The Race to Decide Who's Greenest

Companies are buried in requests for data as groups jockey to be the arbiters of sustainability

Illustration by Tatsuro Kiuchi

By Karen Weise

Every year, Suzanne Fallender’s corporate responsibility office at Intel receives dozens of requests from sustainability analysts and nonprofits looking to rate the company on its water usage, carbon emissions, workforce diversity, and scores of other factors. While some queries can be answered quickly from Intel’s annual sustainability report, others require further research, so Fallender prioritizes a core list of about a dozen requests and responds to the rest when she can get to them. “There are many, many ratings out there,” she says. “More every year.”

Investors and the public are demanding increasingly detailed information on nonfinancial metrics that define sustainability. Companies that take the lead in the field, the thinking goes, are likely to continue churning out profits in an era of growing global competition, climate change, and diminishing resources. In response, scores of data analysis and rating outfits have sprung up, vying to be the arbiter of who’s really green. That’s “confusing, congested, chaotic,” says Allen White, a senior fellow at the Tellus Institute, a nonprofit research group. “If you are an investor trying to move $1 billion, you’re left throwing up your hands. In the worst case, you just ignore all of the ratings.”

White is one of a small cadre of data junkies who have spent the past decade trying to get executives, investors, and nonprofit groups to agree on how to distinguish dirty, risky companies from cleaner, sustainable ones. As more companies publish annual sustainability reports, many are looking to the Global Reporting Initiative, a group White co-founded in 1997, for guidance on the most important factors to disclose. Today, 80 percent of the world’s 250 largest companies use GRI’s framework for their sustainability reports, according to consultancy KPMG.

Investment managers say many companies don’t go far enough in their disclosures. Since GRI’s guidelines are voluntary and reports are rarely audited, few companies provide information on all of the group’s 100-plus metrics in areas such as workplace safety, use of recycled materials, or toxic waste spills. “We believe current corporate sustainability reports are insufficient to form a fully integrated and long-term investment view,” says Paul Abberley, CEO of Aviva Investors, an asset manager in London.

Further complicating the issue: GRI doesn’t judge performance, leaving raters and analysts to evaluate companies in ways that are digestible for investors. These groups make their own determinations as to whether, say, Ford is more sustainable than Volkswagen or Microsoft is better than Apple. Newsweek’s “Green Rankings” rate companies on their commitment to the environment, Dow Jones publishes indexes of companies it deems the most sustainable, and the Ethisphere Institute ranks the “World’s Most Ethical Companies.” Others carve out niches such as evaluating transparency, water usage, or the suitability of the workplace for employees over 50.

Only a third of these groups rely solely on corporate sustainability reports; the rest seek extra stats, often asking companies to slice and dice numbers in ways that conform to the groups’ metrics. Wayne Balta, IBM’s environmental affairs chief, says companies need a “rock solid” commitment to data analysis to ease the hassles of responding to such queries. (Bloomberg LP, the owner of Bloomberg Businessweek, compiles sustainability data and scores companies on how much information they disclose.)

In 2000, the consulting firm SustainAbility, which advises clients on green business strategies, identified 21 raters; by last year, that number had swelled to 108, both nonprofits and companies seeking to sell research to investors. IBM’s Balta says the rankers’ ranks will probably continue to grow. “It’s in our collective American culture to rate,” he says. “Look at Dancing with the Stars.”