Fortune has released their annual list of Most Admired Companies – the companies that Fortune has deemed praiseworthy for contributing to the greater good. This includes activities such as ethical sourcing, contributing to the community, and protecting the environment.
We took a deeper look into the corporate social responsibility (CSR) initiatives of the top 12 companies in the list, to see whether they are indeed worthy of the name “Most Admired Companies”.
Take a look at the full list of companies to find out some pleasant surprises about which companies we rely on are doing a good job ethically, such as Facebook (#14) and Netflix (#19). This list of 350 companies comes from a comprehensive analysis by Fortune and Kom Ferry Hay Group of Fortune’s 1,000 largest US companies and the Fortune 500 largest global companies. The research comprised a mix of self-reporting and industry reporting.
Canstar can help you make some of your own investment decisions more ethical, by comparing what your Superannuation Fund invests in, or your Managed Funds, online share trading platform, or ETF. You can also make your own business more sustainable by comparing business accounts. Check you’re not paying than you have to in account fees and put those extra dollars to work for the greater good.
Without further ado, in reverse order, here is our take on Fortune’s Top 12…
Industry: Specialty Retailers
Fortune 500 Rank: 18
We were all dreadfully excited when Costco finally immigrated to Australia, with their giant supermarket-slash-Bunnings-style warehouses filled with bulk consumer goods. Costco’s operating philosophy is to keep costs down and pass savings on to members, so it’s good to see they still care about their social responsibility, having jumped from #16 on Fortune’s list last year to #12 this year.
Ethical sourcing and labour:
Costco’s ethical sourcing goals include avoiding slave labour; selling sustainable seafood; avoiding conflict minerals (raw materials sourced from conflict zone countries where the materials are sold to finance the fighting groups, e.g. “blood diamonds”); protecting animal welfare in on-farm living conditions and slaughter methods; and working towards 100% sustainable palm oil products.
However, it’s not coming up all roses. Costco only ranks at 53% on the Greenpeace Sustainability Scale, which is largely due to its transparency around seafood industry labour sources. In contrast, Australia’s supermarket giant Coles uses only seafood from 100% sustainable fisheries and aquaculture farms for its homebrand seafood products.
Costco’s 2015 report shows they have increased their energy efficiency by 25% from 1994 to 2012. They use skylights so they only use electric lights when clouds restrict natural light – using high-efficiency light bulbs, of course. This has reduced sales floor lighting by 50% from 2001 to 2014. Then the warehouse roofs and carpark shade carports are covered in solar panels, so Costco can feed back what it uses. Water-wise, Costco’s high-efficiency restroom fixtures save 40% more water than the code requires.
When constructing a new store, Costco often rehabilitates dilapidated buildings, using recycled materials and the minimum amount of steel possible. In the carparks, they use sustainable pavement materials and bioswale and bio-retention gardens to prevent pollution.
Costco uses one set of recyclable, sustainable packaging from the manufacturer to the customer’s home, and even the plastic comes from post-consumer recycled PET plastic. They use square containers wherever possible because then Costco staff can pack 50% more units into one pallet – which means 600 fewer depot trucks each year. Australia’s Coles has a lot to learn from Costco in this area, based on their stated packaging and recycling policies.
Costco admits that CO2 emissions have increased from 2009 to 2013 in their 2015 report, but they are working hard to combat this. The “bulk” nature of their business means their distribution trucks and their customers both make fewer trips to the store, keeping emissions low.
Costco has a charitable giving program open to many not-for-profit organisations such as The United Way, Children’s Miracle Network Hospitals and the Red Cross, but they aren’t transparent on their website about how much they give. To put that in perspective, we know that Australia’s Coles gives away $36 million in charitable donations, as well as an addition $7 million given charitably by customers, employees, and suppliers.
Costco provides returning veterans with work with competitive wages and benefits, with either full-time or part-time positions available for those using the G.I. Bill to attend school. They also support the literature industry by holding author signings in-store.
