The companies that provide services to the federal government have a special duty to act transparently. Here are the highest performers.
By Richard Crespin
On March 30 during a special White House event, the Obama Administration launched a Sustainable Supply Chain Community of Practice. This occasion marked yet another significant milestone not only for the administration but also for corporate responsibility as a whole. Over the past few years, it has become increasingly clear that the line between “greenwashing” and true corporate sustainability lies through the supply chain. Companies put their money where their mouths are when they commit to responsibility throughout their supply chains.
This sustainable supply chain community of practice unites two hallmarks of the President’s agenda and of this magazine’s own mission: transparency and sustainability. We have long contended that transparency is the precondition of corporate accountability and responsibility. For more than 10 years our 100 Best Corporate Citizens List has highlighted the most transparent and accountable of America’s largest publicly traded firms. We were pleased to see the President follow this example with his Open Government Directive, inaugurated in 2009, which set similar standards of openness and accountability for government agencies. Three years ago we helped launch the ResponsibilityWorks Roundtable, which focuses on sustainable supply chain management, and two years ago we began publishing our list of the Best Corporate Citizens in Government Contracting. Executive Order 13514 on greening the supply chain followed suit, and while limited at first to energy and environment issues, it has since expanded to include a “triple bottom line” focus on responsibility throughout the federal supply chain.
We continue our shared commitment to transparency and accountability, publishing this list of government contractors for the third time. As we said when we first launched this list, “What gets measured gets done,” and by continuing to publish the list we hope to raise the bar on companies that uphold the public trust and serve the U.S. federal government. In assembling this year’s list, we followed a proven process, which nevertheless bears some explanation.
Over the past 12 years, CR Magazine and the Corporate Responsibility Officers Association (CROA) developed a methodology for measuring and ranking the transparency and accountability of publicly traded firms. This methodology, borne out by experience and subjected to peer review, if not perfect, provides a good starting point. We focus on the largest U.S. firms as listed in the Russell 1000 because improving the responsibility of these firms will have the greatest impact.
The CROA’s Corporate Citizenship Methodology Committee, composed of CR practitioners, academics, investors, and non‐profits, oversees the methodology and subjects it to public comment. The current year methodology assessed more than 300 publicly‐available data points across seven domains: environment, climate change, human rights, employee relations, philanthropy, governance, and financial performance.
Once finalized, the methodology is turned over to CR Magazine, which has the final word on publication. For the 2012 list, the magazine retained ESG research firm IW Financial to gather the data and compute the rankings. All ranked companies had the opportunity to review their scores and submit corrections. The methodology underlies the 100 Best Corporate Citizens List, and in recent years the development and publication of industry sector lists, this government contractor list, and the Black List—the least transparent companies.
Who are the “best of the best corporate citizens” in government contracting? The contractors we consider the best corporate citizens are those that are listed among our 100 Best Corporate Citizens overall. All other companies ranked below simply report data for the 100 largest government contractors according to USASpending.gov. These lists were created to increase the measurement and disclosure of corporate responsibility practices across the government contractor community.
Why now? The government has set goals for transparency and sustainability, and we provide an independent assessment of the companies that serve that government. Moreover, in a market‐based, democratic society, we the people need information to make better decisions. When agencies and their private sector partners make more information available it makes us all better citizens.
Why transparency and accountability? To understand this ranking and its methodology, understand this premise: Transparency is the precondition of responsible citizenship. Citizenship bestows rights and responsibilities. To be responsible corporate citizens means being willing to be held accountable by others. If we the people don’t know what contractors are up to, we can’t hold them accountable.
This methodology does not judge companies for the businesses they are in or their conduct per se. It measures their willingness to be held accountable, providing the information needed to make decisions about whether to invest in them, work for them, live next to them, or buy from them. In a market‐based democracy, that’s the best way to improve responsibility: Put the information out there for investors, employees, neighbors, and customers (including government) to judge.
Why only publicly‐traded companies? Our methodology relies on independently verifiable public data. Many privately-held companies do not publish this kind of data on a consistent basis. We are working, though, with the Government Services Administration and the White House on an effort to encourage greater transparency in that realm.
Is this an effort to get government to mandate corporate responsibility? No. By definition, you can’t. Once it’s mandated, it’s not responsible to comply, it’s required. Moreover, you cannot comply your way to greatness. This entire effort is about going beyond compliance. The famous British jurist, Lord Moulton, distinguished three realms of human action: that which lies solely in the realm of personal freedom, that which lies solely in the realm dictated by law, and that vast gray space in between—the realm of ethics.
Some of the data we look for are required by law. Some are purely voluntary. By declaring these data elements—the mandatory and the voluntary—as important, we take a stand for what should constitute ethical behavior and disclosure. Not what should be required, but that which is ethical. Surprisingly, many of the companies we looked at do not even disclose the mandatory data. The companies we consider among the “Best Corporate Citizens” disclose far more. And it is that kind of disclosure we want to encourage and recognize.
What behaviors warrant sanction? The 100 Best Corporate Citizens List uses the soccer analogy of red and yellow cards to call out companies that would ordinarily make the list, but whose egregious behavior warrants sanction. There are two red-carded companies on the 2012 Best 100 list:
• Allergan Inc.: First red-carded on the 2011 list. In September 2010, Allergan pled guilty to a misbranding charge related to Botox for $375 million and took on an additional $225 million fine to settle civil claims from the Department of Justice.
• Exxon Mobil: First red-carded in 2010. In October 2009, Exxon Mobil was found liable for contaminating groundwater in New York City and was ordered to pay the city $104.7 million in compensatory damages. The suit began in 2003, when the city sued 23 oil companies over M.T.B.E. contamination from fuel leaks from gas station storage tanks. It reached settlements totaling $15 million from all of the companies except Exxon. Exxon Mobil lawyers denied the company was responsible, pointing to other sources of contamination.
We spent a good deal of time deliberating about what issues unique to government contractors would warrant similar sanction, and we researched various sources, including Ethisphere’s ranking of government contractor ethics, and the Project on Government Oversight (POGO)’s Federal Contractor Misconduct Database. Each of the companies we examined has a variety of issues that may require sanction across categories ranging from ethics to environment, to human rights, labor, and health. We will look to the CROA’s Corporate Excellence in Government Roundtable to advise us on this issue moving forward and which publicly available data to consider.
We will continue our work to encourage greater transparency and accountability in global supply chains with two important events later this year. The first is the CROA’s third annual ResponsibilityWorks Roundtable entitled “If Sustainable Supply Chains Cost You More, You’re Doing It Wrong.” It will take place on the morning of July 18 in Washington, D.C. The second is our annual conference, CR Magazine’s COMMIT!Forum on October 2 and 3 in New York City, which will feature a set of discussions on sustainable value chain management. More details on both events can be found at www.commitforum.com. We need your help and input. Be one of the first 100 people to register and receive a 25 percent discount!