October 18, 2011
Why the Newsweek Green Rankings are Important
by Robert Kropp
SocialFunds.com talks with Cary Krosinsky of Trucost about the methodology and the significance of
the findings of this year's results.
The year's most highly anticipated Green Rankings
of large global companies were published yesterday by Newsweek, and media outlets
everywhere—including here on SocialFunds.com—have rushed to spread the news on what those companies
are doing to address the crisis of climate change.
When Newsweek's first Green
Rankings were published in 2009, I wrote that as significant as the rankings themselves was the
fact that a mainstream publication sought out the environmental research conducted by Trucost to contribute to the methodology.
Joined for the first time this year by Sustainalytics, Trucost continues to
provide environmental impact assessments by quantifying publicly disclosed environmental data and
putting a dollar figure on that impact. Sustainalytics determines the rankings' environmental
management score by focusing on company operations, contractors and suppliers, and products and
Besides the fact of Newsweek's broad penetration, what gives this particular set
of rankings such visibility? SocialFunds.com posed the question to Cary Krosinsky, Senior Vice
President for Trucost.
"We seem to have emerged, for whatever reason, with the most
relevant ranking of its kind," Krosinsky said. "Our data is not perfect—no data is perfect—but I
think the reason the Green Rankings are gaining traction is because it's clear what we're all
trying to do."
"Social risks are important," he continued. "But strictly looking at
environmental sustainability, combining the quantitative perspective that only we have with the
work of Sustainalytics, we provide enough of the E side of ESG (environmental, social, and
corporate governance) to get a sense of where we are."
In an article in Newsweek, Krosinsky wrote, "Companies that actively manage environmental
risks—and take advantage of associated opportunities—increasingly seem to outperform those who
don’t in the stock market."
"Companies that ranked in the top 100 of the 2009 ranking,
weighted equally, outperformed the S&P 500 by 4.8 percent over the last two years," he continued.
In his article, Krosinsky cited a recently published academic paper which found that Newsweek's 2009 rankings had a significant impact on
For example, the stock price of IBM, which finished first in the US
rankings and second to Munich Re in the global rankings, has increased more than 100% in the last
five years while growth of the S&P 500 has been flat, Krosinsky observed. He pointed to initiatives
focusing on energy and water efficiency and smarter cities "as categories of opportunity to drive
"IBM not only looks for such environmentally focused revenue
opportunities, they are also now demanding environmental reductions from their suppliers," the
Asked about the response to the rankings by companies, Krosinsky told
Social Funds.com, "We've had unprecedented levels of response this year. It's a fairly laborious
research process in which we share our data with companies and have dialogues with over half of the
800 global companies."
"Companies are paying serious attention," he continued. "The
sustainability folks are not usually in the C-suite, but the large companies in our rankings are
getting a lot of questions. They're very keen on how they're perceived compared to their peers,
which is very motivating for them."
"Companies are going to compete with one another, and
now they have to compete on sustainability as well," he said.
Looking at the worst
performers among the 500 US companies in the rankings, one might be surprised to learn that of the
bottom 25, seven are financial firms.
"The bottom company in the US is not a coal-burning
utility, but T. Rowe Price," Krosinsky said.
Reasons for the poor performance of US-based
financial firms can be found in a report Trucost wrote for the United Nations' Principles for Responsible Investment (PRI), in
which the responsibilities of universal ownership, or portfolios that reflect the makeup of the
global economy, are explored.
Finding that the estimated annual environmental costs from
global human activity reached $6.6 trillion in 2008, the report concluded the portfolios of
universal owners such as institutional investors "are inevitably exposed to growing and widespread
costs from environmental damage caused by companies."
"The largest financial services
companies are actually universal owners," Krosinsky said.
In addition to the Trucost
report, the Greenhouse Gas (GHG) Protocol
recently published standards for corporate reporting of Scope 3 emissions, or
emissions from indirect sources such as supply chains.
The Scope 3 standards, Krosinsky
said, include "what financial services companies need to account for in their Scope 3. We factored
that in as much as we could, and that changed the equation for that sector. If you just look at the
financial sector in the US, we find that none of these companies actually measure this."
In contrast to the US results, four of the top five global finishers were in the financials
sector. The top financial ranking in the US went to Hartford Financial Services, which finished
Asked what actions he hoped companies would take in response to the rankings,
Krosinsky said, "We have to know where we are before we know what we should do. If we shine a
little light on where we are, something like 40% of the global footprint comes from corporate
activity. What companies can do is be as efficient as they possibly can, and if this helps clarify
where we are then we've achieved something."
In his article, Krosinsky wrote, "High
rankings now indicate which companies are best positioned for the changing world through new
offerings as well as efficiencies and cost savings that they find through best-practice supply
chain management. This should open the door to a new means of investing according to corporate
environmental performance—what you might call sustainable investing— in addition to more
traditional financial criteria."
Krosinsky told SocialFunds.com, "I'd like to see growing
recognition by mainstream investors that companies that are acting on these things are
outperforming. If they put their money that way, then a positive dynamic is created to lift things
in the direction we'd all like to see."