For better or worse, Canada’s business community is both risk-averse and generally skeptical of new regulatory actions. The safest bet for the average company is to stay silent on controversial policies like carbon pricing, even if there’s internal support for it. But the private sector is also home to smart and innovative leadership that is demonstrating remarkable foresight on issues related to sustainability. To push Canada towards a low-carbon future, private sector leadership will be needed to spur governments into action, and vice versa.

We’ve begun to see a new dynamic play out over the past year across Canada. In Metro Vancouver, major business groups worked hard in support of the failed Yes side for the transit plebiscite.

Over 160 B.C. businesses signed an open letter calling on the provincial government to strengthen the province’s carbon tax, while major oil sands producers joined Alberta Premier Rachel Notley on stage for her climate policy announcement last November. The Mining Association of Canada recently endorsed the federal government’s efforts to establish a national carbon price.

The Council for Clean Capitalism takes this a step further by placing CEOs at the head of a group advocating for the integration of clean capitalism principles into broader economic and social policy.

Companies are grappling with how to shift their business models internally towards an economic model in which what is good for business is also good for the environment and society. Economist and author Jeremy Rifkin counselled companies at an event in Toronto earlier this year “to be in two business models simultaneously for the next three decades.” Many companies, including energy powerhouses Suncor and Enbridge, are working hard to bridge this gap to a cleaner future.

Another example of business pursuing this dual focus is the B.C.-based financial co-operative Vancity, the top-ranked company in the 2016 Best 50 Corporate Citizens in Canada ranking. The company has worked hard to remake itself as a different kind of financial institution, one that places values-based or ethical banking at the heart of its business model (see here for a full profile).

Following Vancity on the list is WestJet, a leader in the airline industry on resource productivity and taxes paid. Third place went to the Co-operators group, the insurance provider and perennial contender that finished first in 2011. It performed particularly well on its pension and tax scores, and maintained one of the lowest CEO to average worker pay ratios among the Best 50.

A deeper dive into the indicators turned up a mixed bag when it came to benchmarking any improvements in disclosure practices. All but two companies on the 2016 Best 50 released their energy and carbon productivity, with slight disclosure increases occurring around water and waste productivity as well. The CEO to average worker pay ratio fell to 73:1 from 88:1 in 2015, whereas the amount of tax paid increased three points to 14 per cent.

One troubling finding was a significant decline in innovation capacity from 0.97 per cent in 2015 to 0.55 per cent in 2016. R&D expenditure is measured as a percentage of revenue, trailing over the past three years. Diversity levels, meanwhile, stayed stagnant. Slightly better board diversity scores were offset by lower levels of diversity among senior management.

As Rifkin said, this shift to a cleaner form of capitalism will remain a work in progress for decades to come. The companies on this year’s Best 50 are setting themselves up to flourish in this changing environment.

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That rare attribute helps explain why Corporate Knights has named Vancity Canada 2016’s Best Corporate Citizen. The credit union was also awarded the top spot in 2013.

Vancity scored above 75 per cent in all 12 categories used to compile the rankings, except for water use, employee turnover, taxes and pension benefits. (Full disclosure: Vancity is a minority investor in Corporate Knights. It played no role in compiling the rankings.)

Vancity – its full name is Vancouver City Savings Credit Union – is a rare beast in the corporate world. Size and growth (though not profits) take a backseat to what it calls “values-based” or ethical banking. Its goal is, in its words, “to integrate social, environmental and economic factors into all aspects of our business, and collaborate with others to build healthy communities.”

Owned by its 515,000 members, Vancity is dwarfed by the big Canadian shareholder-owned banks. Its assets of $19.8 billion amount to less than 2 per cent of the balance sheet of Royal Bank of Canada, the country’s largest financial institution. It has fewer than 2,600 employees, and just 59 branches in Vancouver, provincial capital Victoria and British Columbia’s Fraser Valley.

“A lot of smaller local banks see Vancity very much as a role model,” says Peter Blom, chief executive of Netherlands-based Triodos Bank and chair of the Global Alliance for Banking on Values, of which Vancity is a member.

The alliance’s 28 members, mostly cooperative and community banks and credit unions, promote sustainable banking as a way of improving their communities and society at large. Vrooman, who was B.C.’s deputy finance minister from 2004 to 2007, chairs the alliance’s North American chapter.

“What’s so interesting about Vancity,” Blom says, “is that they are in a transition from a local credit union that did a lot of good work to a modern credit union that incorporates the environment and broader social issues into their banking space. That’s quite unique.”

Vrooman’s efforts to immerse senior staff in social responsibility and environmentally sound banking “is a real source of inspiration to the CEOs of other, smaller organizations,” Blom says.

He cites a small bank in Melbourne, Australia, that is modelling itself on the Canadian credit union. Vancity also helps train young “social bankers” from other countries.

Even as many of the world’s biggest banks find themselves in the political crosshairs, Vrooman sees the financial services industry as a powerful force for good in society. “The allocation of capital – what kind of firm, what kind of person does and doesn’t get access to credit – is probably the single most positive force in creating the future society that we want,” she says.

“It’s pretty difficult to create the kind of society that most people say they want if we’re not connecting capital to the things that matter to them – the sustainability of the planet, how welcoming and inclusive a community is, the business and corporate environment, the role of education and health and democracy, the inclusion and reconciliation for indigenous people…all those things.”

The credit union’s drive to burnish its do-good credentials takes many forms. For example, the influx of refugees to Canada has been a golden opportunity to pursue both social responsibility and the bottom line.

Vancity offers to open bank accounts for government-assisted refugees within two weeks of them stepping off the plane. Last fall, in anticipation of the arrival of thousands of Syrians, it expanded the number of branches that process refugee accounts from one to five.

Its members can also obtain interest-free, seven-year loans of up to $50,000 to provide accommodation for a refugee.

On other fronts, Vancity claims to be the biggest organization in Canada to stick to a “living wage” policy for its employees; in other words, pay that significantly exceeds the legal minimum wage and is sufficient to meet basic living needs.

Management compensation hinges partly on meeting social responsibility goals. “Finance has no greater weighting than those criteria,” Vrooman says. “In fact, it’s only one of five.”

Vrooman earned a base salary of $441,000 last year. Performance-related bonuses added another $522,000, making a total of $963,000.

Vancity has attracted 30,000 new members a year over the past three to four years. As Vrooman sees it, more and more people are saying “hey, I care what happens to my money and what my money is used for, and I understand what role my community cooperative financial institution can play in that.”

As a result, she says, “we think we can do even more. A lot of the digital technology around social media and social networking works well with a values-based financial institution that’s open and transparent and inclusive. We think technology can extend our business model.”

She declines to disclose projects currently in the pipeline, but points to Vancity’s alternative to payday loans as an example of where the credit union is heading.

Customers with low credit scores or no credit history can obtain a Vancity “fair and fast loan” of between $100 and $2,500 within an hour at an annual interest rate of 19 per cent, compared to the typical 60 per cent favoured by the industry. Vancity arranged almost 1,000 of these loans last year.

“Being able to offer an ethical, transparent alternative to payday lending that at the same time provides capacity building and financial literacy online is definitely a place where we want to go,” Vrooman says. “We think we can reach more people if we do it that way.”

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* On January 14, 2016, Alcatel-Lucent started operating as a part of the Nokia Group.

** On November 1, 2015, Hewlett-Packard Company split into HP Inc. and Hewlett Packard Enterprise

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These companies are then subjected to the sanctions screen, which looks at the dollar amount that companies have paid out on a trailing one year basis in sustainability-related fines, penalties or settlements.

If the total amount of a company’s fines, penalties and settlements as a percentage of total revenue since Jan. 2015 is found to be in the bottom quartile compared to GICS Industry Group peers, the company is removed from Best 50 contention.

The sanctions screen only considers monetary fines, penalties and settlements that are definitive i.e. the company has reached a point where all possible options have been exhausted and it has no other choice but to pay the set amount. Therefore, amounts associated with legal claims are not considered.

The methodology for the 2016 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 use.

4. Waste productivity: Revenue per metric tonne of non-recycled 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/number of employees.

12. Pension fund status: Unfunded liabilities / Total assets (2014)
Defined contribution plans expenses (2014)

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 $450 million/year in Canada, and the parent corporations must have qualified for CK’s 2016 Global 100 Most Sustainable Corporations in the world shortlist.

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