But in fact, as Gilles Vermot Desroches, senior vice-president for sustainable development and strategy at this year’s most sustainable corporation, Schneider Electric, says, “the opposite is true.” Rather than abandon sustainability pledges, governments around the world have seized on the opportunity presented by the need to kick-start their economies to inject trillions of dollars of green investments into their stimulus plans.

The European Union, for example, has committed almost €550 billion to green projects over the next seven years, almost a third of its recovery package, while President Joe Biden has pledged to spend US$2 trillion on tackling climate change. There have also been notable commitments from China, Japan and South Korea to become net-zero economies, offering a clear sign of increased ambition in Asia that should transform the investment landscape in the region.

It’s not just national governments taking action; the number of companies and municipalities signing on to net-zero has more than doubled since last year. This year has also seen the launch of a $5-trillion Net Zero Asset Owner Alliance and a $9-trillion Net Zero Asset Managers initiative, whose members have committed to decarbonizing their portfolios in line with global efforts to limit warming to 1.5°C.

This shift in attitudes has come about in part because of the astonishing fall in the costs of renewable energy, which is now the cheapest source of new power in many parts of the world. From 2009 to 2019, the cost of solar fell 89%, as did batteries, while onshore wind is 70% cheaper.

With increasing evidence of the harm that climate change can cause, from devastating wildfires in Australia and California to heat waves in the Arctic, another driver is the growing concern from consumers and voters, epitomized by the school strikes for climate, inspired by Greta Thunberg, and the Extinction Rebellion movement.

At the same time, the Corporate Knights Global 100 index continues to demonstrate that sustainability is good business and enables companies to outperform their peers.

From its inception on February 1, 2005, to December 31, 2020, the Global 100 index has generated a total return of 263% versus the 220% increase of its benchmark, the MSCI ACWI (All Country World Index). For the calendar year 2020, the Global 100 was up 26% compared with a rise of 16% for the MSCI ACWI.

Members of the Global 100 earn 41% of their revenues from products or services aligned with the UN Sustainable Development Goals, according to the Corporate Knights Clean Taxonomy, compared to just 8% for MSCI ACWI companies on a weighted basis.

Global 100 companies are also more gender-diverse than their peers, with almost a third of board directors (32%) being non-male against 24% for MSCI ACWI companies.

Rising from 29th spot last year, Schneider Electric was one of several top 10 companies in this year’s index that jumped significantly from 2020. Last year’s winner, Ørsted, dropped one spot to No. 2, followed by Banco do Brasil (No. 9 last year); Finnish oil refiner Neste also dropped one place, to No. 4. American food company McCormick jumped from 22 to No. 6, while Canadian National Railway moved up to No. 10 from 54.

Highlighting the speed at which fortunes can change, 26 companies left the index, including Toyota, which was weighed down by its dependence on internal-combustion-engine vehicles, and chemicals giant BASF, flagged by U.K.-based InfluenceMap for lobbying against measures to combat climate change.

In a year dominated by the global pandemic, pharmaceutical group AstraZeneca, whose low-cost, easy-to-store COVID-19 vaccine could provide a real boost to efforts to conquer the virus, is a notable presence on the index.

There is also a growing number of Global 100 companies in the green building and real estate space, such as Owens Corning, Trane Technologies, Prologis and Singapore’s CapitaLand and City Developments. They complement the usual suspects in green infrastructure: along with Schneider, also represented are Siemens, Johnson Controls, Rexel, American Water Works and ABB.

Companies such as Ørsted, Iberdrola and Verbund demonstrate that green energy majors are becoming increasingly established in mainstream energy markets, particularly in Europe.

The presence of companies such as Quebec-based Cascades and Transcontinental and U.S.-headquartered Ball Corporation show that packaging is one of the first areas where the circular economy is gaining traction.

The Global 100 list continues to be dominated by companies from North America and Europe, but there are new entrants from India (Tech Mahindra) and Turkey (appliances and homeware group Arcelik, that country’s first representative). On an individual country basis, the U.S., with 20 companies, and Canada, with 13, are the best represented, but regionally, Europe continues to dominate the Global 100 with almost half the companies (46) to North America’s 33. The Asia Pacific region hosts 17 of the index’s members, while Latin America (two), Africa (one) and the Middle East (one) continue to lag.

The Global 100 illustrates just how much sustainability is a field independent of economic might, where Denmark and Finland (both five members each) rank higher than China, which has just two companies on the index.

This year, we introduced several new key performance indicators (KPIs) when selecting the index’s constituents, reflecting not just the ongoing importance of tackling the climate crisis but also some of the social concerns that the pandemic and Black Lives Matter highlighted during 2020. These include paid sick leave, executive and board racial diversity, and clean investments (including clean capital expenditures, R&D and acquisitions). Corporate Knights found that the average clean investment for Global 100 companies was 33%, compared to 22% for the 8,080 companies analyzed for the ranking. As well, 86% of Global 100 firms offer at least 10 days of paid sick leave, compared to just 41% of the 8,080 assessed.

