2023 Global 100/Winter 2023

100 most sustainable companies of 2023 still flourishing in tumultuous times

Meet the latest Global 100 companies driving the transition to a low-carbon, circular economy

 

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• BY Mike Scott

• January 18, 2023

With Russia’s war in Ukraine driving energy prices up to record levels and the world experiencing unprecedented climate disasters, it has never been more important for companies to cut their emissions and double down on sustainability.

This year’s Global 100 ranking of the world’s most sustainable companies, now in its 19th year, reveals that the transition is gathering momentum – and that businesses that take sustainability seriously are flourishing financially.

While the Global 100 is light on oil and gas companies, whose profits have soared because of rising energy prices (Finland’s Neste being the only oil company on the ranking), it still managed to outperform its blue-chip benchmark, MSCI ACWI (All Country World Index), and other ESG indices. While both the Global 100 and ACWI fell somewhat in 2022, since its inception on February 1, 2005, the Global 100 Index has generated a total investment return of 270.7% compared to 222.1% for ACWI.

Ralph Torrie, Corporate Knights’ research director, says rising oil prices have stimulated growth in renewables, smart buildings, electric vehicles and other climate solutions, including circular economy measures. Indeed, the top-ranked company, Schnitzer Steel, is a metals recycler. “Global 100 companies are providing the products and services that are needed for the sustainability transition and that will form the basis of the emerging 21st-century economy,” says Torrie. “They’ve outperformed the market through these last few tumultuous years.

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2023 Global 100 ranking table

