However, a number of roadblocks to true comparability exist. First, the items that are included in the reported waste figure can vary from company to company. While the phrase “one person’s waste is another person’s treasure” suggests that differing interpretations of waste may be responsible, it is in fact usually the presentation of partial data that is the culprit. The Global Reporting Initiative’s (GRI) guidelines for reporting waste (the EN22 indicator) addresses this issue by calling for the estimation of waste weight data where actual data is not available. Given that a growing number of companies are adopting the GRI reporting framework, it is hopeful that a concomitant improvement in data quality will follow.

In addition, corporations still do not universally disclose this information. Less than a third of the world’s 4,000 large public companies (> US $2B market capitalization), currently disclose waste data. This is compounded by the variation in the level of waste data disclosed from company to company. While GRI’s EN22 indicator prescribes the disclosure of total weight of waste by disposal method (such as reuse, recycling, and landfill), many still only disclose the total waste figure. Thus, while it would be ideal to use waste sent to landfill in the Waste Productivity KPI (given that reused or recycled waste is not a waste of resources), it remains impractical to do so from a data availability standpoint, with less than an eighth of large public companies reporting that data.

But as disclosure levels improve over time, are there other waste disclosures that should be made? The answer may lie with the disclosure practices of a Spanish retailer. Inditex, more commonly known as the clothing retailer Zara, goes beyond standard disclosures to include a breakdown of dangerous waste produced such as batteries, oil filters, and contaminating metallic packaging. Many companies disclose the breakdown between hazardous and non-hazardous waste, but few detail the specifics. While it is certainly important to identify the unnecessary production of waste, it is perhaps even more important to detail the production of potentially harmful waste. Even though the production of such waste may be unavoidable, its disclosure serves to communicate the risks associated with a company’s operations and demonstrates management’s commitment to mitigate those risks.

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Pension Fund Status = (Pension Obligations – Plan Assets) / Market Capitalization

The score for this metric is determined by taking (1 – the result of the above calculation) and percent ranking it against other same-industry group peers within theCorporate Knights research coverage universe.

The motivation for adding this metric to our analytical toolkit is two-fold. First of all, the performance of a defined benefit pension plan reflects an employer’s fulfillment of its social responsibilities, as a well-funded pension plan implies a commitment to the long-term security of its employees. Second, a pension fund’s performance can be a leading indicator of the ‘economic sustainability’ of a company. A significantly underfunded pension plan could lead to future financial obligations that may hinder an organization from pursuing its core mission.

As the calculation above implies, the metric applies to companies that have a defined benefit pension plan. Despite the secular trend away from defined benefit plans to defined contribution plans over the past decade, more than half of the companies in the Global 100 starting universe still had a defined benefit pension plan as of the end of 2011, as measured by disclosure of pension obligation data through Bloomberg. (The 2013 Global 100 starting universe consisted of approximately 4,000 global mid-cap and large-cap companies). The disclosure rate of the Pension Fund Status metric compares favourably to several of the other Global 100 metrics such as water productivity, waste productivity, and employee turnover. This data shows that the death of the defined benefit plan has been greatly exaggerated.

However, on the performance front, most of the defined benefit plans that we reviewed for the Global 100 project are under water, which is consistent with global trends. Fully 91% of companies with a defined benefit plan in the Global 100 starting universe that disclosed pension data had underfunded pensions in 2011. While this may, in part, reflect the increased challenges pension managers are facing in achieving target returns in the current market environment, clearly there are companies that are more adept than others at delivering returns (as 9% of these companies have fully funded pensions).

In our view, those companies with a strong sustainability ethos will be the same ones that are most motivated to fulfill their pension obligations. It is in the spirit of recognizing and rewarding these companies that we welcome the newest addition to the Global 100 Key Performance Indicator (KPI) family.

Click here to go back to the ranking landing page.

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