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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Yet the top dog in Corporate Knights’ annual Best 50 ranking for 2013 is Vancity, Canada’s biggest credit union.

Vancity – its full name is Vancouver City Savings Credit Union – has gained an enviable reputation for looking beyond the bottom line as it strives to “redefine wealth,” as its vision statement puts it.

“We are a different kind of financial institution,” chief executive Tamara Vrooman told Corporate Knights. (Full disclosure: Vancity is a minority investor in Corporate Knights. It played no role in compiling the Best 50 rankings.)

“We are a financial cooperative and we are owned by the people we serve,” says Vrooman. “So we are very much in tune with the needs and desires of our members and the communities in which they live.”

Vancity ranked especially high in narrowing the gap between the pay of senior executives and other employees; the strength of its pension fund; and the diversity of its board and senior management. Its weakest points were its relatively high water use and low tax rate, measured as a percentage of the past five years’ pre-tax earnings.

Vancity is dwarfed by the big Canadian shareholder-owned banks. Its assets of $17.1 billion amount to just 2 per cent of the balance sheet of Royal Bank of Canada, the country’s largest financial institution. It has fewer than 2,500 employees, and just 59 branches in Vancouver, provincial capital Victoria and British Columbia’s Fraser Valley.

Even so, the credit union has become an outspoken supporter of social and environmental causes. For example, it provided $2 million in loans to Emmanuel Pentecostal Church in New Westminster, whose activities include a daycare centre for 65 children. On a smaller scale, it financed the start-up of Fairy Cakes, a vegan cupcake bakery.

Financing low-income housing makes up a sizable part of its business. Vegetables grown in a rooftop garden at its head office are delivered to needy residents of Vancouver’s downtown Eastside.

“They’ve certainly carved out a brand and a reputation for being a reliable partner for growing neighbourhoods and the community,” said Greg D’Avignon, chief executive of the Business Council of British Columbia. Noting that the co-operative movement has deep roots in B.C., D’Avignon added that “there’s a broad respect for the work that Vancity does.”

Vancity has not shied away from taking sides on hot-button issues. Two mutual funds that it helps manage sold all their Enbridge shares last August in protest against the pipeline operator’s handling of a much-publicized oil spill in Michigan.

Vrooman said in a statement at the time that “Vancity Investment Management’s portfolio managers balance risk, return and the impact of all the investments that are made. They believe in engaging with companies to improve their environmental, social and governance performance; however, if companies no longer meet (these) criteria, they will divest the holdings from the portfolio.”

Vancity further burnished its social responsibility credentials two years ago by joining the Global Alliance for Banking on Values (GABV), a Netherlands-based group of 22 financial institutions which, in the alliance’s words, “have a shared commitment to find global solutions to international problems – and to promote a positive, viable alternative to the current financial system.”

James Niven, a GABV spokesman, said in an email that “we’re thorough when assessing who we invite to become members to make sure our network is only made up of values-based banks with a strong commitment to progressing this agenda.”

Vancity, Niven added, is “extremely active” in the alliance. Vrooman, who was B.C.’s deputy minister of finance from 2004 to 2007, sits on the GABV steering committee and jointly leads the alliance’s advocacy and engagement work. The group held its annual meeting in Vancouver last year.

Vrooman insisted that Vancity’s focus on social responsibility “not only builds better communities, but also builds a better bank.” She pointed to a study published last year by the GABV and the Rockefeller Foundation which showed that a group of 17 “sustainable” banks outperformed 29 traditional global heavyweights on almost every measure, including return on assets, growth in loans and deposits, and capital strength.

“It’s because we’re more directly connected to the people we serve,” Vrooman said. “We understand what the needs are. We don’t grow at a pace that the community can’t withstand or the planet can’t withstand. As a result, we have lower loan losses and better returns. We don’t make money by moving money around.”

Spurred by new legislation that clears the way for more federally-chartered credit unions, Vancity is now planning to expand its model to other parts of the country. “We get contacted all the time by not-for-profits, mission-based businesses, foundations who want to do business with us outside of British Columbia,” Vrooman said.

Asked about the challenges keeping her awake at night, Vrooman shrugged off the question. “Increasingly, young people in particular want to do business with an organization that isn’t just about short-term profits,” she replied. “One of the biggest challenges for us is, honestly, keeping up with the demand.”

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To establish the Best 50 shortlist, the research team determined all Canadian companies with revenues of at least $2 billion and 2,000 employees in 2011. In addition, all constituents of the TSX 60 were included, along with the 10 largest Canadian Cooperatives by revenue (2011). Companies in the 2012 Best 50 list were automatically added to the 2013 Best 50 shortlist.

The methodology for the 2012 Best 50 Corporate Citizens of Canada is based on 12 key performance indicators (KPIs) covering resource, employee and financial management. All information is derived from publicly-disclosed data. All eligible entities are contacted for data verification prior to project completion.

1. Energy productivity: Revenue per gigajoule of energy consumption.

2. Carbon productivity: Revenue per metric tonne of direct/indirect GHG emissions.

3. Water productivity: Revenue per cubic metre of water withdrawal.

4. Waste productivity: Revenue per metric tonne of waste produced.

5. Percentage tax paid: Taxes paid in cash, as a percentage of EBITDA, trailing over the past 5 years.

6. Leadership diversity: Percentage of women on board of directors and in executive management.

7. Clean capitalism pay link: At least one senior executive’s compensation tied to clean capitalism-themed performance targets.

8. CEO-to-average worker pay link: How much more CEO gets paid (expressed as a multiple) compared to average worker.

9. Safety performance: Lost time injury rate and number of fatalities/number of employees.

10. Innovation capacity: R&D expenditure as a percentage of revenue, trailing over the past three years.

11. Employee turnover: Number of departures/average employee compensation.

12. Pension fund status: Unfunded liabilities at year end 2011 by market capitalization are divided by market capitalization at year end 2011, or expenses towards defined contribution plans.

The Top Foreign Corporate Citizens Methodology

The Top Foreign Corporate Citizens represent corporations with substantial operations in Canada who are leading the way on corporate citizenship and have their main headquarters in another country. Companies must earn more than $1 billion/year in Canada, and the parent corporations must have qualified for CK’s 2013 Global 100 Most Sustainable Corporations in the world shortlist.

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