Why sustainability rankings matter — but maybe shouldn't

This has been a big week for corporate sustainability rankings, with the Dow Jones Sustainability Index (DJSI) and the Carbon Disclosure Project releasing news reports. Vote Solar and the Solar Power Electric Industries Association showcased the  Top 20 corporate users of solar power in the US. A book called Good Company just landed on my desk, along with its own 2012 Good Company Index. And October will bring us the World Series, Halloween and, of course, the annual Newsweek “green” rankings of big public companies.

All of which raises a couple of questions.

Do these ratings and rankings matter?

More important: Should they?

Undeniably, they do matter, mostly but not entirely because of the prestige they confer upon companies that do well. Press releases are flying! “Carbon Disclosure Project Salutes Con Edison” (Really?) “PepsiCo Earns Sustainability Accolades.” “GM Named Top Solar User in the U.S. Auto Sector.” This is all well and good. Some middle-management executive had to fill out all those CDP forms or buy those solar panels, and who could be more deserving of an accolade or a salute?

Seriously, though, companies that do well–like Microsoft, which improved its performance on the Carbon Disclosure Index and was added to the global Dow Jones  Sustainability Index -- used these rewards to track their own progress. Dan Bross, senior director of corporate responsibility at  Microsoft, told me by email:

Rankings help us benchmark our work and help stakeholders evaluate companies on a range of criteria. CDP and DJSI are, in my mind, two of the most credible as their rankings are data driven and analysis extremely thorough.

More than PR cred and good feelings are at stake. Real money follows the Dow Jones Sustainability Index. About $6 billion in assets are invested in a variety of financial products -- including mutual funds and ETFs from such money managers as Barclay’s Capital and Credit Suisse — that track the DJSI. So, when Microsoft is added to the index and IBM is booted out (for reasons that aren’t explained in either case), some money managers will be selling IBM and buying MSFT. Will this move the stocks? No, because $6 billion spread across several hundred companies isn’t meaningful. But clearly it’s better to be in the DJSI than to be out.

Other additions to the DJSI World Index include Target, Hewlett Packard, Canadian National Railway Co. and -- to my surprise -- Enbridge Inc., a Canadian oil & gas company that is best known in the US because it “spilled 20,000 barrels of oil into Michigan’s Kalamazoo River in the most costly onshore spill in U.S. history.” That’s not an NGO talking; that’s the Wall Street Journal. The 2010 Kalamazoo oil spill “was the result of corrosion throughout many vital safety aspects of the Enbridge organization,” said Robert Sumwalt, a member of the National Transportation Safety Board, which investigated the accident. Enbridge had another nasty, but smaller spill, from a pipeline in Wisconsin this past summer.

Next page: How does an oil company get on a sustainability index?