CRO Magazine—using the analytical skills and data-processing prowess of Portland, Maine-based IW Financial—introduces The CRO’s 10 Best Corporate Citizens by Industry 2007. (Part 1)

The industries we’ve dissected in the Sep/Oct issue are: Chemical, Energy, Financial, Media and Utilities. And, in the Nov/Dec issue of CRO, we will present Part 2 and review about a half-dozen more.

This industry-by-industry approach is a new one for us, as we have ventured beyond the 100 Best Corporate Citizens 2007 list, published in our Jan/Feb issue, tweaked some categories and methodologies, and assessed how corporations measure-up against their sector peers.
And, speaking of peers, perhaps the rankings will generate some peer pressure in how companies manage their corporate responsibility.

But, more immediately, we wanted to show you how companies stack up.
Perhaps that’s not the most appropriate verbiage for a publication concerned about cutting carbon emissions.

But The CRO’s 10 Best Corporate Citizens by Industry 2007 cuts through any hype and haze, giving clear visibility to corporate citizenship leaders by industry.

See the full list now (PDF)

Methodology

To determine The CRO’s 10 Best Corporate Citizens By Industry 2007, CRO used a broad base of data, available through Aug. 31, 2007, to evaluate environmental, social, governance and financial issues. To be a productive citizen, a corporation should do well in all of these areas. Of course, some corporations do better in one area, while others leapfrog ahead in a second or third area.

IW Financial performed these 10 Best assessments through a standardized process. CRO modified the methodology used in the earlier 100 Best Corporate Citizens 2007 to reflect emerging issues, available information, and a new approach to company comparisons. As is evident from the tables, each company was evaluated in eight categories: Environment, Climate Change, Human Rights, Employee Relations, Corporate Governance, Lobbying, Philanthropy, and Financial. Since the goal was a comparative determination of “best” among large-cap, publicly traded companies, IW Financial ranked the companies in each category. The final ranking and determination regarding which companies made it into the 10 Best was determined by averaging the ranks within the eight categories.

CRO and IW Financial worked together to remove as much subjectivity as possible from the evaluations. One of the potential pitfalls in doing this kind of research is that prior impressions can color the end evaluation. By designing an evaluation methodology that relies on comparisons of companies within categories based on predefined criteria, we removed the possibility of a preconceived notion tainting the final list. The result is a “data-driven” evaluation of companies. Mark Bateman, Director of Research at IW Financial, commented: “There may be some surprises for people on these lists, but the data speak for itself. Based on the data and categories included in these evaluations, this is an unbiased evaluation of corporate citizenship.”

IW Financial relied on data from several sources. IW Financial reviews company financial disclosures, sustainability/environment/citizenship reports, websites, Environmental Protection Agency databases, and other sources as part of its standard research processes.

Within each industry, CRO and IW Financial established a starting universe of U.S. publicly traded companies, largely based on the Russell 1000 and a few other companies. Within each industry, IW Financial analyzes data (including more than 600 data elements) to complete a “score” within each category. Scores then determine the rankings within a category.

For example, the Employee Relations category includes a component on employee benefits. Rather than a subjective evaluation of benefits, IW Financial gathered the data from company websites and then tallied the total according to a specific formula. These benefit scores were then combined with several other elements for a total Employee Relations score. Companies were then ranked based on these scores.

So, on the Energy Top 10 List, Marathon Oil (No. 1) earned 28 points in the benefits calculation, good enough for the second highest employee-benefits score, but ranked fifth on Employee Relations overall when other factors, including its disclosed unionization rate were considered.

Once we completed the rankings for an industry within each of the eight categories, we averaged the category rankings (equally weighting each category). The 10 Best scores were then selected for each list.

Category Definitions:
Environment. This category incorporates an evaluation of environmental disclosure (including sustainability reporting criteria), environmental policies (including management systems), and environmental performance (including toxic emissions).

Climate Change. This category considers climate-change disclosure (including reports to the Carbon Disclosure Project) and climate-change policies (including offsets and reduction goals).

Human Rights. We evaluated disclosure (including controversies within the company’s overseas operations), policy (including codes of conduct and performance goals), and exposure to countries of concern.

Employee Relations. We looked at unionization rates, employee benefits, and Equal Employment Opportunity Commission complaints.

Lobbying. Certain industries are more involved in lobbying than others, so comparing companies within industries was helpful. This category evaluated a size-adjusted, three-year lobbying total at the federal level. (Information came from www.opensecrets.org and the Center for Responsive Politics.)

Philanthropy. This category in the CRO ratings evaluated giving levels and policies (including employee-match programs).

Corporate Governance. Board independence was the standard used in this category. We evaluated whether the board majority was independent and whether key committees also were fully independent. If a board majority was not deemed independent, the corporation was not considered in the rankings. In addition, ratings covered board accountability and demographics (board tenure, age of directors, over-commitment of directors to multiple boards, and annual election of all directors).

Financial. Any evaluation of corporate citizenship must include a company’s ability to meet this most-basic corporate purpose. This category evaluated companies’ three-year total return. Companies without a three-year return to shareholders were not considered for the ranking. That’s because this list was intended as an evaluation of the citizenship efforts of large cap, publicly traded, U.S. companies, and a three-year history with shareholders was a prerequisite for consideration.
For more information about IW Financial and its research, visit www.iwfinancial.com .

Learn more about the list:

Full List

Methodology

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