2016 Newsweek Green Rankings: FAQ

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The Newsweek Green Rankings is one of the world’s most recognized assessments of corporate environmental performance. Toby Melville/Reuters
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Newsweek Green Rankings

The Newsweek Green Rankings are one of the world's most recognized assessments of corporate environmental performance.

Based on research from Corporate Knights Capital and HIP Investor, the 2016 iteration of the project features eight rules-based indicators that are used to clearly assess and measure the environmental performance of the world's largest publicly traded companies.

This document serves as a roadmap for the Newsweek Green Rankings and helps address many of the most common questions

Which companies are covered by the Newsweek Green Rankings?

The Newsweek Green Rankings consist of two separate rankings. The U.S. 500 ranks the 500 largest publicly-traded companies in the United States by market capitalization, while the Global 500 looks at the 500 largest publicly-traded companies globally by market capitalization.

Who are Newsweek's research partners?

Newsweek partnered with Corporate Knights Capital and HIP Investor to complete the 2016 Newsweek Green Rankings.

How are companies scored?

Companies are scored based on their performance on eight specific indicators. The indicators are described below. A more detailed description of the methodology can be found online here.

Indicator 1: Combined Energy Productivity

Weight: 15%

In the first step, each company's Energy Productivity is calculated for 2014, with Energy Productivity defined as Revenue ($US) / Total Energy Consumption (GJ). Each company's Energy Productivity is then percent-ranked against that of all Industry Group peers in the CKC research universe and multiplied by 0.75. The Global Industry Classification Standard (GICS) definition of "Industry Group" will be used.

In the second step, the change in each company's Energy Productivity from 2012-2014 is calculated and percent-ranked against that of all same-Industry Group peers within the CKC research universe. If the company's percent-ranked 2014 Energy Productivity is top quartile, their percent-ranked change in Energy Productivity for 2012-2014 is multiplied by 1 and then by 0.25. If the company's percent-ranked 2014 Energy Productivity is second quartile, their percent-ranked change in Energy Productivity for 2012-2014 is multiplied by 0.75 and then by 0.25. If the company's percent-ranked 2014 Energy Productivity is third quartile, their percent-ranked change in Energy Productivity for 2012-2014 is multiplied by 0.5 and then by 0.25. If the company's percent-ranked 2014 Energy Productivity is bottom quartile, their percent-ranked change in Energy Productivity for 2012-2014 is multiplied by 0.25 and then by 0.25.

In the third step, the values from the first and second steps are totaled.

Indicator 2: Combined Greenhouse Gas (GHG) Productivity

Weight: 15%

In the first step, each company's GHG Productivity is calculated for 2014, with GHG Productivity defined as Revenue ($US) / Total Greenhouse gas (GHG) Emissions (CO2e). Only Scope 1 and Scope 2 emissions are included according to the GHG Protocol. Each company's GHG Productivity is then percent-ranked against that of all Industry Group peers in the CKC research universe and multiplied by 0.75.

In the second step, the change in each company's GHG Productivity from 2012-2014 is calculated and percent-ranked against that of all same-industry group peers within the CKC research universe. If the company's percent-ranked 2014 GHG Productivity is top quartile, their percent-ranked change in GHG Productivity for 2012-2014 is multiplied by 1 and then by 0.25. If the company's percent-ranked 2014 GHG Productivity is second quartile, their percent-ranked change in GHG Productivity for 2012-2014 is multiplied by 0.75 and then by 0.25. If the company's percent-ranked 2014 GHG Productivity is third quartile, their percent-ranked change in GHG Productivity for 2012-2014 is multiplied by 0.5 and then by 0.25. If the company's percent-ranked 2014 GHG Productivity is bottom quartile, their percent-ranked change in GHG Productivity for 2012-2014 is multiplied by 0.25 and then by 0.25.

In the third step, the values from the first and second steps are totaled and then multiplied by 0.9.

In the fourth step, if the company disclosed Scope 3 GHG emissions in 2014, a score of 100% is attributed and then multiplied by 0.1. Otherwise, a score of 0% is given.

In the final step, the scores from the third and fourth steps are added.

Indicator 3: Combined Water Productivity

Weight: 15%

In the first step, each company's Water Productivity is calculated for 2014. Water Productivity is defined as Revenue ($US) / Total water use (m3). Each company's Water Productivity is then percent-ranked against that of all Industry Group peers in the CKC research universe and multiplied by 0.75.

