What Environmental Ratings Miss
Given the sparkle that environmental rankings lend to high-ranking companies, they should take into account a business’s advocacy activities to influence environmental regulation in addition to the business’s internal operations, argue Auden Schendler of the Aspen Skiing Company and Michael Toffel of Harvard Business School.
In March 2011, News Corporation CEO Rupert Murdoch announced that News Corp’s operations had become carbon neutral. Good, right?
Yes — but there’s a but. Two months earlier, Rolling Stone magazine ranked Murdoch No. 1 on its list of “politicians and execs blocking progress on global warming.”
“No one does more to spread dangerous disinformation about global warming than Murdoch,” the magazine wrote. “Murdoch’s entire media empire, it would seem, is set up to deny, deny, deny.”
So, Murdoch: environmental hero or environmental enemy?
Put another way: Given the sparkle that environmental successes and subsequent rankings lend to companies, shouldn’t those rankings take into account a business’s advocacy activities to influence environmental regulation, in addition to the business’s internal operations?
They should, write Auden Schendler of the Aspen Skiing Company in Aspen, Colorado, and Michael Toffel of Harvard Business School, citing Murdoch as an example, in “The Factor Environmental Ratings Miss.” Among their arguments:
- “The primacy of policy in solving the world’s environmental problems suggests that corporate activism should be considered in a much broader set of environmental rankings.”
- “Why shouldn’t ratings that tell consumers which products are healthy, green and socially responsible consider whether a manufacturer’s political activities support or undermine climate action?”
- “Why shouldn’t standards that purport to identify environmental leaders, like the ISO 14001 environmental management system adopted by more than a quarter million organizations worldwide, require engagement in the political process to promote climate change regulation?”
- “As currently structured, many sustainability ratings risk seriously misleading consumers and shareholders; they can even enable greenwashing by allowing corporations to game the system, gaining high rankings while avoiding controversial policy advocacy that takes courage, invites attack and actually drives real change.”
- “Fixing this problem isn’t all that complicated. Rating systems should factor in political contributions, CEO advocacy work and engagement with nongovernmental organizations among other actions.”