On October 17, Newsweek released its third annual US and global Green Rankings. With a more durable methodology than in prior years, the rankings are beginning to influence corporate behavior and disclosure.
There are a couple of issues with the rankings that Newsweek should address, however, regarding a false sense of accuracy and cross-industry comparisons. These issues are not unique to Newsweek's rankings. Yet with the broadest exposure to consumers among sustainability rankings, improvements by Newsweek would improve other rankings too.
False Accuracy
Newsweek's methodology, supported by detailed analysis from research partners Trucost and Sustainalytics, is described here in detail. In brief, the ultimate "green score" used to determine rankings for 500 U.S. and 500 global companies comprises a weighted average of environmental impact, environmental management, and disclosure scores.
Last year, Newsweek reported its green score to four significant figures (e.g., 76.24). This year, just three (e.g., 76.2). Without reporting error, though, even three significant figures implies that there is a meaningful difference between Intel and Adobe, for example, whose scores differ by a tenth of a point.
Among other estimates, Trucost assigns a dollar value to the potential cost to society of damage to the environment from each company's practices. Attempting to do so is worthwhile but not possible to a high degree of certainty. The reported scores do not adequately reflect the compounding effect of multiple uncertain evaluations.
Apples to Apples
Newsweek normalizes its rankings to take into account innate differences in the environmental impact of various industry sectors. In a webinar last month, Annie White, Research Manager at Newsweek's rankings partner Sustainalytics, explained that the environmental impact score, for example, considers individual scores in multiple categories weighted according to their importance by industry. Some categories are zeroed out for particular industries if they don't apply.
Despite these attempts to standardize across industries, the average green score of the companies within each industry correlates highly with the energy and material intensity of that industry. The graph of industry average green scores shows that, generally speaking, industry sectors that deliver relatively less energy and material-intensive products, like IT services, media, and telecom, have significantly higher scores on average than industries like utilities, materials, and energy. The highest scoring industry, IT, averages a score of 62.5, while the lowest scoring industry, utilities, averages a whopping 22 points lower.
Samantha Buechner is an analyst at 
I have a similar comment. I
I have a similar comment. I think they have to give the rankings by sector and by country. We can learn a thing or two from the EU. Also, metal smelting cannot be meaningfully compared to Information Technology. A second point is that, I see no attempt to chase down those who have outsourced dirty manufacturing (Apple->Foxconn). And they might also spotlight environmentally unfriendly business practices such as the life cycle around one-time use plastic bottles.
You should do a country wide comparison. An country with a couple of "stars" may be a laggard overall.
Finally, here is a real tough one, "Can you compare the public and environmental regulatory environments across countries ?". Perhaps a country, with no industry in the top ten is still a country wide lead
Chris
Very nice post and I think
Very nice post and I think your 3 recommendations are helpful in making this ranking more useful - both to consumers and to the rated companies. I work at Intel and we spend a lot of time looking through and analyzing the results of these ratings. One other question/factor I was wondering if you looked at is not just the cross-sector comparison issue, but also the issue of different business models within the same industry? My understanding is that the only emissions that are looked at in the methodology are scope 1 and scope 2 (not surprising since scope 3 emissions are not regularly or consistently repored). But the problem with this is it seems to penalize companies who are manufacturers vs. companies that have their manufacturing done by others. In fact, if you look at the US top 25 - only 2-3 companies are major manufacturers.
This also came up at the #BSR11 conference yesterday in the scope 3 emissions reporting workshop - brought up by someone in the pharma industry so it impacts a number of very different industries. Between now and when we get good scope 3 emissions and water data for supply chains - is there some way this can be factored in or adjusted? Interested in your thoughts on that aspect.