US companies rank miserably low on the UN’s new corporate responsibility rankings

Counting EBITDA, not development goals.
Counting EBITDA, not development goals.
Image: Reuters/Andrew Kelly

When it comes to the UN’s sustainable development goals, Apple just thinks different.

The iPhone-manufacturing behemoth ranks among the worst of the world’s richest public companies in recognizing sustainable-development themes in its corporate annual reports, according to a new analysis of 100 top brands. Apple is joined at the bottom of the gilded heap by more than a dozen companies who also ignored sustainable development in their annual reports, including Disney, Walmart, and General Electric.

The SDG Commitment Report 100, to be released today (April 19) at UN headquarters in New York, is the first-ever analysis to use annual reports as the sole metric to assess corporate commitments to the UN’s 17 sustainable development goals. Analysts argue that the corporate annual report, a legally-required document, is a higher—and better—standard to judge a company’s commitment to sustainability than any voluntary corporate responsibility report.

The report included the 50 largest global companies with annual reports for the year 2016 available by March 31, 2017. The other 50 companies assessed were made up of largest companies by revenue on each continent (the Americas, Europe, Africa, and Asia-Pacific); the world’s largest family-owned companies; and a number of firms on Fortune’s Most Admired Companies list—as long as they too has 2016 annual reports available for review.

Analysts searched the annual reports for the presence of the 17 UN sustainable development goals, or SDGs, which are a set of moonshot targets that all 192 UN member states, including the US, have agreed to reach by 2030. They include ending poverty and hunger, reducing greenhouse gas emissions, and promoting gender equity.

For example, Chinese energy company Sinopec’s annual report contained more than 30 references to alleviating poverty, more than any other company, while Tesco, the UK supermarket chain, made more than 20 references to ending hunger. A final score calculates total mentions of SDG themes. (A full list of the scores can be found at the end of this article.)

American corporations scored far worse than their European counterparts in the rankings, which were developed by the Geneva-based UN Global Sustainability Index Institute. Eighty-two percent of surveyed companies made at least some mention of sustainable development themes in their 2016 annual reports; of the 18 that did not,15 are based in the US.

Swedish truck manufacturer AB Volvo, Swiss pharma giant Novartis, the UK supermarket chain Sainsbury, and Germany’s Volkswagen were at the top of the list. The highest-ranked US companies were appliance-maker Whirlpool, at 31, and PepsiCo, at 40.

“None of the American companies are at the top of this list,” Columbia University professor John Liu told OrbMedia. “The question is, who is going to be the first to step up?” Sustainable development is good for investors, Liu, who as former comptroller of New York, managed the city’s $152 billion employee pension fund from 2010 to 2013. “There are reports and studies that show that companies who pay attention to [environmental, social, and governance benchmarks] generally have a better track record of long-term growth,” he says.

Data appear to support this view. A 2015 study in The Accounting Review found that “firms with good ratings on material sustainability issues significantly outperform firms with poor ratings on these issues.”

The SDG Commitment Report rankings are part of a growing movement by investors and non-governmental organizations to push corporations into aligning their businesses with sustainability goals, through investment cash and publicity, both good and bad. Last year, for example, the $316 billion California Public Employees Retirement System began asking corporations it invests in to seat climate change experts on their boards.

GE, which has a website dedicated to sustainability, declined comment on the unreleased report. Apple, Disney, Walmart, and other companies that ranked low did not return emails or calls seeking comment.

Spokesmen for several other companies at the bottom of the rankings pointed to their participation in other social and environmental reporting mechanisms. US insurer Humana, one of those lowest-ranked companies, for example, publishes corporate social responsibility reports in line with the Global Reporting Initiative, a standard used by more than 5,000 companies worldwide.

Aetna, also at the bottom of the rankings, is another one of the blue-chips that have separated social responsibility activities from their annual reports. But including sustainable development themes in legal documents like the annual report “makes them a matter for the whole board of directors and the CEO, and brings to them a level of attention that they would not otherwise have,” says Alfred Berkeley, a former president of the NASDAQ exchange.

Unlike other publications, annual reports like the US10-K form carry the weight of a legally-binding document, says Roland Schatz, the UN Global Sustainability Index Institute’s founder. “The sustainability report of a company is not legally binding and is therefore of less relevance. It can turn into ‘greenwashing.’”

The Institute plans to expand the new ranking into an index that will track more than 1,000 companies. Schatz said the rankings will help investors parse which companies are most aligned with the long-term needs of shareholders and the planet.

“While a global sustainability index may be only one small element of many to meet this challenge, it is an essential one because it helps to structure the investment flows of the future,” said Joachim Faber, chairman of Deutsche Borse, the German stock exchange, in a written statement.

The new rankings, however, are not a foolproof measure of a company’s bona fides.

Last month Volkswagen, fourth in the SGD Commitment Report, pled guilty to criminal conspiracy for cheating US diesel emissions tests. Six executives have been charged, and it faces legal action over millions of rigged cars in Europe. Royal Dutch Shell, 20th in the new report, is mired in a $1.3 billion corruption scandal in Nigeria. Last year Shell paid £55 million (about $70 million) to Nigerian farmers and fishermen over oil spill damage after years of negotiations.

“The report isn’t showing the actual behavior of any of these companies,” says Schatz. “But I prefer companies who declare they want to follow the highest standards and sign onto them every year in a way that the world can hold them accountable, as opposed to those who have legally declared nothing, like Apple.” (Apple did not respond to three emails from OrbMedia seeking comment).

All 100 companies assessed, ranked: