It seems Mr. Wayne, the shrewd businessman he is, figured out that Batman – the advanced technologies he uses, the skills he has developed and the symbol itself – should be the heart of a global corporate franchise. By helping others become caped crusaders, the crusader in pinstripes can also help make the world a better place.

A work of fiction, yes, but the thought of corporations as superheroes – rather than greed-driven villains of commerce – has some appeal in the environmentally and socially challenged society we have created, given the unwillingness of our political leaders to don the cape and red tights.

The idea may sound silly. Indeed, using the word superhero is a tremendous stretch. But Corporate Knights’ Global 100 ranking of the world’s most sustainable companies is about as close as one can get to identifying corporations making a big, in some cases heroic, effort to think long term and link profit-making to responsible behaviour.

With collective revenue of about $3.1 trillion (roughly 4.5 per cent of global GDP) and a workforce of nearly 5.3 million, the Global 100 companies – representing 22 countries on six continents – are setting a higher standard that will pressure others to follow.

Take Belgium-based materials company Umicore, which this year ranked No. 1 on our annual Global 100. As contributor Marc Gunther writes here, Umicore began to reinvent itself nearly two decades ago to take advantage of four global megatrends: resource scarcity, electrified transportation, clean energy production and storage, and cleaner air. Once primarily a mining company, it now recycles what has already been mined and creates value-added products, both reducing costs and environmental impacts.

As Marc Grynberg, Umicore’s chief executive, told Corporate Knights, “We don’t see sustainability as an add-on. It’s really part of everything we do.”

Whether by default or design, corporations on the Global 100 continue to raise the bar on what it means to be a clean capitalism leader. For example, the number of companies that link executive compensation to sustainability goals more than doubled over last year, to 54 from 26.

In most of the sectors we cover, energy, water and waste productivity improved across the board, as did reduction in greenhouse gas emissions relative to revenue generation.

The employee turnover rate, an indicator of worker happiness, also improved. Turnover was 11.4 per cent on average in 2012, but fell to 9 per cent on this year’s ranking. There are also slightly more women entering the mix on boards of directors, particularly in the information technology, consumer discretionary and consumer staples sectors.

A 46 per cent company turnover rate on the Global 100 tells us that leadership isn’t just confined to the same group of corporations every year. Newcomers are challenging the early leaders as more companies are coming to realize the bottom-line benefits of using resources more efficiently, treating employees with respect, and being meaningful contributors to the communities they rely on.

The United States and Canada (with one-tenth the population of the U.S.) tied to claim the most companies on the Global 100, with a total of 10 each. Britain, France and Australia followed with nine to round out the Top 5. While Canada’s performance was impressive relative to the United States, Australia had the strongest presence per capita.

“That the U.S. and Canada each contributed 10 sustainability leaders is a strong indication that, despite the absence in each country of regulations on environmental and social performance, more companies are taking sustainability very seriously,” said Michael Yow, lead analyst at CK Capital, the research division of Corporate Knights.

Are the Global 100 companies on a sustainable path?

CK has calculated that a company’s resource productivity would have to improve at a compound annual growth rate (CAGR) of 6 per cent to achieve a doubling in productivity by 2025 and a quadrupling by 2037.

As relates to improvement in energy productivity between 2009 and 2011, 70 per cent of companies are on that sustainable path, while 79 per cent are on a sustainable course for reducing GHG emissions relative to revenues. Performance around water and waste productivity is not as strong, at 51 per cent and 53 per cent respectively. Impressively, 18 companies stood out as achieving 6 per cent CAGR from 2009 to 2011 in each of the four categories.

“These 18 companies all vary in terms of industry classification, size and geographical location,” said Yow. “Achieving top sustainability performance is not confined to a few countries or industries; any company can achieve it with the right approach and determination.”

Of course, clean capitalism is a journey, not a destination, and the Global 100 is a reliable but imperfect barometer of corporate performance. It doesn’t, for example, capture individual social and environmental transgressions, or pass judgment on the ethicality of most products and services.

But the bar will continue to rise as resource productivity and social responsibility become increasingly crucial to staying competitive in our global economy.

There will be setbacks along the way. Pay equity, for example, was down this year for the utility, financials, health care and consumer discretionary sectors. Lost time injury rates hardly changed.

