mart, Procter & Gamble and Frito Lay, among others.

He’s behind a Saatchi project called DOT – do one thing – that is inspired by the PSPs – personal sustainability projects – that he helped bring to Wal-Mart. Wal-Mart encouraged its 1.3 million employees to integrate sustainable practices into their lives by making small changes to their everyday habits. Many thousands have stopped smoking, lost weight, recycled more, or biked or walked to work.

Is this the way to curb climate change, stop the loss of biodiversity, save tropical forests and the like? Or do people screw in a CFL bulb and then figure they’ve done their part?

Werbach argues that small steps lead to big things. “Change begets change,” he says. “Recycling and energy conservation—once you start remembering to do that, you’re remember to do other things.”

Werbach spoke the other day at the Net Impact conference at Cornell University, and he drew a big crowd. Net Impact is a  group of business students and young professionals who want to use the power of business to make the world better. [Disclosure: I’m a new member of the Net Impact board.] The conference attracted more than 2,400 people to Ithaca, N.Y., in November in the midst of a recession–no small accomplishment.

The crowd may have showed up because Werbach is a controversial. His green friends went after him when he joined forces with Wal-Mart. He appeared on the cover of Fast Company in 2007 beside the headline “He Sold His Soul to Wal-Mart.” (Fortunately, the story was kinder.) But even now, he begins his talk by explaining why he gave a speech in 2004 called “Is Environmentalism Dead? [PDF], left the Sierra Club and opted to work in the corporate world.

“My quitting environmentalism was about embracing something different,” he says. “We were not moving far enough, fast enough.” [click to continue…]