2023 G100 Rank	2022 G100 Rank	Company	HQ Location	Carbon Productivity	% Non-Male Board Directors	% Sustainable Revenue	% Sustainable Investment	Final Grade	Climate Commitments
1	15	Schnitzer Steel Industries Inc	Portland, U.S.	$15,928	50%	100%	100%	A+
2	1	Vestas Wind Systems A/S	Aarhus, Denmark	$222,113	42%	100%	100%	A	1.5°C, SBTi
3	10	Brambles Ltd	Sydney, Australia	$156,386	40%	100%	100%	A	1.5°C, SBTi
4		Brookfield Renewable Partners LP	Hamilton, Bermuda	$21,806	33%	99%	100%	A
5	3	Autodesk Inc	San Francisco, U.S.	$456,489	45%	93%	43%	A	1.5°C, SBTi
6	19	Evoqua Water Technologies Corp	Pittsburgh, U.S.	$25,868	33%	100%	100%	A	SBTi
7*	17	Stantec Inc	Edmonton, Canada	$95,950	33%	53%	94%	A-	1.5°C, SBTi
7*	4	Schneider Electric SE	Rueil-Malmaison, France	$142,877	50%	71%	68%	A-
8		Siemens Gamesa Renewable Energy SA	Zamudio, Spain	$514,578	30%	100%	100%	A-	1.5°C, SBTi
9		Taiwan High Speed Rail Corp	Taipei, Taiwan	$7,051	23%	100%	100%	A-
10	9	Dassault Systèmes SE	Vélizy-Villacoublay, France	$498,736	50%	68%	40%	A-	1.5°C, SBTi
12	42	Xinyi Solar Holdings Ltd	Wuhu, China	$843	11%	100%	100%	A-
13	7	Ørsted A/S	Fredericia, Denmark	$5,301	50%	66%	99%	A-	1.5°C, SBTi
14	11	Sims Ltd	Mascot, Australia	$45,238	50%	100%	100%	A-
15	21	Banco do Brasil SA	Brasília, Brazil	$623,504	38%	24%		A-	1.5°C, SBTi
16		Rockwool A/S	Hedehusene, Denmark	$2,350	50%	85%	70%	A-	SBTi
17	12	Johnson Controls International PLC	Cork, Ireland	$35,632	27%	54%	61%	A-	1.5°C, SBTi
18	2	Chr Hansen Holding A/S	Hørsholm, Denmark	$43,041	50%	20%	97%	B+	1.5°C, SBTi
19		Kone Oyj	Espoo, Finland	$734,717	38%	67%	7%	B+	SBTi
20	18	Cascades Inc	Kingsey Falls, Canada	$4,198	50%	92%	80%	B+	SBTi
21	8	Atlantica Sustainable Infrastructure PLC	Brentford, U.K.	$596	25%	84%	91%	B+	SBTi
22	14	McCormick & Company Inc	Hunt Valley, U.S.	$65,393	36%	49%	7%	B+	1.5°C, SBTi
23	35	Novozymes A/S	Bagsvaerd, Denmark	$8,853	27%	53%	11%	B+	1.5°C, SBTi
24	25	Iberdrola SA	Bilbao, Spain	$3,712	43%	72%	85%	B+	1.5°C, SBTi
25	84	BT Group PLC	London, U.K.	$41,583	42%	57%	38%	B+	1.5°C, SBTi
26	36	Alphabet Inc	Mountain View, U.S.	$38,910	27%	89%	6%	B+	SBTi
27	45	Vitasoy International Holdings Ltd	Hong Kong, China	$8,863	18%	91%	100%	B+
28	5	City Developments Ltd	Singapore, Singapore	$19,968	22%	73%	76%	B+	1.5°C, SBTi
29	24	Neste Oyj	Espoo, Finland	$9,381	33%	39%	71%	B+
30	33	Ecolab Inc	Saint Paul, U.S.	$30,832	42%	71%	53%	B+	1.5°C, SBTi
31	12	Kering SA	Paris, France	$978,971	57%	39%	25%	B	1.5°C, SBTi, FCCA
32	20	Beijing Enterprises Water Group Ltd	Hong Kong, China	$4,526	7%	74%	100%	B
33		ASM International NV	Almere, Netherlands	$98,187	33%	98%	63%	B	1.5°C, SBTi
34	72	StarHub Ltd	Singapore, Singapore	$41,945	23%	47%	0%	B
35	39	SunPower Corp	Richmond, U.S.		22%	100%	100%	B	SBTi
36	26	Xerox Holdings Corp	Norwalk, U.S.	$51,747	25%	75%	3%	B	1.5°C, SBTi
37	49	Telus Corp	Vancouver, Canada	$54,239	40%	62%	12%	B	1.5°C, SBTi
38	78	Unilever PLC	London, U.K.	$107,250	42%	30%	6%	B	1.5°C, SBTi
39	50	HP Inc	Palo Alto, U.S.	$398,038	46%	61%	29%	B	1.5°C, SBTi
40		VMware Inc	Palo Alto, U.S.	$184,723	30%	75%	0%	B	SBTi
41	55	SAP SE	Walldorf, Germany	$194,558	50%	25%	0%	B	1.5°C, SBTi
42		BCE Inc	Verdun, Canada	$68,365	38%	48%	96%	B	1.5°C, SBTi
43	83	Coloplast A/S	Humlebaek, Denmark	$55,646	33%	46%	3%	B	1.5°C, SBTi
44	13	Koninklijke KPN NV	Rotterdam, Netherlands	$38,857	43%	55%	100%	B	1.5°C, SBTi
45	81	Cogeco Communications Inc	Montreal, Canada	$95,151	56%	47%	39%	B	1.5°C, SBTi
46		First Solar Inc	Tempe, U.S.	$5,218	33%	100%	100%	B-	1.5°C, SBTi
47	77	Puma SE	Herzogenaurach, Germany	$270,328	33%	29%	0%	B-	SBTi, FCCA
48	28	Cisco Systems Inc	San Jose, U.S.	$82,189	36%	58%	0%	B-	1.5°C, SBTi