11. American Express
Industry: Consumer Credit Card and Related Services
Fortune 500 Rank: 88
American Express (a.k.a. AMEX) was founded in 1850 and now issues the world’s largest number of credit cards.
Ethical sourcing and labour:
Not much material involved to source, but the labour is all slave-free.
Green initiatives helped American Express reduce its carbon emissions by 27.5% from 2007 to 2012. By the end of 2014, they had further reduced carbon emissions by 9% on the new 2011 baseline, and 55% of their electricity use was renewable and carbon-free. The EPA has gone so far as to list AMEX at #48 in its National Top 100 list of green, renewable power users in the USA.
What about the trees? More than 2 in 5 AMEX customers are paperless as of 2014, and 91% of their paper use was from certified responsibly-managed forests.
The company donates a fair bit to the historic preservation of major sites for future generations to enjoy. However, most of these grants go to historic buildings and organisations, as opposed to the natural landmarks or forests that are currently being destroyed in large numbers across the globe.
Community support: American Express Australia focusses on charitable giving to just two not-for-profit organisations, OzHarvest and the Australian Business Community Network. Each year, American Express Australia donates over $6.67 million through gift-matching to employee-driven charities, and they donate a minimum of 500 hours of paid employee volunteer work to non-profit organisations.
American Express also supports the Australian and global small business communities through their annual ‘Shop Small’ advocacy campaign.
10. General Electric
Fortune 500 Rank: 8
This household name was founded by Thomas Edison in 1892 in Schenectady, New York, after the merger of Edison Electric Light Company (founded 1878). Edison’s legacy is much more than the humble lightbulb, as he held 1,093 patents for his own inventions, and his company made many of these a reality. Reportedly, GE is responsible for the first household electric lighting, the refrigerator, the electric fan, the X-ray machine and the MRI machine, the electric range, the radio broadcast and the clock radio, the non-reflective “invisible glass” we now use in camera lenses, the world’s largest locomotive of the era (in 1895), and the first US jet engine.
Ethical sourcing and labour:
GE works hard to respect human rights and protect the environment in their supply chain, and they have a hard task to perform. They use no slave labour or child labour, and even no prison labour. However, the results of their supply chain goals and metrics are less than stellar, with “Health and Safety” having declined in the supply chain from 38% in 2012 to 36% in 2014.
As all of their products are made from minerals, avoiding conflict minerals is difficult even with policies in place. Their 2014 report shows that just over 50% of the smelters and refiners in their supply chain have been verified to be “conflict-free”.
GE has reduced their greenhouse gas emissions by 31% from their 2004 baseline and reduced water use by 42% from their 2006 baseline, blasting away their 2015 goals of 25% for both of these. Their approach to environmental responsibility as a designer and manufacturer involves Energy Star appliances, their recycling program for old appliances, the EPA WasteWise program, and the EPA SmartWay Transport program for cleaner air.
GE also has many public initiatives that have revolutionised day-to-day safety and sustainability, such as Ecomagination and healthymagination. Ecomagination was launched in 2005 to make “green” resource efficiency affordable in an economic sense for both consumers and manufacturers. In 10 years, they have gone from investing $700 million per year to this cause to an impressive $21 billion.
The GE Foundation was developed in the 1950s to provide philanthropic support for the communities GE lives in and works for, with a tangible focus on diversity, education, and health.
In terms of diversity and education, the GE Foundation has supported everything from the United Negro College Fund in the 1950s, to the National Action Council for Minorities in Engineering (NACME) in the 1970s, to the Developing Futures™ in Education Program since 2005.
They also provide substantial funds to support the causes their employees and the world community really care about. They do this through the More Gifts…More Givers gift-matching program, which started in the 1980s, and responses to natural disasters such as Hurricane Katrina and Indonesia’s 2004 tsunami.
When it comes to health, the GE Foundation has gone above and beyond, creating Developing Health Globally™ (DHG) to improve healthcare in vulnerable populations around the world in the 2000s and Developing Health™ (DH US) in 2009 to assist non-profit community health centres in the USA. They supported the American Red Cross from their early days in the 1950s.
