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On the Environment

Tuesday, September 29, 2009
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Newsweek Green Rankings

By Daniel C. Esty

Newsweek has just released its first corporate Green Rankings “scoring” 500 large American companies on their performance in responding to pollution control and natural resource management challenges. This ranking represents another step towards a more transparent world where companies know that their environmental performance is being scrutinized. 

I am especially pleased to see the Newsweek rankings as well as the Carbon Disclosure Project’s latest corporate greenhouse gas emissions scorecard since the Yale Center for Environmental Law and Policy has been promoting data-driven, analytically rigorous analysis of “green” performance for more than a decade.

The Newsweek project (on which I was an advisor) compiles an impressive range of information, gathered by three of the country’s top environmental research firms, about corporate environmental results and practices. Each company’s “Green Score” reflects three components: (1) Environmental Impact, which draws from quantitative measures and modeled results covering a range of issues including greenhouse gas emissions, air pollution and water use; (2) Green Policies, which examines corporate governance and practices related to the environment; and (3) Environmental Reputation, which reflects survey data on attitudes from corporate and environmental experts.

Having a more fact-based and empirical picture of which companies are doing well – and which less so – with regard to environmental management will be of interest to a variety of stakeholders, including the communities where these companies operate as well as their customers, suppliers, and employees.  Perhaps most importantly, environmental performance in general and “carbon exposure” in particular are increasingly of interest to those in the capital markets. As Congress continues to discuss climate legislation, and as the prospect of carbon charges in one form or another looms, investors have begun to ask which companies have been attentive to climate change and will therefore be advantaged in a carbon-constrained world. Likewise, they want to know which companies and industries will be relatively more burdened.  The Carbon Disclosure Project’s rankings are particularly relevant in this regard.

In some important respects, the Green Rankings (and the CDP report) raise more questions than answers. But this is to be expected in a world of haphazard environmental data.  Indeed, the index methodologies will be refined in the years ahead – and the picture painted will be sharpened.

Posted in: Environmental Performance Measurement

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