In the second step, the change in each company's Water Productivity from 2012-2014 is calculated and percent-ranked against that of all same-industry group peers within the CKC research universe. If the company's percent-ranked 2014 Water Productivity is top quartile, their percent-ranked change in Water Productivity for 2012-2014 is multiplied by 1 and then by 0.25. If the company's percent-ranked 2014 Water Productivity is second quartile, their percent-ranked change in Water Productivity for 2012-2014 is multiplied by 0.75 and then by 0.25. If the company's percent-ranked 2014 Water Productivity is third quartile, their percent-ranked change in Water Productivity for 2012-2014 is multiplied by 0.5 and then by 0.25. If the company's percent-ranked 2014 Water Productivity is bottom quartile, their percent-ranked change in Water Productivity for 2012-2014 is multiplied by 0.25 and then by 0.25.

the third step, the values from the first and second steps are totaled.

Indicator 4: Combined Waste Productivity

Weight: 15%

In the first step, each company's Waste Productivity is calculated for 2014. Waste Productivity is defined as Revenue ($US) / [Total waste generated (metric tonnes) – waste recycled/reused/composted (tonnes)]. Each company's Waste Productivity is then percent-ranked against that of all Industry Group peers in the CKC research universe and multiplied by 0.75.

In the second step, the change in each company's Waste Productivity from 2012-2014 is calculated and percent-ranked against that of all same-industry group peers within the CKC research universe. If the company's percent-ranked 2014 Waste Productivity is top quartile, their percent-ranked change in Waste Productivity for 2012-2014 is multiplied by 1 and then by 0.25. If the company's percent-ranked 2014 Waste Productivity is second quartile, their percent-ranked change in Waste Productivity for 2012-2014 is multiplied by 0.75 and then by 0.25. If the company's percent-ranked 2014 Waste Productivity is third quartile, their percent-ranked change in Waste Productivity for 2012-2014 is multiplied by 0.5 and then by 0.25. If the company's percent-ranked 2014 Waste Productivity is bottom quartile, their percent-ranked change in Waste Productivity for 2012-2014 is multiplied by 0.25 and then by 0.25.

In the third step, the values from the first and second steps are totaled.

Indicator 5: Green Revenue Score

Weight: 20%

The Green Revenue Score is calculated by HIP (Human Impact + Profit) Investor Inc., an investment adviser and portfolio management firm involved in impact investing, ratings, portfolio construction and consulting.

The Green Revenue Score analyzes the revenue associated with each line of business reported by the company, and is multiplied by its associated "Industry Segment Green Rating" for each line of revenue disclosed.

For example, if Company A's revenue is broken down as Medical Equipment (60%) and Pharmaceuticals (40%) and the Segment Green Rating for Medical Equipment is (0.75) and Pharmaceuticals is 0.70, Company A's Green Revenue Score is (60% x 0.75 + 40% x 0.70) 73%.

The Industry Segment Green Rating is based on HIP Investor's assessment of the environmental and social impacts during production, consumption and post-usage lifecycle of those products and services.

Indicator 6: Sustainability Pay Link

Weight: 10%

A mechanism to link the remuneration of any member of a company's senior executive team with the achievement of environmental performance targets. The existence of such a link is awarded a score of 100%. A score of 0% is attributed if there is no such mechanism in place.

Indicator 7: Sustainability Board Committee

Weight: 5%

The existence of a committee at the Board of Directors level whose mandate is related to the sustainability of the company, including but not limited to environmental matters. A score of 100% is awarded if such a committee exists, and a score of 0% is given in cases where such a committee is absent.

Indicator 8: Audited Environmental Metrics

Weight: 5%

The company provides evidence that the latest reported environmental metrics are audited by a third party. A score of 100% is awarded if such an audit has been performed, and a score of 0% is given in cases where such an audit was not performed.

Are all companies assessed using the same methodology?

Yes. Companies are scored against their global industry groups peers on each of the eight indicators used in the project. To arrive at an overall placement, companies in each ranking (the U.S. 500 and the Global 500) are then sorted in descending order based on their final score.

Can companies opt out?

No. Companies can choose not to work with Corporate Knights Capital or HIP Investor in terms of responding to requests for data verification or contact details, but all companies in the U.S. 500 and the Global 500 are automatically considered.

Was any type of oversight body used during the project?

Yes. A Panel of Experts for the 2016 Newsweek Green Rankings. The Panel, shown below, reviewed all aspects of the methodology used in the project.

Panel of experts:

Robert G. Eccles is a Professor of Management Practice at the Harvard Business School. He is the author of One Report: Integrated Reporting for a Sustainable Society (2010) and The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality ( 2014).

Jessica Fries is the Executive Chairman of The Prince's Accounting for Sustainability Project (A4S), established by The Prince of Wales to "help ensure that we are not battling to meet 21st Century problems with what are, at best, 20th Century decision-making and reporting systems." While at A4S, Fries has been responsible for establishing and running the International Integrated Reporting Council during its first 18 months, as well as establishing A4S's CFO Leadership Network and engagement with the capital markets.

