Monday, November 8, 2010

Toby Heaps, Chief Executive of Corporate Knights and creator of the Global 100, writes for Harvard Business School

The following will appear in the publication Harvard Business School E-Book: 2010 Integrated Reporting Workshop Remarks.

Summary: Sustainability is the megatrend of the 21st century and corporations are its mega-institution. The aphorism that no business can succeed in a society that fails has never been truer, and as such it is no longer tenable for our time’s megatrend to be kept off the balance sheet of its mega institution. Among global stock exchanges, regulators and institutional investors, there is no longer a question of whether we need to move toward a new balance sheet for the 21st century that more fully reflects a company’s impacts on the planet and society; rather, the question is, “Where do we start?” In this regard, crowd wisdom drawn from existing disclosure thresholds and indicators sophisticated investors are already integrating into their analysis points to a surprisingly clear path of six first generation metrics (carbon, water, waste, energy, payroll, and injuries) that, if disclosed across the board by all large corporations, would enable a radical improvement of corporate valuation models with a more forward looking orientation. Three steps are required to accelerate the evolution of the balance sheet and corporate valuation:

1. Mandate: A critical mass of investors and companies issue call for all large companies to report a New Balance Sheet consisting of a focused list of first-generation metrics at the same time as their regular financial filings by a certain hard date, and back this call up with a public relations and lobbying campaign to give regulators the impetus and courage to take action.
2. Correlate: A “Stern Report” showing where green pays to reveal where there are strong linkages within industries for certain social/environmental metrics and profit/revenue growth.
3. Integrate: As investors integrate these clear metrics into their valuation models, they will create a virtuous cycle where the most sustainable companies attract the most capital and earn the best returns.

Download the rest of the document here.

Returns on the Global 100 as of October 31, 2010

As you can see here, the Global 100 continues to outperform the MSCI World Index (since February 2005).

Monday, July 5, 2010

Returns on the Global 100 as of June 30, 2010

If you go to this page, you can see that the Global 100 is holding its lead pretty well against the MSCI World Index (since February 2005).

We'll update this page monthly, so check back at the beginning of August for July 2010's returns.

Monday, April 19, 2010

Sompo Japan Insurance now NKSJ Holdings

Sompo Japan Insurance, which placed 100th spot in the 2010 Global 100, is now a part of holding company NKSJ Holdings, effective April 1, 2010. NIPPONKOA Insurance Company, Limited jointly established this holding company with Sompo Japan Insurance.

The shares of NKSJ Holdings, Inc. have been newly listed on the Tokyo Stock Exchange (First Section) and Osaka Securities Exchange (First Section).

The company's rationale is as such: in the face of the declining birthrate and aging society – the significant challenges Japan faces in the medium to long-term period – as well as of increased risks associated with depopulating society, deteriorating global climate change, and in response to the diversified consumer demands amidst the individuals’ lifestyle changes, companies are urged to take proper actions and contribute to social safety and to customers’ sense of security. Based on this shared perspective, Sompo Japan and Nipponkoa decided to establish a “new solution service group which provides customers with security and service of the highest quality and contribute to social welfare” (the “NKSJ Group”), while sharing as a unitary group the strengths nurtured through 120 years of their respective history.

Thursday, March 4, 2010

Transparency in the Global 100

In January, prominent CSR blogger Elaine Cohen posted Opaque Transparency, where she questioned why the Top 10 companies in the Global 100 did not have the top 10 transparency scores. Toby Heaps, Chief Executive of Corporate Knights, responds below:

Hi Elaine,

Thank you for your thoughtful analysis. We struggled with how to deal with companies that chose not to report certain key metrics. We had three broad choices:

A. Apply a zero score (penalize harshly)
B. Apply a null score (neutral/no penalty)
C. Apply a null score and include a separate score for transparency, which is weighted in inverse proportion to the extent of ESG/CSR disclosure (ie. the less a company reports, the more the transparency score is worth).

