17 February 2010
If you care about the environment, it may show in the way you spend your money. Maybe you shop at an organic food store, rather than a conventional supermarket. You probably look at energy efficiency labels before buying a new laptop. And if you're really serious, you may even be concentrating your nest egg into "green" investment funds.
But do the corporations that benefit from environmentally-conscious purchasing and investment choices deserve their green halo?
To provide some answers, New Scientist magazine teamed up with two companies that possess the most relevant data. Earthsense, based in Syracuse, New York, has polled US consumers to paint a detailed picture of public perceptions of corporate sustainability. Trucost, headquartered in London, UK, has compiled a comprehensive quantitative assessment of companies' global environmental impact.
Bringing these two datasets together for more than 100 major corporations shows just how confused ordinary people are about companies' green credentials. Overall, there was no correlation between the Earthsense and Trucost scores, suggesting that US consumers have little idea about companies' relative environmental performance, across a wide sweep of businesses.
There were also some dramatic mismatches between performance and perceptions: Fresh Del Monte Produce, for instance, is one of the greenest companies around in the eyes of the US public. But according to Trucost's analysis, it has the biggest environmental impact ratio of all the companies in our sample.
Trucost's assessment of corporate environmental performance accounts for more than 700 different environmental impacts, including greenhouse gas emissions, water use, and a wide range of chemical releases. Its analysts use models based on all of a company's activities, and the materials and processes involved, incorporating official sources of data such as the US Environmental Protection Agency's Toxic Release Inventory, and companies' own environmental data when these are disclosed. Trucost also works with firms to refine the results, to ensure as accurate a profile of their impacts as possible.
Trucost then converts each impact into an annual dollar cost. In the case of a firm running a fleet of diesel vehicles in its distribution chain, for example, these costs could include the burden of treating people with lung disease caused by emitted soot particles, plus the price of greenhouse gas emissions on a carbon-trading market. To assign these costs, Trucost relies on a library of prices derived from the latest academic research, updated with the help of an international advisory panel of leading environmental economists.
Finally, Trucost divides the cost of all the impacts by the company's annual revenue to produce an overall environmental impact ratio, expressed as a percentage. For extremely polluting companies, such as those running coal-fired power plants, these ratios can exceed 100 per cent. The ratios for companies in New Scientist's analysis ranged between 0.47 per cent and 52.60 per cent.
Each company's supply chain is included in Trucost's analysis - so that a restaurant chain's score, for instance, incorporates the environmental cost of producing and distributing the food and beverages sold.
In May 2008, Earthsense conducted the second wave of its Eco-Insights survey with a nationally representative sample of 30,000 US adults. As part of this online survey, individual respondents were asked about a randomly-assigned sample of up to 20 companies.
Participants were first asked if they were familiar with each firm, if necessary being prompted with some examples of its brands.
Only if they were familiar with a company were survey participants asked to rate the firm's environmental credentials. This gave an average of 1648 respondents per company included in New Scientist's analysis, which drew on the answers to two questions:
1) Sustainable business practices allow companies to "make green by going green," by taking the environment into account in how they run their business. For example: using renewable energy in manufacturing, recycling raw materials, reducing packaging, etc. When thinking about these companies, how much do you think sustainability is an important part of how they do business? Please rate them on a scale of "1" to "10" where a "1" means you think they don't consider the environment in any meaningful way in their business, and a "10" means you think the environment is a core part of their business approach.
2) Products have different impacts on the environment - how they are made, what they're made from, and how they are packaged and distributed. Thinking about these companies' products, what DIRECT IMPACT on the environment do you think the main products they make or distribute have? Please rate them on a scale of "1" to "10": a "1" means you think the company's products are having a very negative impact on the environment, and a "10" means they don't damage or even have a positive impact on the environment.
For New Scientist's analysis, the scores from both questions were combined into a single average for each company.
Companies were assigned to business sectors using their "Super Sector" listings in the Industry Classification Benchmark system run by Dow Jones Indexes and FTSE, established as a global standard for grouping companies with similar activities.
Please cross reference to http://www.newscientist.com/ if you run this story.