Michael Meehan is the Chief Executive of the Global Reporting Initiative (GRI), the global standard-setter in sustainability reporting.

L. Hunter Lovins is President of Natural Capitalism Solutions. Consultant to heads of state, corporate leaders and communities around the world, she is a Professor of Sustainable Management at Bard MBA.

William McDonough is founding principle of William McDonough + Partners and co-author of the widely influential Cradle to Cradle: Remaking the Way We Make Things.

Doug Miller is Chairman of GlobeScan, a public opinion research consultancy company with offices in London, San Francisco, and Toronto. He is one of the pioneers of global public opinion polling and is also a respected advisor and practitioner in the field of stakeholder engagement and collaborative action.

Jessica Robinson is Chief Executive of the Association for Sustainable and Responsible Investment in Asia (ASrIA), Asia's leading association working to promote sustainable finance and responsible investment across the region through providing research, thought leadership, industry engagement and advocacy support. In her role, Robinson also has responsibility for the Asia Investor Group on Climate Change, an ASrIA initiative to assist Asia's institutional

Kathleen Rogers is President of The Earth Day Network. She has worked for more than 20 years as an environmental attorney and advocate, focusing on international and domestic environmental public policy and law. Under Rogers' leadership, Earth Day Network has developed a significant role in advancing the new green economy and has emerged as a dynamic year-round policy and activist organization.

Can companies participate in the research process?

Yes. All companies in the U.S. 500 and Global 500 were attempted to be contacted with a data verification request by Corporate Knights Capital and HIP Investor.

Can the ranking results and scores be compared year to year?

Yes. All eight indicators and weights in 2016 are similar to the 2015 Newsweek Green Rankings.

As for prior year rankings, seven of the eight indicators in the 2015 Newsweek Green Rankings are similar to the ones used in the 2014 edition of the ranking. The only difference is the replace of the Reputation Score by the Green Revenue Score. The weighting scheme is unchanged.

Corporate Knights Capital and HIP Investor expects to continue to serve as the research provider for the Newsweek Green Rankings, and since we do not expect any material alterations to the methodology going forward, the year over year comparability of the rankings is likely to improve going forward.

How is each company classified by industry?

Each company is classified using the Global Industry Classification Standard (GICS). The GICS structure consists of 10 sectors, 24 industry groups, 68 industries and 154 sub-industries, into which all major public companies have been categorized.

Where do you get your data?

All the data used in the 2016 Newsweek Green Rankings was pulled from Bloomberg's Professional Service, which includes sustainability information on over 5,000 public securities and the Carbon Disclosure Project (CDP) via Bloomberg. The Green Revenue Score was informed by analytics provided by HIP Investor Inc.

What happens if a company doesn't disclose a particular indicator?

Companies are effectively penalized if they fail to disclose any of the indicators used in the Newsweek Green Rankings. For instance, if a company fails to disclose its energy use, which is information required by Corporate Knights Capital to calculate the Energy Productivity indicator, the company would receive a score of "0", thus negatively affecting its overall performance in the ranking.

What year's data is considered in your rankings?

The 2016 Newsweek Green Rankings use 2014 performance year data, which is to say data that corresponds to the performance of the company in 2014.

Can I be sure the rankings are fully accurate and reliable?

Corporate Knights Capital and HIP Investor use a variety of techniques to ensure that the data collected and used in the Newsweek Green Rankings is as accurate and reliable as can possibly be determined. These techniques include statistical analysis of industry trends and year over year shifts in performance, as well as investigations of outliers.

What are the weaknesses in the methodology?

In addition to being clear, well-defined and objective, the methodology is comprehensive in the sense that it captures a company's main environmental impacts, as well as reputational and legal challenges related to the environment and a company's approach to environmental management.

Some stakeholders have argued that the decision to normalize a company's consumption of energy and water, and production of carbon emissions and waste, by sales is inappropriate.

What are the principles to which the Newsweek Green Ranking adhere to?

The Newsweek Green Rankings follows six core principles:

Transparency

The precise methodology of the ranking and the results of the process are fully disclosed.

Objectivity

Eligible companies will only be assessed using quantitative data and performance indicators.

Public data

Only data-points that are part of the public domain are used

Comparability

Companies are compared against their industry group peers based on performance indicators for which the underlying data are reasonably well disclosed by their industry group globally.

Engagement

Companies eligible for the ranking will be informed prior to the ranking, so as to have an opportunity to ensure the necessary data is made available publicly.

Stakeholders

Stakeholder feedback is actively solicited throughout the project. A Panel of Experts, consisting of 8 leading sustainability practitioners, reviewed and commented on all aspects of the Newsweek Green Rankings methodology.

Newsweek Green 2016 Section

Uncommon Knowledge

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

About the writer

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