But the trajectory is encouraging, and should be encouraged as we confront our global challenges. As Superman likes to say, “Up, up and away!”

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The company, now called Umicore, is still mining and refining – but instead of extracting metals from the earth, it recovers them from the discards of the industrial economy: electronic waste, catalytic converters, rechargeable batteries, and residues from copper and zinc smelters. The Hoboken refineries have been shuttered, and in their place is what Umicore calls “the world’s most advanced, largest (116 hectares) and cleanest precious and specialty metals refining, recycling and recovery operation.”

The extreme makeover in Hoboken has helped Umicore reach the top of Corporate Knights’ 2013 list of the Global 100 Most Sustainable Companies. It’s part of Umicore’s top-to-bottom transformation from traditional mining company into an innovative technology firm that operates at the frontier of metallurgy, chemistry and materials science. Today, the company focuses on clean technologies, including emission-control catalysts, materials for rechargeable batteries and photovoltaics, and advanced recycling.

“Sustainability has been and remains an all-pervasive driver of our strategy and day-to-day actions,” says Marc Grynberg, chief executive of Umicore, in an email interview. “We don’t see sustainability as an add-on. It’s really a part of everything we do.”

Chances are, you don’t know Umicore, but the company’s products are everywhere on earth – and beyond. About one in three of the world’s cars are equipped with a Umicore catalytic converter, and about one in four of the world’s laptops and mobile phones have Umicore materials in their batteries, according to Tim Weekes, director of group communications. Umicore-manufactured germanium substrates – layers of a hard, lustrous metallic element – formed the base layer of the solar panels on NASA’s Mars Exploration Rovers, the robots that studied the red planet.

With revenues of about €14.5 billion (roughly $19 billion) in 2011, Brussels-based Umicore employs about 14,600 people and operates 77 industrial sites and 15 R&D and technical centres in 34 countries. Its operations are concentrated in Europe and Asia but it also runs nine factories in the United States and Canada.

While the company traces its history back to a zinc mine established in 1805, Umicore as it is now configured took shape during the 1990s and 2000s. “Umicore managed a complete transformation of its business mix,” Grynberg said. “We morphed from a commodity supplier into a premium provider of value-added solutions.” The company devised a new strategy intended to capitalize on four global megatrends: resource scarcity, electrified transportation, clean energy production and storage, and cleaner air.

A flurry of divestments and acquisitions followed. The company spun off or sold its copper and zinc businesses, and made a pair of acquisitions – PMG and Delphi Catalyst – to give it a major presence in the automotive catalysts business. It also invests heavily in research and development, spending about €157 million on R&D last year, the equivalent of more than 6 per cent of net revenues.

Umicore now operates four business units:

• Catalysis: Its catalysts reduce pollution from cars and trucks powered by internal combustion engines. Government air pollution standards, which are becoming stricter, help drive growth.

• Energy materials: These are engineered materials derived from cobalt, germanium and nickel that find their way into products like rechargeable batteries and photovoltaics.

• Performance materials: These are materials derived from zinc, platinum and other metals that are used in building products, fertilizer and fibreglass production.

• Recycling: The company recovers precious and non-ferrous metals from complex waste streams, including industrial, electronic and consumer waste. This business, too, has been driven by regulation, particularly in the EU, where industries are required to take back and recycle e-waste.

Recycling is a very efficient way to produce metals, says the company, highlighting the benefits of “closing the materials loop.” From 50,000 mobile phones – around three tons of material, excluding batteries – Umicore is able to recycle around one kilogram of gold, 10 kilograms of silver, 400 grams of palladium and 420 kilograms of copper. By contrast, extracting one kilogram of gold from a mine below the ground requires the removal of 200 tons of rock.

To push efficiency further, Umicore is aiming for a 20 per cent reduction in its CO2 emissions from a base year of 2006. It had achieved a 14 per cent reduction by the end of 2011, adjusting for changes to the business; in absolute terms, it cut emissions by 6 per cent.

It ranked near the top in our survey in terms of energy, GHG, water and waste productivity.

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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.

