How America's Most Responsible Companies Are Rethinking 'Going Green'

It's been a tough year for companies trying to do the right thing. Conservatives attacked corporate responsibility programs in 2023, and in a series of congressional hearings this summer, some lawmakers took aim at the guidelines for environment, social and governance practices, or ESG, derisively labeling them "woke businesses."

Progressives, on the other hand, pushed companies to take stances on an even broader range of social issues, all while consumers grew wary of sustainability claims and eco-marketing that smacked of empty greenwashing.

"It's very hard in today's current kind of 'gotcha' mindset," New York University Stern School of Business associate professor Alison Taylor told Newsweek. She said companies are caught between a "bad faith" backlash against ESG on the one hand and a desire to have corporations "fill the gap left in politics" on the other. It could almost be enough to make a business leader abandon the whole idea.

And yet, the fifth annual ranking of America's Most Responsible Companies by Newsweek and research and data firm Statista shows more companies tackled ESG initiatives this year compared to last. Thanks to increased reporting and data availability, we managed to incorporate 100 additional companies without compromising the quality of the list. To wit: The company at the 600th spot this year boasts a higher score than the company ranked at 500 last year.

Far from retreating from ESG, companies appear to be leaning in.

"I worried that companies would pull away. That is not what we're seeing," Dell Technologies VP of Corporate Sustainability and ESG Cassandra Garber told Newsweek. "Every customer group that we have—our top customers, our small businesses, our customers in other parts of the world—are only increasing their expectations significantly."

"We're not seeing our customers take their foot off the gas," said Hillary Weingast, VP and deputy general counsel at Juniper Networks. "We're not seeing it slow down at all."

Newsweek spoke to ESG leaders at a sampling of the companies on this year's list to find out why they are redoubling efforts for corporate responsibility in the face of criticism and—perhaps more importantly—how they make responsible business practices something more than just marketing.

Xylem

Claudia Toussaint is chief people and sustainability officer at Xylem, a water technology company based in Washington, D.C., that has the second-highest overall score on the Most Responsible Companies ranking.

Toussaint said the company's sustainability practices start with a business problem they are trying to solve for customers.

"Our business strategy really drives our sustainability strategy," Toussaint said. Xylem works with water utilities and industrial water systems in more than 100 countries, so the business is naturally focused on environmental concerns around water quality and delivery.

"Water is heavy, so it needs energy," she said. That energy takes up a big part of a water system's budget, and about 2 percent of global greenhouse gas emissions are associated with water management. Any products or systems that make water treatment and delivery more efficient represent both sustainability wins for the climate and savings for clients.

"The big drivers that drive our business strategy—like water scarcity, resilience and adaptation against climate change, and affordability of water—are also what inform our priorities from a sustainability perspective," Toussaint said.

That's a concept known in the ESG world as "materiality": social and environmental goals should be material to core aspects of the business.

"We really look at it from the perspective of, 'Where should we focus in order to have the greatest impact?'" Toussaint said.

Toussaint's other secrets to ESG success: have executive-level understanding of how the focus on sustainability helps the business, tie ESG goals to compensation and make sure the person responsible for sustainability has a voice in the boardroom.

Dell Technologies

Texas-based computer maker and technology company Dell Technologies addresses the materiality question with what the company calls priority impact areas.

"I think that is the secret sauce, if you will, that every company has got to start with," Garber said. Sometimes that means knowing when to say "no."

"It sometimes is very hard to not tackle issues that people might be personally passionate about," she said, but it's important to maintain focus on the things that matter most to a business.

As a technology company, Dell focuses on things like digital inclusion, ethical use of artificial intelligence and building trust around online privacy and security.

The company also emphasizes sustainability, and it received the highest score on environmental factors in the Most Responsible Companies ranking.

Garber said Dell is stressing greater use of recycled and sustainably sourced materials and has ambitious goals for a circular approach to the full life-cycle of its products by 2030.

"For every metric ton of product we put out, we seek to take a metric ton back," she said—a stretch goal they don't yet have the means to achieve.

There are, of course, targets for clean energy, efficiency and greenhouse gas emissions reductions within the company's operations.

