The CDP, a non-profit organization focused on urging investors, companies, and cities towards a more sustainable economy, recently released its annual list of companies that nailed corporate sustainability. Using metrics including “environmental performance and transparency,” the CDP evaluated some 8,400 companies to put together its A-List.
Of those 8,400 businesses, only 3% received a spot on CDP’s A List for any category. For the fourth year in a row, L’Oréal topped the list, receiving a perfect triple ‘A’ rating; the list also included companies like Unilever and Danone.
What’s interesting is that most lists don’t result in much beyond marketing value. But lists like the CDP’s encourage companies to rethink the ways they interface with the environment. They also underscore the idea that companies have an important seat at the table when it comes to transitioning to a more sustainable economy.
Especially for major companies, which often have complex supply chains, an abundance of resources, and the potential to make an impact at scale, the point is that corporate sustainability matters.
On an individual level, people can try their hardest to adopt more sustainable lifestyles. But since 1988, a mere 100 companies are responsible for more than 70% of greenhouse gas emissions in the whole world. So, when thinking about actions like reducing pollution, it’s time to turn towards big businesses — they indeed have the power and should have the responsibility to make a big difference.
That said, what’s the definition of corporate sustainability anyway? And how can companies approach making their corporate sustainability initiatives more effective?
What is Corporate Sustainability?
Corporate sustainability generally refers to the approach of being mindful of the environment while operating a business. Investopedia defines it as “meeting the needs of the present without compromising the ability of future generations to meet theirs.”
Altogether, corporate sustainability is about prioritizes the three P’s — people, planet, and profit. Recently, there has been increased emphasis on the “planet” pillar of this management approach.
Some companies have made corporate sustainability a core pillar of their operating principles, while other companies are falling behind and paying the price.
But what’s more important than recognizing the importance of corporate sustainability is to “show not tell” and have the data to back it up. That’s why it’s crucial for corporate sustainability to be tracked.
And in order to eliminate the bias associated with tracking corporate sustainability, it is often best to have a third-party get involved. After all, corporate sustainability efforts are just a shot in the dark if there’s nothing holding them accountable.
How to Track Corporate Sustainability — and the Motivation Factor
Through its annual reports, the CDP holds companies accountable for their environmental impact by disclosing its findings to the public. The nonprofit is based in the United Kingdom and scores investors, companies, and cities.
In its evaluation, the CDP sends out a questionnaire to several thousand companies for a self-assessment. Afterwards, companies receive a grade from A to D- based on their environmental performance in three categories: climate change, forests, and water security.
These disclosing companies must answer three questionnaires centered around these three areas of focus. Since last year, the CDP saw a 20% jump in study participation. The CDP hopes this spike will continue increasing environmental transparency and incentivize more companies to commit to more sustainable practices.
Being Transparent Can Be Risky, But May Very Well Help You Get Ahead
There are a number of things companies can do today to improve corporate sustainability initiatives. At the top of that list is being transparent — sharing both the good and the bad. Being honest about what the progress really is can tell a meaningful story; otherwise, putting out press releases only when something good is happening may not paint the full picture.
One straightforward way to be transparent about corporate sustainability is working with an organization like CDP to report progress. Although many businesses may initially see this as a means to be exposed, the CDP believes it’ll actually benefit companies. Since CDP uses self-reporting metrics, it requires factual confirmation compliant with recognized verification standards.
By reporting to third-parties, companies not only actively seek ways to improve, but also are given a benchmark against competitors. As more consumers look for companies with shared sustainable values, this information can be extremely advantageous.
Some Corporate Sustainability Initiatives ‘Greenwash’ — And It’s Not For Anyone’s Good
As the climate crisis becomes more urgent, several major companies have publicly announced their new sustainability goals. Many of these goals come from a good place — and the initiatives that follow are often meaningful in their own right.
However, companies know that the press likes to write about sustainability initiatives and that these announcements often have many eyes watching. That’s where the possibility of greenwashing comes in.
For instance, companies like H&M faced some major scrutiny after releasing misleading information about how sustainable their products really were. Which gives insights into a more general problem: any company has the power to label themselves as sustainable.
Here’s where the need for transparency and verification comes in.
With environmental sustainability becoming an increasingly hot topic, companies are listening, but some are taking advantage of that. However, these greenwashing techniques often work against the companies that perpetuate them. Customers are smart, and it seems like being disingenuous when it corporate sustainability simply isn’t for anyone’s good.
When companies work hard to make environmental progress, they should be proud to share that progress with everyone. But that can only really happen with transparency. Plus, with organizations like the CDP around, there’s more of an incentive for companies to not only do more, but do better. Hopefully, with the CDP’s growing presence, their A-List will become a lot longer.