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PORTLAND, ME — Intel, Weyerhaeuser and Merck have the strongest environmental governance and policies, according to a study that looked at the practices of the largest publically traded firms in the U.S.
The latest company evaluations done with the Governance and Environmental Management Strength (GEMS) Rating found firms that are performing strongly in ever major sector, but also found a large chunk of companies that are severely lagging.
The GEMS Rating gives companies a score on a 100-point scale, based on their ability to anticipate and manage environmental issues that offer risks and opportunities to their operations. The GEMS Rating assesses companies depending on the presence or absence of 49 indicators in five categories: governance, policy, infrastructure and systems, performance results and transparency and accessibility.
The top 10 firms, and their scores, are:
- Intel - 82
- Weyerhaeuser - 75
- Merck & Co. - 71.5
- Lexmark International - 71
- Ford Motor Co. - 70.5
- Dell - 70.5
- Johnson & Johnson - 70
- Xcel Energy - 68.5
- Owens Corning - 68.5
- Xerox - 68
The GEMS Rating was created by Soyka & Company and IW Financial, which used the rating system to assess 962 companies from the Russell 1000. Research on the companies' practices and disclosure was provided by IW Financial.
Of those companies, 448 received a score of less than 10, and 170 received a zero, meaning they did not disclose any information related to the 49 indicators. To any outside party or shareholder, that essentially means that the companies have no environmental governance, do not measure their environmental results and have no policies on the environment, climate change or health and safety.
Although not all of the 12 major sectors are represented in the top 10, Soyka & Company and IW Financial note that there were strong performers in every sector. For example, the ratings found 17 companies that are in the overall upper quartile, but also have scores that are more than twice their closest peer company.
The leading sectors include consumer staples, materials and utilities. Four companies from this sector - which includes food processing, personal hygiene products, soft drinks and food retailing - are in the top 25, and the sector as a whole stands out from the others in that none of its companies received a zero score, and only five companies got a score below the median of 10.3. Lagging sectors include real estate and telecommunications services.
The full report on the latest GEMS Ratings is available for purchase from IW Financial.
Image CC license by Flickr user Engin Erdogan
I take issue with the
I take issue with the statement that by not disclosing information for the GEMS rating companies effectively have no environmental governance, measurement, or policy. The number of ratings is increasing rapidly. Companies simply cannot respond to every entity that asks for information in order to score them. Companies have to choose and tend to focus on those ratings that are seen as most credible.
I understand the basis for
I understand the basis for this concern. Allow me to clarify. The summary in CEF, while accurate as far as it goes, does not make clear that the basis for populating the GEMS rating is all pertinent information publicly disclosed by a particular company (e.g., from sustainability reports, SEC disclosures, web sites). There was no attempt made to solicit information from companies for purposes of applying the GEMS Rating methodology, and therefore no choices made by companies as to whether or not to participate. This stands in marked contrast to the methods employed in many other rating systems.
As clearly described in the public summary of our report, the judgments that we have made about the relative strength of the environmental posture of individual companies are based upon what can be divined by any external party viewing the information that these firms have chosen to disclose. And while it is probable that many companies have more going on behind the scenes than they have chosen to disclose, it is not possible to discern which ones are more sophisticated than they may appear, or in what respects. This leaves the external interested party, whether an investor/owner, customer, NGO, or other completely in the dark about the extent to which a particular company is really on top of their environmental aspects and prepared to both control related risks and exploit new business opportunities.
In contrast, as highlighted in our report, many companies have done an excellent job of showing how they have designed and deployed their approaches to managing their environmental issues, and have provided information on the results that these approaches have delivered. We believe that there are material differences between these firms and the hundreds of large and mid-cap companies that have disclosed little or nothing about their environmental management activities. The GEMS Rating provides an objective and consistent means of distinguishing the two, as well as identifying the many firms that have begun but are in the early stages of the journey toward long-term sustainability.