This month, Green Edge focuses its sustainability lens on green company ranking systems that rate how sustainable an organization is. Since 2000, close to 100 of such ranking systems have been established. Although this proliferation of green ranking systems is a testament to the remarkable transition of sustainability from a fringe movement to a mainstream concern, both the corporate subjects of the ranking systems and their stakeholders----at whom the rankings are directed----are often confused as they attempt to navigate the myriad systems available.

Some of the criteria considered by the ranking systems Green Edge studied.

Here is a summary of what we found.

The Systems

The systems we studied were Corporate Knights Global 100, SB20, Tomorrow's Value Rating, Southeastern Corporate Sustainability Rankings, Dow Jones Sustainability Indexes, Newsweek's Green Rankings, and the Toxic 100 Air Polluters Index. We chose these seven systems because they differ so drastically with respect to how they define sustainability, the population of organizations they evaluate, the information they rely on, the methodologies they employ to arrive at their conclusions and the transparency of their approach.

Making the List

Ranking systems fundamentally differ based on whether they select or order companies. What we mean by this is whether the ranking system is ranking companies that they have already determined meet some sustainability criteria (select) or whether they are ranking organizations based on selection criteria unrelated to sustainability, such as those companies that have the largest market capitalization (order). Newsweek, for example, orders the 500 largest companies in the United States from most to least sustainable. Thus there is no sustainability cache for those companies at the bottom of Newsweek's list because they didn't make it onto the list in the first place based on having satisfied sustainability related criteria. In stark contrast, Dow Jones selects companies for its Sustainability Indexes based on a comprehensive sustainability analysis and then ranks those companies that they have already determined to be sustainable. Therefore earning a spot on a Dow Jones Sustainability Index is a prestigious sustainability credential regardless of the actual rank.

Methods Matter

One of the most important things to consider when assessing the validity and usefulness of a ranking system is the methodology it uses to determine how an organization should be ranked.  

The methodology reveals how a ranking system "defines" sustainability and the biases to which it is prone. Unfortunately, most green company ranking systems have been very cautious about revealing their methodology. Given the overall lack of transparency when it comes to the ranking systems themselves, it is ironic that the transparency of the companies being ranked is often a key consideration in the ranking results. One sustainability ranking system stands out from all the others we evaluated when it comes to transparent methodology and that is the Corporate Knights Global 100. The Global 100 relies entirely on quantitative metrics and is completely transparent about those metrics. The other systems we studied rely, to varying degrees, on a less tangible and less transparant set of criteria in making their determinations.

Sustainable, or More Sustainable?

There are two irreconcilable schools of thought where assessing environmental impact is concerned. The first is more relativist and believes that impact should be measured on an industry-by-industry basis. Individuals that subscribe to the first school view drilling for oil and harvesting lumber as necessary evils, and feel strongly that companies in these areas should be rewarded for mitigating their impact, even if that impact is still large relative to that of companies in other industries. The second school of thought is vehemently opposed to these ideas, and subscribes to the notion of absolute impact----that corporate activity should be compared to an ideal baseline of no environmental impact at all. Tomorrow's Value Rating is generally aligned with environmental relativism, while the Toxic 100 falls on the absolutist side of the spectrum.

Looking Ahead

Until the subjects of these ranking systems and their stakeholders----to whom the ranking systems are directed----understand how they work, confusion about how to use them and uncertainty about their validity will abound.  

Our research report, which provides an in-depth analysis of ranking systems that differ drastically in their approach and results, will help the companies being ranked and their stakeholders understand how the different systems work and the purposes for which they can best be relied upon. We anticipate that the corporate sustainability rankings landscape, which is still in its early stages, will undergo dramatic changes in the near future. We look forward to continuing to help consumers, sustainability analysts and corporations navigate them with greater ease.