Fortune magazine has announced the results of its 2005 Accountability Rating, a rating of corporate responsibility of Fortune Global 100 companies.
NEW YORK and LONDON Fortune magazine has announced the results of its 2005 Accountability Rating, a rating of corporate responsibility of Fortune Global 100 companies. The Accountability Rating -- compiled by the London think tank AccountAbility and the consultancy CSRnetwork -- scores companies on how seriously their future decisions will consider nonfinancial matters. Topping the survey is BP, followed by Royal Dutch Shell Group (No. 2); Vodafone (No. 3); HSBC Holdings (No. 4); Carrefour (No. 5); Ford Motor (No. 6); Tokyo Electric Power (No. 7); Electricite de France (No. 8); Peugeot (No. 9); and Chevron (No. 10).
The Accountability Rating is not an index of how much good the company does or how loud its critics are. "It doesn't seek to label the good or bad but rather to identify the smart," says Simon Zadek, chief executive of AccountAbility. "It's a business, not a moral, rating. It looks at the world's biggest corporations and asks, 'Do they understand how to create and exploit effective business opportunities by addressing the needs of the poor? Do they understand how to make money by investing in environmentally sound business practices? Are they, in short, prepared to maximize the opportunities for our changing world?'"
"Many of the existing measures of corporate responsibility are focused on short-term issues," says Zadek. "They make a narrow assessment of how thorough a company's social reporting is. Or they attempt to name and shame by exposing negative social and economic impact...They do not offer clear insight into where a company wants to go and how smart it is in converting society's changing expectations into marketable products and services." The fact that oil and chemical companies have high ratings simply indicates that these companies face the biggest hurdles and are taking corporate responsibility seriously.
This is the second year the Accountability Rating has been applied to the Fortune Global 100. The results are encouraging: The average score has risen to 32 from 24 last year (out of a maximum of 100). This year a third of the companies achieved a score of 40; last year only one in ten did. Most of the bettered scores this year can be attributed to improvements in public disclosure -- one of the six criteria by which companies are measured -- to the level and quality of formal auditing of social and environmental performance, and to the number of companies reaching out to engage with nontraditional stakeholder groups.
The biggest success story on this year's list is HSBC (No. 4), which gained the most on this year's rankings. In the past two years HSBC has named a subcommittee of its board to oversee corporate responsibility and make it its No. 1 strategic goal. That was good enough to rank 45th last year. But his year, HSBC has committed to the World Bank's Equator Principles in deciding whether to lend to dam and forestry projects, and it started using an outside standard, AccountAbility's Assurance Standard, to help verify that new governance structures were a good response to shareholder needs.
"It will be interesting to see which corporations get smart first in aligning their business strategies to emerging social and environmental risks and opportunities," concludes Zadek. "One thing is clear: Those that will not or cannot change their strategies will ultimately not maintain their rankings in the Fortune Global 100."