49	51	Atea ASA	Oslo, Norway	$652,546	38%	67%	3%	B-	SBTi
50	53	Konica Minolta Inc	Chiyoda-ku, Japan	$28,739	11%	52%	1%	B-	SBTi
51		Giant Manufacturing Co Ltd	Taichung, Taiwan		9%	100%	100%	B-
52		Essity AB	Stockholm, Sweden	$5,115	42%	48%	39%	B-	1.5°C, SBTi
53	32	Eisai Co Ltd	Bunkyo-ku, Japan	$103,312	9%	33%	24%	B-	1.5°C, SBTi
54		ERG SpA	Genoa, Italy	$1,941	42%	64%	96%	B-	1.5°C, SBTi
55	43	Sprouts Farmers Market Inc	Phoenix, U.S.		25%	28%	14%	B-	SBTi
56	75	CapitaLand Investment Ltd	Singapore, Singapore	$10,348	27%	38%	41%	B-	SBTi
57		Sino Land Co Ltd	Hong Kong, China	$13,753	0%	49%	1%	B-	1.5°C, SBTi
58		Severn Trent PLC	Coventry, U.K.	$5,357	56%	39%	72%	B-	1.5°C, SBTi
59	90	Intesa Sanpaolo SpA	Turin, Italy	$375,162	37%	12%		B-	1.5°C, SBTi, NZBA
60	79	Gildan Activewear Inc	Montreal, Canada	$7,843	30%	39%	1%	B-	SBTi
61	67	Sanofi SA	Paris, France	$86,211	38%	20%	13%	B-	1.5°C, SBTi
62		Swatch Group AG	Biel, Switzerland	$66,638	33%	50%	49%	B-
63	46	Samsung SDI Co Ltd	Yongin, South Korea	$10,422	14%	81%	57%	C+
64		Yadea Group Holdings Ltd	Wuxi, China	$282,774	13%	100%	100%	C+
65	95	Telefonaktiebolaget LM Ericsson	Stockholm, Sweden	$151,002	23%	34%	100%	C+	1.5°C, SBTi
66	82	Adidas AG	Herzogenaurach, Germany	$257,999	38%	35%	0%	C+	SBTi, FCCA
67	54	Hewlett Packard Enterprise Co	Spring, U.S.	$170,695	36%	50%	20%	C+	1.5°C, SBTi
68		KB Financial Group Inc	Seoul, South Korea	$132,305	22%	5%		C+	SBTi, NZBA
69		Maxeon Solar Technologies Ltd	Singapore, Singapore	$5,227	11%	100%	100%	C+
70		Orkla ASA	Oslo, Norway	$42,247	36%	22%	0%	C+	1.5°C, SBTi
71	76	BNP Paribas SA	Paris, France	$267,081	47%	21%		C+	SBTi, NZAM, NZAO, NZBA
72		Svenska Handelsbanken AB	Stockholm, Sweden	$1,448,025	54%	2%		C+	NZBA, SBTi
73	48	Apple Inc	Cupertino, U.S.	$6,309,148	33%	71%	0%	C+	1.5°C, SBTi
74	69	Kesko Oyj	Helsinki, Finland	$174,412	29%	3%	11%	C+	1.5°C, SBTi
75	62	Quadient SA	Bagneux, France	$156,273	33%	23%	0%	C+
76		Investec Ltd	Sandton, South Africa	$125,606	36%	5%		C+	NZBA
77	55	Sun Life Financial Inc	Toronto, Canada	$622,072	56%	4%		C+	NZAM
78	74	Teck Resources Ltd	Vancouver, Canada	$3,689	29%	7%	23%	C+
79		NIO Inc	Shanghai, China	$160,817	17%	96%	100%	C+
80		Ricoh Co Ltd	Ota-ku, Japan	$70,664	10%	21%	42%	C+	1.5°C, SBTi
81	63	Henkel AG & Co KgaA	Düsseldorf, Germany	$61,401	44%	20%	1%	C+	1.5°C, SBTi, NZAM
82	55	Storebrand ASA	Lysaker, Norway	$89,785,901	50%	5%		C+	1.5°C, SBTi, NZAM, NZAO
83		Gilead Sciences Inc	Foster City, U.S.		33%	44%	0%	C+	SBTi
84	22	Sekisui Chemical Co Ltd	Osaka, Japan	$16,577	24%	10%	41%	C+	1.5°C, SBTi
85	60	Commerzbank AG	Frankfurt, Germany	$353,063	45%	6%		C+	SBTi, NZAM, NZBA
86	52	Tesla Inc	Austin, U.S.	$91,536	25%	100%	100%	C	1.5°C, SBTi
87		Beazley PLC	London, U.K.	$3,601,492	45%	14%		C	NZIA
88	80	Bank of Montreal	Toronto, Canada	$224,613	50%	4%		C	NZAM, NZAO
89	57	Arçelik AS	Istanbul, Turkey	$226,657	17%	5%	3%	C	1.5°C, SBTi
90	98	Canadian Tire Corporation Ltd	Toronto, Canada	$169,655	19%	2%	1%	C
91	71	National Australia Bank Ltd	Melbourne, Australia	$130,528	33%	5%		C	NZBA
92	41	IGM Financial Inc	Winnipeg, Canada	$68,785,497	33%	7%		C
93		Pfizer Inc	New York City, U.S.	$69,800	33%	17%	0%	C	1.5°C, SBTi
94	70	Nordea Bank Abp	Helsinki, Finland	$3,537,626	40%	3%		C	NZAM, NZAO, NZBA
95		Merck KGaA	Darmstadt, Germany		43%	32%	20%	C-	SBTi
96		Société Générale SA	Paris, France	$276,944	40%	3%		C-	NZBA, SBTi
97	91	AstraZeneca PLC	Cambridge, U.K.	$140,130	38%	8%	0%	C-	1.5°C, SBTi
98	56	Koninklijke Philips NV	Eindhoven, Netherlands	$122,236	40%	16%	0%	C-	SBTi
99		Danaher Corp	Washington, D.C., U.S.	$79,075	29%	16%	0%	D+
100		Novavax Inc	Gaithersburg, U.S.		29%	12%	87%	D+