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All companies that had a market capitalization in excess of $US 2 billion as of Oct 1, 2012

First screen: Eliminate all companies that did not disclose at least 75% of the ‘priority indicators’ in their respective industry group for performance year 2011. A priority indicator is any of the 12 key performance indicators (KPIs) used in CK’s research model that is disclosed by at least 10% of all companies in an industry group. Since CEO pay is not widely tracked by Bloomberg, the disclosure test for KPI # 7 was based exclusively on total wage bill. KPIs 6, 11 and 12 are not used in the first screen as they are either universally disclosed or applicable to a subset of companies.

Second screen: Eliminate all companies with an F score below 5. The F-Score (the Piotroski F-score) is a measure of the financial strength of a company. The F-score is the sum of the scores for each of nine tests. Each test scores one for a pass and zero for a fail. The tests are: i) net profit is positive; ii) operating cash flow is positive; iii) net profit ÷ total assets at beginning of year, minus the same number for the previous year is positive; iv) operating cash flow is greater than net profit; v) long term debt ÷ by average assets has not increased; vi) the Current ratio has increased (the change is more than zero, so even a negligible increase passes the test); vii) no raising of ordinary (common) equity over the previous year: this test is passed if the company did not issue any ordinary shares; viii) gross margin has improved over the previous year; and ix) asset turnover has increased.

Third screen: Eliminate all companies with a Global Industry Classification Standard (GICS) sub-industry classification that relates to the manufacturing or distribution of tobacco products or armaments. The relevant sub-industries include: i) Aerospace & Defence; and ii) Tobacco. In the case of Aerospace & Defense, the company will be eliminated if it derives a majority of its revenue from its Defense business.

Fourth screen: Eliminate all companies that are bottom quartile performers in the CK Financial Sanctions screen. The CK Financial Sanctions screen measures the amount of money that companies have paid out in qualifying fines, penalties or settlements on a trailing one-year basis. Companies that pass the CK Financial Sanctions screen may be reassessed during the October 2012 to January 2013 timeframe.

Approach for fourth screen: A keyword search for “fines, penalties or settlements” is run for each company using Factiva and Lexis Nexis.5 Payouts may relate to legal repercussions from environmental accidents, generalized environmental pollution, infringement of labor standards, human rights-related abuses, child exploitation or violation of collective bargaining arrangements. Payouts that occurred from October 1, 2011 to October 1, 2012 are totaled and converted to USD6, and then divided by total revenue reported from Q4 2011 to Q3 2012. The resulting ratio is then percent-ranked on an industry group-specific basis, such that companies are only compared against their industry group peers. Those companies that receive a bottom quartile percent score (e.g. 25% or below) are eliminated.

Shortlist:

Companies that pass the fourth screen constitute the 2013 Global 100 Shortlist. The 100 companies in the 2012 Global 100 are automatically included in the 2013 Global 100 shortlist.

Selection Criteria: Companies in the shortlist are analyzed using CK’s standard research model, with the latest performance year being 2011, and with data that was available on or before October 1, 2012. The 2013 Global 100 will be comprised of the highest ranking companies in the shortlist subject to each industry group’s ‘cap’. Each GICS sector will be allotted a fixed number of slots in the 2013 Global 100, based on each sector’s market capitalization-weighted contribution to the MSCI ACWI on October 1, 2012. The GICS sector is used instead of the GICS industry group due to the relatively small number of sectors (n = 10), the large number of industry groups (n = 24) and the resultant effects on portfolio concentration.

CK’s research model is comprised of 12 key performance indicators (KPIs). Companies are only scored on the ‘priority KPIs’ for their respective industry groups. In industry groups where all 12 KPIs are deemed to be priority KPIs, each KPI will have a weight of (100%/12) = 8.3%

Key Performance Indicators (to view complete descriptions of each indicator, visit the Global 100 website):

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.

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.

10. Innovation capacity: R&D expenditure as a percentage of revenue.

11. Employee turnover: Company’s employee turnover rate is calculated, then percent-ranked against that of the same industry group peers.

12. Pension fund status: For applicable companies, Unfunded liabilities at year end 2011 by market capitalization are divided by market capitalization at year end 2011. This amount is then percent-ranked against that of all same-industry group peers within the CK coverage universe.

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