Finding the Greenest Companies in Silicon Valley

Finding the Greenest Companies in Silicon Valley

[Editor's note: Last week, Two Tomorrows released global ICT sustainability rankings; this report from the head of Two Tomorrows' U.S. office applies the same methodologies to Silicon Valley-based companies.]

Which companies produce the best CSR reports? I'm frequently asked this question as a consultant and as a director for the Tomorrows Value Rating. Five or ten years ago, I would probably have argued that the best reports were produced by companies with the highest risk of catastrophic damage -- for instance petroleum, energy and mining companies. The logic was simple: The greater the risk, the more control systems in place and therefore, the easier to communicate on practices and performance.

Today, however, I would point to the information and communication technologies (ICT) sector as a source of some of the best practices in reporting. From IBM's "power of the network," to Vodafone's M-pesa to eBay's programs for social entrepreneurship, there is a parade of best practices and innovative initiatives to be found in ICT sector reports.

But does this constitute reporting best practice? And are these the examples others should look to emulate when developing their own approach to reporting?

To answer these questions, we applied the criteria of the Tomorrows Value Rating to some of the most highly regarded companies -- the 15 largest ICT companies (based on 2009 sales) headquartered in the San Francisco Bay Area. We looked at all of their 2009 corporate responsibility disclosures, including reports and associated web content, and coined the resulting assessment the "Silicon Valley Rating."

The Tomorrow's Value Rating is based on our fundamental belief that adequate management of social and environmental issues contributes to a company's sustainability, and so helps protect and create value -- for the company and for society as a whole. The Rating focuses on the areas of corporate sustainability performance that still have significant scope for improvement, that offer big opportunities for competitive differentiation, and that will be the future drivers of long-term value.

The Rating uses corporate responsibility reports to assess a company's management of environmental and socio-economic performance. The assessments are based purely on publicly disclosed information; we rely on companies to be transparent and do not use surveys. The Rating criteria are broken into five domains of analysis:

  • Strategy: how corporate responsibility efforts match the core business strategy and how material issues are being addressed;
  • Innovation & Leadership: efforts to innovate in a profitable and scalable manner;
  • Governance: The quality of governance of corporate responsibility issues;
  • Engagement: how the company understands and responds to stakeholders' concerns; and
  • Value Chain: managing extra-financial impacts from suppliers through end-of-lifecycle

The findings from our Silicon Valley Rating are presented in the graph below.

figure 1

Hewlett-Packard and Intel lead the Silicon Valley Rating with scores right around the 50 percent mark. Companies are assessed on a scale of 0 to 100, where 100 represents an ideal, so these should not be seen as "bad" or 'low" scores -- compare these scores to those of the top energy company (EDF, with 57 percent) and the top hotel (Accor, with 55 percent) in other Tomorrows Value Rating industry ratings. Newcomers to reporting, such as Symantec, also performed well. However, the majority of the large Silicon Valley ICT companies show scores around 20 percent or less.

How do we reconcile a perception of best practice in reporting for the ICT sector and rating scores averaging less than 25 percent? The answer lies in the scoring within each of the five domains of analysis.

figure 2

The highest average scores for Silicon Valley companies are in the Innovation and Leadership domain. Here is where flagship initiatives in corporate responsibility are acknowledged. They include Sun Microsystems's commitment to interactive dialogue on responsibility issues, Apple's disclosure on product environmental impacts, eBay's various programs to enhance entrepreneurship and economic development for the under-served and Google's application of search technology to global environmental issues.

These world class initiatives are still, in the end, initiatives. The evaluation of systematic approaches to corporate responsibility lies in the Strategy, Engagement and Governance domains. These domains seek processes, mechanisms and systems to ensure that ethical, environmental and social benefits are integrated into the way the company operates.

{related_content}The presence of a systematic approach to identify and manage corporate responsibility issues is the best means for stakeholders to understand how the company will behave when responsibility to society is weighed against responsibility to shareholders. It also gives us a sense as to whether the company will recognize and manage the next great social and environmental challenges.

It is in these domains that the Silicon Valley companies achieve their lowest scores. Our conclusion is that, although there are impressive examples of responsible behavior and innovative solutions to society's greatest challenges, few of the Silicon Valley companies have a systematic approach to ensure responsible behavior. This includes little disclosure as to who is accountable for driving performance, little information on how decisions are made and a notable absence of management system mechanisms to help the companies to improve.

The lack of systems and protocols in Silicon Valley could very well be a legacy issue from companies founded on the premise of rapid innovation and freedom of thought.

Despite the apparent constraints of protocols, embedding responsible practices and driving real improvement in the Silicon Valley ICT companies will require investments in management system approaches and governance structures. HP and Intel will serve as good examples, but Silicon Valley might still consider looking to other sectors such as extractives for these aspects of best practice in reporting.

Todd Cort is CEO for Two Tomorrows (North America). The recently established Two Tomorrows Group brings together two CSR consultancies -- Csrnetwork and Sd3 -- operating globally with offices in Bath, London (U.K.); San Francisco (U.S.); and Seoul (Korea). Dr. Cort is co-author of the IEMA practitioners guide, Corporate Social Responsibility: A guide to good practice.