*Indicates a tie as a result of a data correction

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Sustainable revenue now makes up half of gross revenue for the Global 100 compared to just 5% for the wider benchmark, while sustainable investment shows a similar trend. For every tonne of carbon they produce, Global 100 companies earn 33 times more revenue than ACWI firms.

But while improved productivity scores for carbon, energy, water and other environmental performance indicators are often collateral benefits of underlying megatrends, such as increasing electrification, energy efficiency and digitization, the improvement in sustainable revenues and investments is generally the result of much more deliberate corporate investment policies and strategic decisions, Torrie says. “Very often, there is visionary leadership from the CEO, and the company has a clear view of the way the world is headed and how to get ahead of it.”

That doesn’t mean that corporate sustainability leaders don’t have their challenges, though. In the face of Europe’s energy crisis, the Danish government ordered 2020’s top G100 company, wind giant Ørsted, to postpone the shutdown of three of its power station units that use oil and coal as fuel. “We still believe that we, as a society, must phase out the use of gas, oil, and coal as soon as possible, but we’re in the middle of a European energy crisis, and we will, of course, contribute to ensuring the electricity supply to the best of our ability,” Ørsted said in a statement.

All the while, companies outside the Global 100 are starting to catch up. While the average gender diversity of Global 100 boards inched upward slightly to 34%, that figure shot up from 23% to 32% for the broader universe of more than 6,000 companies analyzed for the Global 100. In racial diversity, there has been little improvement on company boards of directors, but there was a slight improvement in executive teams. The Global 100 and ACWI firms are neck and neck on the ratio of taxes paid, and ACWI firms have a slightly smaller gap between CEO to average worker pay.

A fifth of Global 100 companies are U.S.-based, making it the leading country for members of the index, followed by Canada with 11%. However, as a region, Europe still leads the way with 44%, while Asia Pacific hosts 22% of the ranking’s companies.

The leading sectors remain information technology (20%) and financial services (15%). Among the standout results of the rankings, Italian bank Intesa Sanpaolo saw a huge 234% increase in its sustainable revenue ratio thanks to a combination of increased exposure to sustainable social and environmental loans and better disclosure.

In the wake of the COVID-19 pandemic, new entrants to the index included a number of pharmaceuticals groups, such as Merck, Pfizer, Novavax and Gilead Sciences. Chinese electric vehicle maker NIO and its compatriot Yadea, which produces electric bicycles, were also notable entrants, along with two companies from Taiwan: bicycle maker Giant and the Taiwan High Speed Rail Corp. Torrie says the addition of these corporations reflects the improved reporting on environmental, social and governance (ESG) factors from companies in the region.

As Corporate Knights has added new companies to the index, it has dropped others for a range of reasons. U.S. chipmaker Analog Devices, for example, fell out of the Global 100 because it has shown a steady worsening of its energy, carbon, water and waste productivity, and the disparity between its CEO’s pay and that of the average employee has doubled since 2020.

 

 

By contrast, battery and electric vehicle maker BYD fell out of the index even though it improved its overall performance because the car and truck manufacturing sector has become increasingly competitive. In fact, it is harder than ever to make it into the Global 100 because Corporate Knights now has a much bigger data pool to draw from.

 

As ever, the G100 methodology was refined this year in a number of areas, including executive pay. But the narrative of the G100 remains the same as it has been since the index was started in 2005: more sustainable companies are not just better for people and the planet. Even in the most challenging times, they are a better bet financially, too.

 

CLIMATE COMMITMENTS	1.5˚C Business Ambition for 1.5˚C	SBTi Science Based Targets Initiative	FCCA Fashion Charter for Climate Action	NZAM Net-Zero Asset Managers Initiative	NZAO Net-Zero Asset Owners Alliance	NZBA Net-Zero Banking Alliance

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Methodology

Corporate Knights’ 2023 ranking of the world’s 100 most sustainable corporations is based on a rigorous assessment of more than 6,000 public companies with revenue over US$1 billion. All companies are scored on applicable metrics relative to their peers, with 50% of the weight assigned to sustainable revenue and sustainable investment. Nine of the indicators have fixed weights; the rest are assigned weights according to each industry’s relative impact in relation to the overall economy. After quantitatively analyzing data for 25 key performance indicators, using the Corporate Knights methodology, this year’s overall scores were converted to letter grades.

Awarded to the top company​

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2022 GLOBAL 100

2021 GLOBAL 100

2020 GLOBAL 100

2019 GLOBAL 100

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The post The 100 most sustainable companies are still outperforming in tumultuous times appeared first on Corporate Knights.

Steel is one of the world’s most carbon-intensive products (accounting for roughly 7% of human-produced CO2 emissions, the International Energy Agency’s Iron and Steel Technology Roadmap says), so having a corporation that makes steel products top Corporate Knights’ Global 100 ranking of the world’s most sustainable companies may seem surprising.

