Last week, I shared Corporate Knights‘ list of “100 Most Sustainable Corporations In the World” with my followers on Twitter and Facebook - with the intention that this could be a good list to consider for sustainable companies to invest in. A friend and follower commented on the post questioning the validity of the list that featured Suncor as the top Canadian company (ranked #48). He also cited the Environmental Record on Suncor’s Wiki page – according to the Pollution Watch fact sheet, in 2005 Suncor’s oil sands activities had the sixth highest greenhouse gas emissions in Canada.
So is this list still valid if it includes some of the world’s contentious corporations in terms of sustainable business practices? For what it is trying to accomplish, I’d say yes – it is still valid. Would I invest in these companies only because they made it on this list? Definitely not! However, it is important to look at the factors that enabled them to make it on the list so you can make an informed investment decision:
- Corporate Knights’ rankings are product- or service-agnostic; i.e. they don’t discriminate corporations based on industry or the fact that it deals with fossil fuels or oil sands. In my opinion, it’s only fair to be all-inclusive to avoid biases.
- The ranking methodology is a purely quantitative exercise based on financial metrics that determine how efficiently a corporation uses energy and water and how much emissions and waste it generates to create the wealth that they do; i.e. revenue is expressed as a percentage of resources used and emissions generated. The higher this percentage, higher the corporation’s ranking. In Suncor’s case, with oil prices at such high levels, revenues are bound to be high, which would skew the ratio in Suncor’s favour.
- Finally and most importantly, the methodology does not account for ecosystem contamination, labour exploitation and other factors that are highly subjective in nature and challenging to measure consistently across various industries.
#3 was my ‘”Aah! No wonder!” moment. It’s not a surprise, after all, how companies like Suncor made it on the list – because it’s biggest sin wasn’t being accounted for. I don’t necessarily agree with the exclusion of this factor. I believe that the revenue of corporations like Suncor should be adjusted for the cost of repairing the damaged ecosystem. Ofcourse, it would be challenging to measure these costs as companies are not required to report these figures (not yet, anyway).
The fact that Suncor is transparent about these metrics publicly, bears some merit. Instead of focussing on how fossil-fuel companies get on this list, I would focus more on using these (low) rankings to divert capital and investor focus away from inefficient/irresponsible firms toward those who are more responsible. Also, a low ranking would provide an incentive to companies like Suncor to do better – that’s the hope anyways. Personally, I wouldn’t invest in Suncor (or any other oil sands company) because they would fail my primary criteria – extent of ecosystem contamination. Disclaimer: my preferences are just that – my preferences and should not be construed as financial advice.
Corporate Knights is candid about accepting that their ranking system isn’t perfect. Having some measurable ground rules, as imperfect as it may be, is better than not having any. I find a capital-driven exercise such as this is able to communicate to capitalistic companies how the markets expect them to operate. We’ve been condemning the oil sands for years – can’t say we’ve made much progress, with the exception of getting noticed. If the financial markets condemns their operations in ways that would affect their economies, we have a better chance of success in bringing about change, in my opinion anyway.