"But, quite frankly, that is not the most material place where energy is an issue," Garber said. The energy used in Dell's supply chain is greater than the company's in-house energy consumption, she said, and the energy used to power Dell's products and data services is greater still.

"So, when we talk energy, it's way more about, 'How are we working with our suppliers for their reduction of greenhouse gas emissions?'" she said. "And then, really importantly, how are we innovating to make our products more energy efficient?"

In sustainability speak, the emissions associated with the upstream supply and downstream use of products are called scope 3 emissions. This is a challenging area for companies to cover but something that is growing in importance as the European Union and California move toward requirements for disclosure of scope 3 emissions.

The Securities and Exchange Commission is also considering requirements for additional transparency in reporting greenhouse gas emissions, and those pending regulations are likely driving a lot of the increased ESG reporting activity that Statista found when compiling data for the Newsweek ranking.

Juniper Networks

California-based technology company Juniper Networks is among the companies that had the biggest year-over-year improvement in the Most Responsible Companies ranking, jumping nearly 250 spaces to land at 14th place.

"It's become obvious to us that it's critical for business," Juniper's Weingast said. "In the last year, we have heard increasingly from our customers how important some of the social, but particularly the environmental, issues are to them."

Weingast said Juniper learned to integrate corporate responsibility pursuits across the company rather than silo them, and to keep rigorous records of those efforts.

"When I think about the last year, so much of it has been spent on data collection, measurement," she said. "Really being maniacal about understanding where we're at."

Part of her motivation, she said, comes from the increasingly competitive recruiting and hiring process, where a strong ESG program helps attract top talent.

"We're hearing it particularly from younger generations," she said. "They care about this. They're making decisions on where to go based on some of these things."

Juniper SVP and General Counsel Rob Mobassaly said the past year's political attacks on ESG are missing the point about why many companies are adopting corporate responsibility programs.

"The reason we do this isn't because we're trying to make a political statement or a social statement," he said. "We do it because there is a true business imperative for what we do."

Progress or PR?

The ESG practices that Xylem, Dell and Juniper emphasized match some of the main criteria that Taylor, from the Stern School of Business, described for an effective approach to corporate responsibility.

In her research and a forthcoming book, Higher Ground, Taylor explains the importance of setting ESG goals that are material to a company's business, the need for transparency and accuracy in reporting, and the necessary incentives and corporate structure to fully integrate ESG into business operations.

"What we really want is companies to focus on the problem they can actually solve and to be focused and strategic," she said.

Taylor said some warning signs could indicate that an ESG program is more about public relations than real progress toward responsible behavior. For example, she said, if a social media company's top ESG goals are all about climate change then she would question whether that is truly material to the company's core business.

"[Social media companies'] biggest issue is not climate, it is misinformation, it is the effect on teenagers' mental health," she said. "So, what they're trying to do is distract us from that and talk about all the wonderful things they're doing on climate."

If the person in a company charged with sustainability reports only to the marketing department, Taylor said, that's a red flag.

"The tendency to treat this as PR may be distracting us from actually thinking about what it seriously takes to get a few of these things done," Taylor said.

In addition to the Most Responsible Companies ranking, there are other resources for investors, consumers and prospective employees to judge how companies are doing on sustainability goals.

Science Based Targets initiative, or SBTi, is a corporate climate action nonprofit group that sets rigorous standards for business pledges on emissions reductions, making sure that they align with international agreements to limit warming. The SBTi dashboard tracks climate action by nearly 7,000 companies (including the companies interviewed for this story).

In a similar vein, the Net Zero Tracker is maintained by the British nonprofit Energy & Climate Intelligence Unit and the Data-Driven EnviroLab at the University of North Carolina-Chapel Hill. It monitors progress by about 1,000 companies that have pledged to reduce greenhouse gas emissions to net zero.

If current trends hold, there will likely be more company responsibility pledges and ESG reports to keep track of in 2024. Despite this year's blowback and criticism of corporate responsibility programs, specialists like Dell's Cassandra Garber said ESG is here to stay.

"The world needs it. Our customers are demanding it. It's good for business and society," she said. "It hasn't slowed things down."