However, during its long history, Schnitzer Steel has developed into a global leader in the collection, processing and sale of the world’s most recycled product: steel. The company generates most of its revenues from recycling steel and other metals. And about a third comes from forging recycled scrap steel into finished products in electric arc furnaces that are powered by hydropower, making the metal extremely low carbon.

It’s only the second recycling company and the first steelmaking company to earn the top spot in the Global 100 since its inception in 2005, highlighting the growing importance of both the circular economy and low-carbon metals in creating a more sustainable future.

The company’s rise to the top of the ranking has been rapid. Last year was the first time it appeared in the index, when it placed 15th. While Schnitzer’s business model leaves it well placed to embrace sustainability, the spark for its current performance came almost a decade ago when the company launched what it called a sustainability framework.

“We’ve been recycling for about a century,” says Tamara Lundgren, Schnitzer’s CEO, chair and president. “But how do we incorporate that into a framework that our employees, suppliers, investors and communities can identify with? Weaving the bigger picture together with the specific targets into everything we do is what has allowed us to garner this honour.”

In 2019, the company set about bolstering its framework by adopting specific goals and metrics to track progress. These included reducing Scope 1 and 2 greenhouse gas emissions from recycling operations by 25% from 2019 levels by 2025, and reaching net-zero GHG emissions for all operations (steel manufacturing, metals recycling and auto dismantling) by 2050.

“For an ‘old economy’ company to be recognized as a sustainability leader is a great example of how sustainability principles can be successfully applied to an industrial company.”

—Tamara Lundgren, CEO, Schnitzer Steel

Schnitzer has not set specific Scope 3 emissions targets yet because it’s working through how best to account for and verify the emissions inventory data of the various external operations in its supply chain, Lundgren explains. “Once we have our arms around that information, we can confidently set and publish science-based Scope 3 targets. In the meantime, we are still pursuing Scope 3 emissions-reduction initiatives that provide low- and net-zero-carbon solutions for our customers. Our GRN Steel product offering is a good example of such an initiative.”

This year, Schnitzer’s emissions were 24% lower than in 2019, its baseline year when it started tracking its GHGs. This reduction has come from the introduction of measures such as investments in best-available-technology emission control systems that, at the company’s Oakland, California, facility, reduce its Scope 1 emissions by around 3,500 metric tons of carbon dioxide equivalent a year. Other measures include improved energy efficiency, the use of alternative fuels and resource-conservation projects.

For all its sustainability credentials, the company’s operations aren’t without environmental impact. Recycling metals, while essential to the circular economy, can be a hazardous business. Its Pick-n-Pull car recycling subsidiary paid US$2.5 million in 2022 to settle allegations from 14 district attorneys in California that the company had illegally disposed of toxic materials and had stormwater pollution issues. “When contacted by prosecutors, Pick-n-Pull promptly implemented improved procedures and practices relating to their hazardous waste disposal,” said Contra Costa County District Attorney Diana Becton.

A few years ago, Schnitzer Steel was also involved in a legal dispute with the Oakland Athletics baseball team over the presence of a metals shredding plant near the team’s proposed new ballpark on the waterfront. An appeals court ultimately sided with the company.

Reduce, reuse, recycle

Schnitzer’s approach to sustainability has ultimately paid off, with the company returning a top-quartile performance on a range of Global 100 indicators. It saw a 74% increase in energy productivity over last year and made significant improvements in water (69%) and carbon (55%) productivity. It also scored well for its proportion of non-male board members (five out of nine are women) and racially diverse executives, while it also saw a significant drop in its worker injury rate. The company’s ranking also received a boost by its linking of its CEO’s pay to the achievement of sustainability targets (11% of variable compensation is tied to reaching these goals) and its policy of offering paid sick leave.

As for the profit side of things, last year was the second-best year in the company’s history. “Our people and planet goals are clearly not coming at the expense of profit,” Lundgren says.

“For a company that is 116 years old and that many consider to be ‘old economy’ to be recognized as a leading force in sustainability is a great example of how sustainability principles can be successfully applied to an industrial company.”

Schnitzer’s ascension to the top of the Global 100 is also quite timely, given the recent focus on how to decarbonize hard-to-abate industries, including steelmaking, and the importance of metals in the energy transition. Lundgren points out that technologies of the future like electric vehicles, wind turbines and battery storage are more metals-intensive than their fossil-fuel-powered predecessors.

Yet there is still a widespread ignorance of the importance of recycling steel, copper, aluminum and nickel – all of which Schnitzer recycles using its advanced metal recovery systems – in the energy transition, Lundgren adds.

“There has been underinvestment in metals and mining for years, and there are shortages of some critical ferrous and non-ferrous metals, which we recover and recycle,” she says.

“We can’t eliminate these shortages, but we can alleviate them. Metals recycling is one of the foundational pillars for global decarbonization.”

