Corporate Knights gets sustainability wrong

How and why words matter.

5

Corporate Knights continues to mislead. Once again it has issued a list of the world’s “most sustainable” corporations—the Global 100—and once again the metrics used have surprisingly little to do with what most of us mean by the word “sustainability.”

First, let’s get one thing out of the way. The organization is right to defend the fact that there are oil companies (including Enbridge, for example) and other producers of “sin” products on their list. There’s nothing in principle that says an oil company can’t, in some useful sense, be sustainable. And even if you think a company like Enbridge should be docked points because oil is a non-renewable resource, it still is a useful and interesting exercise to look at which oil companies are leading the field in terms of sustainability.

But the way the Global 100 measures what CK refers to as “sustainability” is wrong.

Here are the 12 “key performance indicators” that get a company onto the Global 100:

  • Energy Productivity
  • Carbon Productivity
  • Water Productivity
  • Waste Productivity
  • Innovation Capacity
  • Percentage Tax Paid
  • CEO to Average Employee Pay
  • Pension Fund Status
  • Safety Performance
  • Employee Turnover
  • Leadership Diversity
  • Clean Capitalism Pay Link (rewards “companies that have set up mechanisms to link the remuneration of senior executives with the achievement of clean capitalism goals or targets”)

These are essentially the same criteria CK used (and which I critiqued) last year. The only difference is that it has added the bit about “Pension Fund Status,” the relevance of which may already have you wondering.

Hopefully, the problem with those criteria is clear: only the first four actually have something to do with what most of us mean by “sustainability.” The rest are important issues, to be sure, but not relevant to the question of sustainable use of resources, or to the notion of sustainable economic growth that is compatible with environmental conservation.

Many will surely defend these criteria, and will tell me that I’m working with too narrow a conception of sustainability. Sustainability, they may say, isn’t just a narrow environmental concept. It’s about the whole People-Planet-Profits nexus. Well, certainly you can draw a diagram with boxes and arrows that shows connections of various kinds between those three. But to say that the three are one is to make so many undefended ethical, conceptual, and factual assumptions that the only result must be unnecessary confusion.

The Global 100 really isn’t a sustainability index, at least in the way that word is used by normal folks. It’s a complex index of sustainability, fairness, and a bunch of other positive stuff. And if you’re interested in all that stuff, why not just say so? Why bury it in a word that most people take to mean something else entirely?

The kicker here, in terms of misleading language, is the tag-line that completes the title of the Corporate Knights list: “The Global 100: World Leaders in Clean Capitalism.” The problem here is that “Clean Capitalism” is a term CK uses to describe what others might refer to as “conscious” capitalism, or perhaps “corporate social responsibility.” But when most of us hear “clean,” we think “not dirty,” or “not polluting.” The implication, here, whether intended or not, is that the firms on this list are clean ones, firms unlike the dirty, polluting, earth-pillaging kinds of the past.

Now, it would be one thing if CK wanted to turn the word “sustainability” (or “clean”) into a technical term, a term of art with a special meaning for experts in the field. But that’s not what’s going on. Instead, the organization is turning the word into a brand, a buzzword, and it’s a buzzword with which 100 companies are today adorning press releases. A hundred firms are today bragging about being sustainable, and are doing so with Corporate Knights’ endorsement. But “sustainable,” here, simply does not mean what you think it means.

 

5 comments on “Corporate Knights gets sustainability wrong

  1. The Corporate Knights Ranking is one to throw anyone off the ratings and rankings “business”. Thanks for taking an important stand on the methodology and the genuine confusion the jargon it creates. Marc Gunther raised some provocative questions about the Corporate Knights Ranking yesterday http://c2k.co/5oj.

    Cathie Guthrie

    Reply

  2. Thanks Chris,
    For your detailed note.
    Sustainability means many things to many different people beyond the original root of sustainable development defined by the Bundtland Report (“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”). At Corporate Knights, we accept it as self-evident that no form of wealth producing capital (including social capital) exists in isolation from other forms of capital. This means that it is not sustainable to have leadership structures that do not reflect the diversity of the marketplace in which they operate, or to benefit from the social capital of a civilized society necessary to sustain the modern marketplace without paying the price in the form of a fair share of taxes.
    A system of clean capitalism (which meets the conditions of sustainable development) must optimally manage a portfolio that consists of five forms of capital:
    Financial – funds which are available to acquire real capital;
    Produced – such as roads, railroad tracks, electrical grids, and machines;
    Human – including levels of education, knowledge, and creativity;
    Social – robustness of our institutions; and
    Natural – the earth’s natural assets (e.g., oil, minerals, land) and ecosystem services resulting from them
    On balance, when we enhance our various forms of capital on a net basis, we enhance our overall wealth. Our system must not deplete any particular type of capital past a danger point. This is the essence of clean capitalism.

    Reply

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