Fortune 500 Rank: 106
“Just do it!” now means more than just shoes – it may also mean doing things right, for this company founded in 1972 on a handshake between athlete Phil Knight and track coach Bill Bowerman. These purveyors of fit and fancy footwear and apparel rate each of their new products for its sustainability of materials, as well as waste, solvent use, and energy use in the manufacturing process.
Ethical sourcing and labour:
Nike is an interesting case when it comes to ethics, because they weren’t always the responsible, upstanding global citizen they are today. In fact, in the 1990s they were facing boycotts and serious public protests outside their Niketown stores as the media reported on villainous child labour and sweatshop abuses. In 1998, their company earnings reportedly dropped by a terrifying 69%.
In 2005, they became the first company in their industry to publish a complete and transparent list of their contracted factories, pay scales, and working conditions – and admitted that they had some problems to fix in these areas.
Their most recent CSR report is the 2012-2013 report, which shows they now demand all contractors and suppliers and their 785 contract factories to follow strict protective policies for their 2.5 million workers. They have an independent third party conduct their audits, and this has proven a success: violations are down to 16% of factories compared to 29% in 2012. Workers do not put in excessive overtime in 93% of factories, up from 87% of factories in 2012.
In 2012, Nike switched to the new DyeCoo ColorDry fabric-dyeing process that uses no water or chemicals (it uses carbon instead). Without water, this process dyes materials 40% faster, and it even reduces its energy use by 60% because the materials don’t have to be dried out afterwards. Nike has also promised to remove all hazardous chemicals from its global supply chain by 2020.
Since 1992, Nike has recycled 36,000 tons of manufacturing waste and 29 million pairs of old shoes into “Nike Grind”, a material used to make sports surfaces such as courts and tracks. In 2012, Nike created the revolutionary Flyknit technology for shoe and clothing manufacturing, which has helped reduce manufacturing waste and the amount of materials used. Other Nike sustainability innovations include using recycled polyester from plastic bottles in their shoes and clothing.
Nike innovates to get kids moving. They partner with many organisations in Brazil, China, Russia, Turkey, and USA for active schools; and they sponsor global organisations that do youth sports, like Marathon Kids and Zoom League in the USA and Sport For All in Europe (helping kids overcome economic, intellectual and physical barriers to sport and physical activity). They also sponsor Designed to Move, a framework for breaking the physical inactivity cycle around the world for adults as well as kids.
Nike seeks to break the cycles of poverty and poor health in the world. They sponsor the Girl Effect, which educates adolescent girls to free them from worldwide poverty; and Hurley and Waves for Water, which distributes portable water filtration systems so that an estimated 5 million people now have their own clean water to drink.
Fortune 500 Rank: 65
Founded in 1973, FedEx ships more than 3.6 million shipments every business day, making it the world’s largest express transportation company. So how do you protect people and the environment when your business revolves around a delivery service of trucks and planes?
Ethical sourcing and labour:
FedEx are currently in hot water over how they treat their delivery workers. A long-running lawsuit over “employee misclassification” settled to the tune of $228 million in early 2015 for delivery drivers for claims made from 2000 to 2007.
FedEx has always paid its Ground drivers as independent contractors, allegedly in order to avoid the US laws for full-time workers such as the minimum wage, benefits including health insurance, overtime pay, and more. The independent contractor status also meant FedEx could make their drivers pay for their own FedEx branded van, uniform, scanner machine, fuel, and vehicle servicing and insurance.
Over the past 5 years, FedEx have helped the National Fish and Wildlife Foundation to restore more than 450 acres of habitat and plant more than 50,000 trees in the USA. FedEx has also distributed 1.45 million trees for planting by the Arbor Day Foundation, to help disaster-stricken communities rebuild their local ecosystem. Hopefully these trees somewhat make up for the constant emissions involved in their transportation business.
