Why are Toyota, Ford and Honda the ‘best green global brands’?

Two Steps Forward

Why are Toyota, Ford and Honda the ‘best green global brands’?

The latest annual ranking of the 50 global brands with the most environmental appeal is just out, with automotive and tech companies leading the pack, despite the inherent environmental challenges faced by companies in those two sectors.

The 2013 Best Green Global Brands is produced by Interbrand and “powered by” Deloitte, according to the study’s — well, branding. The study measures the environmental perception of 100 global brands and compares it to those companies’ actual environmental performance.

This year’s ranking shows Toyota maintaining the No. 1 spot, with Ford, Honda, Panasonic, Nissan, Johnson & Johnson, Volkswagen, Danone, Nokia and Dell rounding out the top 10. (Click here to read the top 50 companies, including their rank and “gap” scores.)

The gap in question is the difference between the companies’ perception and performance scores. The perception survey is conducted by Interbrand, a global branding and brand management firm, which queries consumers in the 10 largest global economies (based on GDP), interviewing more than 10,000 consumers in total. For each brand, more than 100 people aware of that brand in each country are asked to assess it in terms of six “pillars”: authenticity, relevance, consistency, presence, differentiation and their understanding of environmental claims.

The performance-side assessments are conducted by Deloitte, which also has six pillars: governance, stakeholder engagement, operations, supply chain, transportation and logistics, and products and services.

Each of the top 100 global brands is scored on a 1-100 scale on both performance and perception. The two scores, along with the gap between them, comprise the rankings. A negative gap score indicates that public perception is greater than the company's actual environmental performance; a positive score says that environmental performance is greater than the public's perception. Obviously, having a smaller score means the two are closer to alignment. The top 50 companies are included in the report. (You can read the full methodology here.)

I asked Will Sarni, a director at Deloitte, who led that firm’s portion of the study, what it means to be one of the “best global green brands.” “It means essentially achieving not just a balance between perception and performance, but actually performing on both. It means that what you’re doing in the way of performing is successful in some measure, and there is acknowledgment by stakeholders in the marketplace that you are achieving positive results.”

The idea of aligning perception and reality has long been a challenge for companies, when it comes to their environmental performance and achievements. Most companies, I’ve found, tend to underplay their performance, preferring to enjoy other benefits it brings, such as reduced costs or increased employee engagement. A smaller number of companies get ahead of their skis, so to spea, with outsized reputations as progressive companies that may not be matched by their actual performance. Those are the ones more vulnerable to charges of greenwash (although the other companies are by no means immune to it).

That’s the case with BGGB’s top 50 companies: 31 of them have positive scores, meaning their performance is greater than their perception; 19 have greater perception than performance.

Brand perception is no small matter, says Sarni. “The importance of intangible value, of which brand value is a part, is increasing in the marketplace. If you look at intangible value as a percent of market capitalization, it’s gone up over the past couple decades. There’s been a decoupling of business assets from market capitalization, and the difference is things like goodwill, intellectual capital and brand loyalty.”

Of course, brand value also plays a role internally. “These things are important not just on the outside for consumers, but also on the inside for employee engagement and recruitment,” explains Jez Frampton, Global CEO of Interbrand. “Everyone is striving for the best possible talent pool, and brand value has become an increasingly important driver for people choosing which companies they’re going to work for.

I was struck that nearly half of the top 50 companies — 24 of them — fall into either the automotive or technology sectors. I asked Frampton why that was the case.

For automotive companies, “If you go back to 2009, when it looked like the industry was going to crash and burn, a lot of them made pretty big commitments to innovation, to develop new products and services,” he told me. “At the same time, many of them have gotten better at reducing costs, and because of the impacts on the environment, they were under pressure by governments around the world.” The result, he says, was a near-death experience that led to dramatic shifts in both operations and products, the fruits of which are just now coming to market. “The whole industry was affected by this nightmare view of the future. Combine that with the fact that the industry has a long lead time — about five years from design to market — so improvements are just showing up.”