The post How a one-man scrap metal recycler became the world’s most sustainable corporation appeared first on Corporate Knights.

Passenger jets have voracious appetites. A Boeing 747 will burn about four litres of fuel every second. Assuming the tanks are topped up, the fuel alone weighs almost as much as the empty plane. A single transatlantic round trip produces the equivalent of one tonne of carbon dioxide per passenger, according to the British oil company BP.

You get the idea. Aviation’s share of global greenhouse gas emissions may seem trivial, at about 2.5%, but the figure will rise as air travel becomes more popular – the industry’s growth has always exceeded its efficiency gains. If airlines are to meet their net-zero commitments by 2050 – a goal set in 2021 by the industry’s trade association, the International Air Transport Association – they will have to find a substitute for fossil fuels fairly quickly.

But how? You cannot fly a large passenger plane on battery power – a 250-seat airborne Tesla seems like a fantasy at this point. Ditto commercial hydrogen-powered planes or those that run on synthetic fuels. While work on these technologies is underway (Rolls-Royce recently made a big to-do of testing a green hydrogen-fuelled jet engine), they may not become commercially viable for decades. “For the foreseeable future, these technologies will not be the solution,” says Fatima da Gloria, vice-president of sustainability at Air France-KLM. “So SAF are very important to us, and we expect them to remain complementary with hydrogen solutions.”

“SAF” stands for “sustainable aviation fuel.” Neste is well aware of the aviation industry’s epic decarbonization difficulties and is gambling much of its future on transportation biofuels.

The oil industry pioneer is now the leading supplier of SAF, which is made from forestry and agricultural waste, used cooking oil and – contentiously – palm oil and animal fats. The company’s SAF is being bought by airlines around the world, including Canada’s WestJet and Air France-KLM, which in October signed an eight-year contract to buy one million tonnes (1.3 billion litres). The French-Dutch airline group is buying another 600,000 tonnes from DG Fuels of the United States, making it the airline industry’s top buyer of biofuels.

Air France-KLM claims that the use of SAF will avoid 4.7 million tonnes of carbon dioxide emissions on a full life-cycle basis. That’s because Neste claims its SAF reduces planet-warming emissions by up to 80% compared to regular fossil fuels. The theory is that the plants used to make biofuels absorb carbon dioxide as they grow. Once the plants are converted to burnable fuel, the carbon dioxide emitted balances out the carbon dioxide absorbed.

SAF sounds like a godsend to airlines. Burning the fuel in jets requires no modifications to their engines. It is just mixed with regular kerosene in the same way that corn-based ethanol is mixed with gasoline in the United States and Canada. SAF does not require unique delivery infrastructure, and the costs, while three to four times higher than regular fuel, will come down as SAF production increases and economies of scale kick in.

So what’s not to like? More than a little, it turns out.

The SAF volumes are small and will remain small, relatively speaking, even as production ramps up. In 2021, total SAF production represented a mere 0.01% of jet fuel consumed worldwide. Air France-KLM’s goal is to see 10% of its fuel made from SAF by 2030 as part of its drive to cut carbon dioxide emissions per passenger per kilometre flown by 30% by 2030 over 2019’s level. “Decarbonization is the biggest challenge the aviation industry has ever faced,” the airline group’s Canadian chief executive, Ben Smith, said in a statement when announcing the Neste purchase.

In other words, SAF on its own will never turn air travel fully green. And any biofuel’s green credentials are never as great as advertised. Feeding crops such as corn or palm oil to planes or cars or trucks comes with a lot of environmental and political baggage, all the more so today, when food prices are soaring. Shouldn’t all that land, or at least the land that can be agriculturally productive, be growing food to feed the hungry instead?

But SAF represents nothing less than a revolution – and a profitable one – for Neste. Its remarkable reinvention somewhat resembles that of Ørsted, the Danish power-generation company that once burned obscene amounts of coal, blackening the skies, to keep the country’s lights on.

In 2008, under enlightened management that saw the potential of emissions-free electricity, Ørsted began transforming itself into a renewable energy powerhouse. It replaced its grubby fossil-fuel plants with offshore wind farms that would eventually make it the top player in that industry. Along the way, it became a stock market darling and an inspiration to other companies contemplating a black-to-green transformation.

Neste – “liquid” in Finnish – is on a similar trajectory.

The liquid that gave the company its name is oil. Neste was founded in 1948 as the state petroleum refiner in Espoo, just outside of Helsinki. Neste began tinkering with renewable diesel fuel in 1990s and, by 2010 later, launched the world’s biggest renewable diesel plant, in Singapore. About the same time, it built a renewable fuels plant in Rotterdam, Europe’s largest.

