Strandberg Consulting published a study in April full of surprising findings on executive compensation. It found that 57 per cent of TSX 60 companies now consider sustainability targets in their executive compensation plans, one of many changes to Canadian corporate culture that have emerged in the 12 years since Corporate Knights first began conducting the Best 50 ranking.
This year has already seen scandals over foreign guest workers and unsafe garment contractors in Bangladesh, demonstrating a growing public appetite for accountability and leadership from companies throughout Canada. Corporate citizenry encompasses an ever-greater set of responsibilities for corporations, from reducing carbon footprints to obtaining a social licence to operate.
For Corporate Knights, our vision for corporate citizenship is one that contributes to a cleaner form of capitalism, which means that it is not sustainable to maintain leadership structures that do not reflect the diversity of the marketplace any more than it is sustainable to work in an unsafe environment. The 21st century marketplace will require businesses to become a driving force for social, environmental and economic benefits, and punish companies that neglect these responsibilities.
The leading company this year is Vancouver City Savings Credit Union, a British Columbia-based financial cooperative (see profile). “Vancity is an organization that lives and breathes sustainability,” says Michael Yow, lead analyst with CK Capital, our sister research division. “Even looking beyond the indicators, the company encourages employees to switch to sustainable transit modes, produces preferential banking products for disadvantaged groups and fosters socially responsible investments.”
With a turnover rate of 26 per cent, a number of new companies have joined the list this year. These include the iconic Canadian brands Tim Hortons, Telus and Bombardier. Each of these corporations greatly improved its reporting practices, moving all three into the Top 15.
Cooperative businesses continue to demonstrate a superior commitment to corporate citizenship, with three of the Top 5 firms using this type of membership-based corporate structure (see our spotlight on cooperatives here).
A regional assessment of company headquarters exposes some interesting trends. Ontario has 18 companies on the list, followed by Alberta’s 14. Quebec has 10. Ontario companies are dominated by banks and mining companies, while Alberta is mostly represented by oil and gas firms. Interestingly, Quebec is the province with the widest range of industries represented, from media and publishing to aerospace and transportation.
The Best 50 results themselves are encouraging on several fronts. Water, waste and energy disclosure rates continue to rise, suggesting a renewed focus by firms on disclosing more than just greenhouse gas emissions. This change was particularly evident in the materials sector. Companies also improved resource efficiency rates. The revenue per metric ton of waste produced, for example, increased by a third compared to last year. Greenhouse gas productivity doubled.
On the employee compensation front, the average ratio of CEO to average worker pay declined to 73, from 79 in the 2012 ranking. Another positive development came from the number of companies tying executive compensation to sustainability performance, which rose by 8 per cent to 40 firms.
Several changes were made to the ranking this year, including the addition of executive management diversity. Our leadership diversity score now combines female representation rates in executive ranks as well as in the corporate boardroom. Due to the difficulty of assessing minority and/or aboriginal status, we will no longer be measuring this data point.
Barrick Gold’s rise to 4th in the Best 50 this year is likely to cause controversy. The company’s Pascua Lama mine, straddling the border between Chile and Argentina, was suspended in April on the Chilean side by court order for “environmental irregularities.” Allegations of human rights abuse stemming from mines in Tanzania and Papua New Guinea continue to swirl around the company.
This raises an important point about our various corporate rankings. To ensure an objective, data-driven approach for assessing corporate citizenship, we look only at publicly disclosed data points that can be compared across companies. On this front, Barrick is an industry leader. It has embraced stronger disclosure practices, while becoming more resource-efficient than its peers. Very few workplace safety injuries occur at the company and it has also been working to diversify its workplace.
A growing body of research is demonstrating just how beneficial corporate citizenship is for the bottom line. Studies point to the increased profitability of firms that employ more women in senior management roles, while resource-efficient firms are better equipped to handle swings in commodity prices. Failing to properly incentivize managers to hit safety and sustainability targets can result in disasters like the BP Gulf of Mexico oil spill. In the years leading up to the incident, BP had been hit with more U.S. fines and penalties than its four biggest rivals combined.
This list salutes the Canadian companies that best embrace this new paradigm. The bar is being raised, but there is much more work to do.
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