One big winner in this year’s BGGB rankings was Nissan, which jumped 16 spots — the most overall — to land in the No. 4 slot, after making the list for the first time only last year. That was due in large part to a single product — the Leaf electric vehicle — that has placed Nissan near its rival Toyota, which has held the top spot for several years, largely as a result of the halo effect of the Prius.

“I think what we are starting to see is a recognition by consumers and the market of the ongoing investment we are making especially in the Leaf,” Roel de Vries, Nissan’s global head of marketing, communication and brand strategy, told me. “But not only the Leaf. Like many car companies, we're investing quite a bit in getting our cars cleaner and getting our whole supply chain more green. But I think in the case of Best Global Green Brands, it's a recognition of the ongoing efforts that we have in developing electric vehicles and what we've done with the Leaf.”

Can a single product drive a company’s reputation? In the case of Nissan, like Toyota's Prius before it, that seems to be the case. “From the consumer’s perspective, without a doubt, companies’ perception are driven by an individual hero product, which will make them appear to be a highly sustainable business,” says Frampton. “And there are a number of brands that have a general halo because they’re highly respected and loved brands in their own right. There’s a consumer perception that, ‘Well, they’re a great company and they make such wonderful products and they’re such a cool brand, therefore they must be a good company, too.”

As for consumer electronics manufacturers like Panasonic, Nokia, Dell, Sony, Hewlett-Packard, Intel, Apple and Philips — all in the top 25 slots — each has a strong environmental program. All of these companies, save Apple, have positive scores, meaning their environmental performance was greater than their environmental brand perception. (Apple's gap was barely negative, at -0.93.) The industry has been pushed by government, activists, and investors to address significant environmental challenges, including electronic waste and toxic materials, as well as the energy consumption of their products. While such problems are by no means solved, there's been a race to the top that's pushed all of the companies forward.

But not all technology companies made the grade. In particular, the online brands — including Amazon, eBay, Facebook, Google, and Yahoo! — didn’t make the top-50 list. “In a lot of those instances, it’s caused by their performance data,” said Frampton. The online companies are still largely AWOL when it comes to being environmental leaders, or at least in disclosing their commitments and achievements.

One of the frustrating things about the BGGB study are the companies not listed — and which weren’t even considered. Because the study covers brands and not companies, several firms — among them Diageo, General Motors, Procter & Gamble, SABMiller and Unilever — weren’t rated or ranked. Each of these is a “house of brands,” meaning that few, if any, products bear their corporate names. That left them out of the running for purposes of this study. That’s a shame, as several of these would likely have scored quite well.

(Somewhat more confusing was that a couple of the listed companies, Nestlé and Colgate, are also houses of brands, but were rated and ranked only for the products that bear their their company's names. So, for example, Nestlé-branded chocolate and water were considered, but not Gerber, Purina, or Lean Cuisine, which the company also owns.)

The challenge of connecting the environmental performance and perception of a corporate enterprise to its individual products or brands is a significant challenge, says Sarni. “The survey is triggering conversations with a number of companies about how to make that connection. How do you manage to take all the good things they’re doing at the enterprise level and drive that to individual brands? That’s a question we’ll hear more and more about in the coming years.”

The whole business of assessing companies — in both environmental performance and perception — is a tricky one. Today’s leader is tomorrow's laggard. A new halo product is bound to rise to the top, displacing whoever's on top.

But strong brands are enduring. Witness Toyota, which has clung to the top spot despite its highly publicized 2010 safety recall for Prius braking problems. That company’s continued innovation, as witnessed through the 13-year-old Prius brand’s extension into multiple models and technologies, has allowed it to maintain and even grow its halo over time. Inevitably, it will some day be displaced by the next-gen green brand leader.

As Frampton counsels: “Watch this space because it’s changing all the time.”