Sustainable firms also have longer lifespans: analysis by Corporate Knights with Thomson Reuters Datastream shows that the average age of a Global 100 company is 74 years, versus 53 for companies in the MSCI All Country World Index.

Notably, 60 of the Global 100 companies have signed on to the Science Based Targets Initiative to reduce their emissions in line with a 1.5°C future.

Sustainability is now central to doing business, as the Global 100’s continuing superior performance shows, but the introduction of our new KPIs highlights that it is always evolving – and companies must evolve with it.

Mike Scott writes on business, finance, clean energy and sustainability.

Find out how this year’s Global 100 companies ranked:

The 2021 Global 100 Ranking

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This past year saw the publication of two startling reports from the Intergovernmental Panel on Climate Change (IPCC), warning of the worsening impacts of climate change threatening food supplies, infrastructure and already fragile global water supplies. At the same time, the United Nations reported that the “emissions gap” – the gap between the greenhouse-gas (GHG) emissions that will limit temperature increases to the 1.5C that climate scientists say is safe and the GHGs that we are actually emitting – is growing.

With nations failing to make progress at the COP25 climate talks in Madrid in December, corporate action on the climate has never been more important.

If the 2010s were the decade when business started to realize the dangers of climate change and the impact it could have on their operations, the 2020s must be the decade when they act to dramatically reduce the emissions that cause it.

The shift is reflected in the growing influence of initiatives such as the Task Force on Climate-Related Financial Disclosures (TCFD), which calls on companies to disclose their climate risks and how they intend to tackle them. The physical risks are becoming more obvious, in the form of stronger hurricanes, weeks-long wildfires in locations from California to Australia, record temperatures from the Arctic to Africa, and rising sea levels. TCFD also asks that companies quantify the financial and non-financial impacts of the low-carbon transition (on reputation, policy, technology, etc.).

The COP25 talks in Madrid highlighted the challenges that businesses will face from an uneven and divergent pace of change – countries such as the U.S., Australia and Brazil resisted introducing stricter measures, while the European Union, the world’s largest trading bloc, announced that it planned to become “climate neutral” by 2050, meaning that some 40% of global GDP is now covered by net-zero commitments.

The science tells us that bigger emissions cuts are needed as the impacts of the climate crisis become ever more apparent and alarming. According to KPMG, “Governments that are seen as lagging at the moment may be forced to implement more stringent policies more rapidly in the future.”

The past year has also seen a wave of grassroots protests around the world against climate inaction, including by Extinction Rebellion activists and hundreds of thousands of students inspired by Swedish teenager Greta Thunberg’s “striking for climate.” The world’s future consumers and voters are increasingly intolerant of failure to tackle climate-change and social-justice issues. Business and investors are starting to take notice and come to grips with what the crisis could mean for their future prospects.

It is no accident that the biggest grouping in the Global 100 is financial services companies – investors, insurers and lenders are often ahead of the game when it comes to acknowledging where the risks of failing to deal with sustainability issues lie.

Business and investors are starting to take notice and come to grips with what the crisis could mean for their future prospects.

 

That is why they encourage companies to disclose their emissions and their climate strategies through bodies such as TCFD and CDP (formerly the Carbon Disclosure Project). It’s also why, aided by technology in the form of big data and artificial intelligence, they are increasingly focused in their engagements with companies – for example through the Climate Action 100+ initiative that targets the world’s biggest emitters and those “with significant opportunity to drive the clean energy transition.”

The leader of this year’s Global 100, Ørsted, is a perfect example of a company that has identified the way the world is changing, spotted an opportunity to gain a competitive advantage and reshaped its business strategy accordingly.

Many other businesses are reacting by signing up to initiatives such as Science Based Targets, which calls for companies to set targets in line with the scale of reductions needed to keep average temperature rises below 2C, and RE100, whereby corporations commit to procure all their electricity from renewable sources.

Renewable energy and associated technologies such as batteries and electric vehicles are becoming cheaper and more competitive every day, making it easier for companies to make the sustainable choice.
While relatively few companies have committed to these initiatives, those that have are among the biggest corporations in the world, and their efforts to meet their own targets will encourage their suppliers to become more sustainable in turn.

The drivers for companies to become more sustainable are coming from everywhere – the science, initiatives from governments and regulators, increased consumer pressure and demands from investors. The best-prepared businesses see opportunities as well as risks and are preparing accordingly.

Who made this year’s list? The 2020 Global 100 ranking

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