Today, Neste is the top producer of sustainable aviation fuel and renewable diesel, but, unlike Ørsted, hydrocarbons remain at the core of its business. Its Porvoo refinery in Finland transforms more than 200,000 barrels of oil a day into diesel, gasoline and low-sulphur marine bunker fuels. But its future is in renewable fuels. Already, about 90% of its profits come from renewables, even if oil refining remains by far its highest-volume business. “We are clearly looking for growth in renewable and circular solutions,” says CEO Matti Lehmus, who trained as a chemical engineer. “Renewable diesel and SAF are decarbonization solutions that are available today.”

Neste’s transformation may see Porvoo, one of northern Europe’s largest oil refineries, converted into a renewable fuels operation in the middle part of the next decade; Porvoo is undergoing a strategic review. If it ceases to refine fossil fuels, Neste, like Ørsted, will have almost fully buried its hydrocarbon past. Investors appear to like the message. Neste shares have been trending up for years and rose 37% in 2022 (as of November 29), giving the company a market value of €37 billion. Over the past five years, Neste’s stock is up 138% versus 11% for its fossil-fuel-focused benchmark (S&P Europe BMI Energy Index EUR, as of November 29, 2022).

Neste’s rise into a biofuels powerhouse has not been glitch-free. A lot of the time, it has been in the news for reasons that make management cringe. In May 2022, Carlos Calvo Ambel, a senior director of the Transport & Environment environmental campaign group, called the band Coldplay “useful idiots for greenwashing” Neste’s image.

The accusation came after Coldplay signed a deal with Neste to provide SAF and renewable diesel to cut its concert tour emissions by half. A 2020 Profundo research report commissioned by Friends of the Earth Netherlands determined that Neste’s palm oil suppliers were responsible for 10,000 hectares of deforestation between early 2019 and mid-2020. Most of Neste’s palm oil comes from Indonesia and Malaysia.

In response to the Profundo report, Neste said that “we acknowledge the fact that there are sustainability concerns linked to the palm oil industry” but said that it was careful not to buy fuel whose feedstock comes from plantations involved in deforestation. The company says that “claims on Neste’s suppliers being linked to deforestation were proven not to be true in lengthy investigations involving also satellite imaging and third party experts.”

Despite monitoring its supply chain carefully to ensure that orangutans in Indonesia are not being threatened so that SAF can fill aircraft tanks, Neste plans to eliminate palm oil from its mix by the end of 2023. Doing so will not put Neste in distress, since, at last count, palm oil supplied only 7% of the company’s biofuel raw materials.

Neste knows that current SAF solutions will never be able to provide 100% of the fuel for the aviation industry – there simply isn’t enough renewable feedstock on the planet to ensure that. Neste says it’s looking for new solutions to expand its feedstock base and ensure the potential for future growth. It also believes that SAF and renewable diesel can play a crucial bridging role in the long decarbonization process. Lehmus says the company plans to double its renewable fuels capacity by 2026 (in 2021, production was more than three million tonnes) while it tries to develop new technologies. “I see a lot of long-term potential in new technologies,” he says.

In other words, biofuels are a step along the way, not the ultimate solution to rising aviation emissions. Their existence at least proves the airlines know they have to clean up their act.

Eric Reguly is the European bureau chief for The Globe and Mail and is based in Rome.

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Most sustainable investments: Iberdrola

Called the “Exxon of green power” by The New York Times, Spanish electricity company Iberdrola led all other Global 100 companies in terms of sustainable investments in 2022. It pumped €8.6 billion into green assets, such as renewable energy and EV charging, as well as energy storage and hydrogen production.

Most gender-diverse executives: Xerox

Xerox has prided itself on its efforts to hire a more racially diverse staff dating to the 1970s, and now the Connecticut-headquartered document management company is a leader in gender diversity, in part thanks to the efforts of former CEO Ursula Burns. More than 58% of its execs are women, up from 43% last year.

Most racially diverse executives: HP

In 2020, under the leadership of its new CEO, Enrique Lores, HP announced a goal of doubling the number of its executives who are Black and African American by 2025. The multinational IT corporation is already well on its way to diversifying its leadership, as 58% of its executives are racially diverse, up from 43% in 2021.

Lowest gap in CEO-to-average-worker pay: Storebrand

Even though Norway’s Storebrand CEO Odd Arild Grefstad’s compensation increased to 9.32 million kroner in 2022 from 9.03 million in 2021, his financial services company leads when it comes to the ratio of CEO-to-worker pay: 6.5 to 1. The total compensation of the Norwegian company’s employees rose to
2.73 billion kroner in 2022.