We chose C, and it is interesting to note that 9 of the top 10 Global 100 are GRI reporters. We look forward to refining the art of presenting a new balance sheet for corporate social/environmental performance--with input from insightful observers like yourself.

Friday, February 12, 2010

The Global 100 Most Sustainable Corporations in the World open the market at the TSX

The CEOs of the Canadian companies on the Global 100 Most Sustainable Corporations in the World opened the market today at the Toronto Stock Exchange. Joining the group was Toby Heaps, Editor-in-Chief and Chief Executive, Corporate Knights Magazine, Karen Kun, Publisher, Corporate Knights Magazine, Matthew J. Kiernan, Chief Executive of Inflection Point Capital Management, and David Gregoire, Managing Director and Head of Distribution of Legg Mason Canada Inc. The Global 100 Most Sustainable Corporations in the World is an annual project initiated by Corporate Knights, the magazine for clean capitalism.

Tuesday, January 26, 2010

What does the Global 100 have to do with sustainability?

Karl-Henrik Robèrt, founder of The Natural Step, has articulated that “Un-sustainability is not a stage, but a gradual decline of the potential of the social and ecological systems to sustain civilization with its industry.” The Global 100 indicators cannot provide a definitive answer as to a company’s “sustainability” or “un-sustainability,” but they do provide a basis for more informed discussions, benchmarking, and analysis. In particular, the resource indicators go beyond a snapshot in time, attempting to dynamically reflect the DIRECTION of the respective companies - are they heading the right way and is it enough? We tested each company’s resource productivity for energy, carbon, water and waste metrics from 2006 to 2008 against an objective standard grounded in “Factor Four” literature. Factor Four, an idea first expressed in 1998 in a book of the same name written by L. Hunter Lovins and Amory Lovins of the Rocky Mountain Institute, and Ernst von Weizsäcker, founder of the Wuppertal Institute for Climate, Environment & Energy, suggests in today’s context that, as a crude rule of thumb, our global economy must increase resource productivity by 400% over the next 20 years in order to exist within the carrying capacity of the planet. On the topic of carbon specifically, Lord Nicholas Stern has written “unless the USA, EU/Japan, Indonesia/Brazil and China reduce emissions per unit of output by a factor of four over the next 20 years, it will not be possible to grow at the desired rates and to reach the emission goals that sensible risk management requires.” The McKinsey Global Institute has made a similar point that any successful program of action on climate change must support two objectives—stabilizing atmospheric greenhouse gases (GHGs) and maintaining economic growth. Research by the McKinsey Global Institute and McKinsey's Climate Change Initiative finds that reconciling these two objectives means that "carbon productivity," the amount of GDP produced per unit of carbon equivalents (CO2e) emitted, must increase dramatically. To meet commonly discussed abatement paths, carbon productivity must increase from approximately $740 GDP per ton of CO2e today to $7,300 GDP per ton of CO2e by 2050—a tenfold increase—which is comparable in magnitude to the labor productivity increases of the Industrial Revolution. A crude but objective sustainability standard for companies in this context is that they should sustain year-over-year resource productivity increases of 6% for the period 2006 through to 2026.

While we the majority of company reported resource use data is unaudited, it is notable that 71 per cent of the 2010 Global 100 companies who report such information meet the test (6% per annum resource productivity improvements) of being on a path toward sustainable resource use (fourfold resource productivity increase over next 20 years).
 EnergyCO2WaterWasteComposite Resources
Fraction of Global 100 companies who report and are on track for fourfold increase in productivity by 202637/5355/7442/4927/4155/77
% of Global 100 companies who report and are on track for fourfold increase in productivity by 202670%74%86%66%71%

Note: Numbers in chart are from 2006 to 2008 for companies where data was available.

Raw data sources for core indicators include ASSET4, a Thomson Reuters business, and The BLOOMBERG PROFESSIONAL ® service.