August 24, 2015

Fortune Magazine's "Change the World" List Needs More Hard Data

Fortune Magazine has taken on a fascinating and very challenging task of ranking companies that are "changing the world" for the good. Their new list could be a solid addition to their other non-financial rankings, such as Best Companies to Work For, Most Admired, or Most Powerful Women.

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But that said, this list is odd, and not for the reasons you might think. Two quick areas that I will not criticize:

- The underlying assumption or impetus. That doing 'good' in the world is also good for business, I'm obviously on board with. Companies can, and should make what I call a "Big Pivot" and put solving the world's largest problems at the center of their business models -- and do it very profitably.

- Who made the list (others will certainly jump on this issue)? Most of the usual suspects that many sustainability watchers (including me) consider clear leaders on tackling environmental and social challenges -- like Unilever, Patagonia, Nike, Marks & Spencer, and Starbucks -- made the cut. As did the more controversial companies that many (again, including me) also give props to (like Walmart). But, of course, people will find fault with every company on the list. Multinational companies are not monolithic and I agree with Fortune that these giants "may be ameliorating one great global problem even as they contribute to another."

But even so, the list is strange in a key way. It's a "ranking" that doesn't exactly rank. Fortune says "We have made no effort here to rate companies on their overall 'goodness' or 'social responsibility.' That's a task beyond our competence." Really? Why?

If we can measure how powerful women are, or who's most admired or most innovative, we should be able to handle this task. Yes, "goodness" is tough to measure, but that's not the same as impossible, and Fortune shouldn't punt on that. If this list is saying that creating societal value creates business value, then let's use some financial (or perhaps blended) metrics.

We could use dollars. My colleague Freya Williams just released a new book, Green Giants, which focuses on 9 brands with over $1 billion in annual revenues that are "directly attributable to a product, service, or line of business with sustainability or social good at its core." Williams includes in her list, which totals $100 billion in revenues from more sustainable products, all of the sales of companies like Chipotle, Unilever, Tesla, Whole Foods, and Natura...and just the greener parts of GE (its ecomagination portfolio), Nike (Flyknit shoes), IKEA, and Toyota (the Prius).

It's not a perfect method, but it's not bad either. So why not rank all of the world's biggest companies by total dollars or percentage of revenues (or profits) coming from "good" products. It's not an exact science, but it would yield interesting results. Total dollars would put Walmart near the top -- even if you just count their organic food sales or some percentage of the business because of its renewable energy investments. Percentage of business dedicated to doing better would highlight those like Patagonia and Natura that are arguably at 100%.

And even without financial metrics, we could estimate how much impact the companies have on the world: number of people whose lives are improved, amount of economic growth driven for those near the bottom of the pyramid, and so on. There's a ton of work going on out there on changing the metrics we use at the scale of companies and the economy (GDP as a measure of well-being has some serious flaws).

Clearly, some of these considerations went into the Fortune ranking -- the think tank that helped build the list, FSG (founded by Michael Porter and Mark Kramer), is a major proponent of "shared value" creation between business and society. But it could all be more concrete. So, by all means, let's recognize the companies finding business value in social and environmental progress. But let's get more specific on how much credit we give them.

(Photo: Flickr, tracyshaun)

(This post first appeared at Huffington Post)

(Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)

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