Highest % taxes paid: Commerzbank

Some companies are notorious for their ability to avoid paying taxes, but Commerzbank is not among them. The German bank had the highest ratio of cash taxes paid over the 2017 to 2021 period of any G100 company, at 30% (down from 34.63% in the previous period). Of the top 10 companies in this category, five others were from Europe.

Highest growth in sustainable revenue: Intesa Sanpaolo

The Italian bank had the largest growth in sustainable revenue – skyrocketing 234% over last year. Intesa Sanpaolo also ranked first in total sustainable revenue in Corporate Knights’ 2022 Sustainable Banking report, with US$3.68 billion, thanks to environmental lending, lending through high-impact social loans and underwriting green bonds.

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That proposition lies behind businesses’ repeated attempts to update their executive bonus plans, to find the best ways to motivate their top leaders to create real value for shareholders. Now, as forward-looking investors and activists prod more companies to embrace ESG targets, the world’s most sustainable companies are actively seeking the best ways to link leaders’ incentive pay to planetary progress and purpose.

Is it working? We posed this question to a handful of companies on the Corporate Knights Global 100 ranking that link the highest percentage of CEO incentive pay to achieving their organizations’ ESG goals. These firms said their sustainability-linked compensation plans are too new to provide definitive evidence that linking CEO pay to corporate purpose is working – but they’re confident they’re on the right track.

“It’s important to make it clear what you stand for as an organization and what priorities you want to set,” says Ida Krabek, head of global sustainability for Ørsted – the Danish power company that topped Corporate Knights’ Global 100 ranking in 2020. Founded to manage Denmark’s oil and gas assets in the North Sea, Ørsted has since become Europe’s biggest operator of offshore wind farms, producing more than 90% of its energy from renewable sources.

“Linking pay to sustainability has been part of our journey from the beginning,” says Krabek. At first, she says, Ørsted based part of senior leaders’ bonus pay on achieving employee-safety goals. As concerns about climate change grew, she says, the company added CO2 intensity targets.

In recent years, Ørsted has doubled down on incentive pay for its most senior leaders, establishing a range of sustainability-related targets. Today, purpose-based incentives amount to 30% of top executives’ variable pay – the same percentage as their bonuses for meeting purely financial goals.

Until recently, however, such bonuses applied only to top management – and Krabek admits those priorities didn’t necessarily filter through the entire organization. Starting in 2022, Ørsted expanded sustainability-related incentives to a broader portion of the management team. In 2023, the program will expand again to nearly all managers – a full 20% of the company’s workforce.

There is no “one size fits all”: managers in different areas will have to achieve personalized KPIs (key performance indicators). And while senior leaders’ compensation will always include more incentive pay than others’, Ørsted intends to raise the relative weighting of ESG metrics in all employees’ paycheques to ensure these goals become top of mind. “We want to be accountable as a team,” Krabek says.

Iberdrola, a multinational electric utility company based in Bilbao, Spain, offers next-level sustainability: ESG targets now determine 50% of the CEO’s variable pay. In 2017, Iberdrola created an executive remuneration plan that tied top managers’ bonuses to renewable energy targets and emission reductions.

In 2020, the renumeration plan was revised to include other ESG goals, such as human rights, equal pay for men and women, and driving sustainability throughout the company’s supply chain. “We are totally committed to a new world,” says executive remuneration manager Armando Ugarriza.

Today, most Iberdrola executives earn half of their bonuses by meeting four to five specific ESG targets. But Ugarriza says all employees are now part of the process, with lower-tier staff earning 15% to 20% of their incentive pay by achieving ESG goals.

Some of Europe’s oldest fashion brands are on the same journey. Paris-based Kering is a conglomerate of legendary fashion houses such as Yves Saint Laurent, Gucci, and others. Based on founder François-Henri Pinault’s belief that “luxury and sustainability are one and the same,” Kering adopted its first social and environmental code of ethics in 1996. In 2010, it began including sustainability criteria in the performance evaluations of key leaders.

Six years later, Kering introduced formal non‑financial criteria that would determine 30% of top executives’ annual variable pay.

The company’s current sustainability criteria include reducing the company’s environmental impact in line with its 2025 strategy; eliminating single-use plastics from product packaging; and leading, and helping to grow, industry-wide sustainability programs.

A parallel incentive program offers top executives shares for meeting three-year performance targets. While 80% of that bonus is weighted to cash flow and operating income, 10% is based on meeting biodiversity targets, and another 10% on increasing the proportion of women in executive roles.

Sadly, information on the impact of adopting ESG incentives is still hard to come by. In the meantime, Iberdrola’s Ugarriza believes that having employees include non-financial criteria in their investment decisions helps the company grow, by building stronger communities and partnerships. “We do things for the future,” he says. “It’s a new way of thinking.”

In any language, you get what you pay for.

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