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Thursday, December 3, 2009

Sustainability Rankings by Industry Sector – Any Better? Part 2

This is the second of two posts. The first, earlier this week, was on TBR’s ranking of the ICT sector.

M&E’s Sustainability Ranking looks at the oil and gas services sector and in contrast with TBR, takes a very broad perspective of sustainability “comparing twenty companies in the sector against 355 criteria of sustainability, corporate governance, social responsibility, transparency and ethics.”

So although it is sector specific, the M&E ranking has a great dependency on weighting factors between very disparate CSR themes which I see as a significant downside when looking at the specific scores.

First in the M&E report is Schlumberger followed by Baker Hughes and then Halliburton in third place. Although the broad scope of the M&E report prevents an accurate comparison to Newsweek’s green ranking, interestingly, the order in the top of the ranking is the same; Schlumberger #118, Baker Hughes #154 and then Halliburton at #169. (Considering they come from the oil and gas services sector I think all are pretty respectable positions in Newsweek’s rankings, ahead of many companies in much less challenging sectors).

I find the observations within M&Es study to be valuable. Amongst other things M&E identifies;

  • relative positioning of the participant companies from year to year, for example “The biggest movers in 2009 are Baker-Hughes, jumping from a score of 47.07% in 2008 to 72.7% in 2009”
  • correlations between sustainability performance and financial performance, “study shows a significant correlation of 0.34 between the total M&E results covering 355 points of sustainability performance with Return on Assets (ROA)”.
  • comparable participation of the included companies with the DJSI, UN Millennium Goals and Carbon Disclosure Project.

All in all although I remain skeptical about the specific scorings, the concise commentary and conclusions provided with this report are valuable and fairly unique amongst reports I have seen.

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