They have some serious environmental protection goals, and they’re making good progress towards them. They have improved fuel efficiency in their truck fleet by 22% from 2005 to 2012, with a 50% improvement goal for 2020. They now use 482 electric vehicles and hybrid-electric vehicles in their fleet, saving 480,000 gallons of fuel from 2005 to 2012.
FedEx packaging is required to be made from recycled materials and recyclable after delivery. And their Cologne distribution hub has FedEx’s largest solar-power rooftop installation, which provides enough power every year to power 230 households for the year.
FedEx’s approach to “citizenship” involves $45.48 million per year worth of philanthropic charitable giving, millions of dollars given to disaster relief funds, and 6.7 million pounds worth of free shipping for disaster relief supplies. Nearly 10,000 FedEx employees use paid volunteer time during FedEx Cares Week every year. More than 10 million children have learned how to be a safe pedestrian through the FedEx/Safe Kids Walk This Way program.
7. Southwest Airlines
Fortune 500 Rank: 161
If you live in Australia like us, chances are you’ve never heard of Southwest Airlines either. They were incorporated in 1967 by Rollin King and Herb Kelleher with the goal of getting passengers to their destination cheaply and on time.
Ethical sourcing and labour:
Southwest Airlines says they build relationships with suppliers who not only meet their operational needs, but who also stimulate economic growth in their communities and satisfy the expectations of stakeholders. This seems quite vague to us, especially when their main suppliers are fuel conglomerates, which is not an industry with a great reputation for ethical sourcing.
Much like FedEx, the very nature of the Southwest Airlines business involves emissions created by air travel. They combat this by using alternative fuels wherever possible. They have signed up to purchase 3 million gallons of low-carbon renewable jet fuel per year from this year (2016) onwards. They have also been recognised for the design and construction practices of their Dallas hangars and airports under the LEED® (Leadership in Energy and Environmental Design) standards.
Every year Southwest Airlines donates more than 25,000 free flight tickets and millions in cash and gift-matching donations – a total of more than $20 million in compassionate contributions. They donate around $3 million per year in free round-trip flights for medical transportation by non-profit hospitals and medical organisations.
Industry: Food Services
Fortune 500 Rank: 187
Starbucks began as a single store back in 1971, the name inspired by Moby Dick because the store was in the seafaring city of Seattle. Today they are a global chain of more than 17,000 stores in 50 countries.
Ethical sourcing and labour:
In 2002 Starbucks began using and selling Fair Trade Certified coffee, and by 2009 they had become the world’s largest buyer of Fair Trade coffee beans. In 2015, the company’s VP claimed that 99% Starbucks coffee was ethically sourced. However, Starbucks has had issues in the past with labeling their coffee Fair Trade Certified, with critics disagreeing with Starbucks’ standards for being a leader in CSR.
As for their 100% “responsibly grown and ethically traded” goal, Starbucks is still working on it and is currently only at 75% according to their Ethical Sourcing page. Starbucks has Farmer Support Centres on the ground in Costa Rica and Africa to train their coffee growers in the most socially responsible and environmentally sustainable ways to grow coffee.
Starbucks had worthy environmental goals to use 100% recyclable and reusable cups by 2015, but have not reported on whether or not they achieved this. They had likewise worthy goals of making all new company-owned stores certified “green” by the end of 2010, but have not reported on whether or not they achieved this. They aimed to cut water use by 25% from 2008 to 2015, achieving 23%. They also do not state whether they have made any reduction in energy use at all according to their goals.
This is a trick one because there is currently an obesity epidemic happening in the Western world, and some of Starbuck’s hot and cold drinks have more than half of your entire recommended daily intake (RDI) of both sugar and fat. And when it comes to transparency about their RDI content, Starbucks Australia’s menu (e.g. Caffé Mocha page) says you must contact them to find out nutritional information (which nobody will do), and down the very bottom of their FAQ section they link to a nutritional brochure.
So what is really in a Starbucks iced chocolate? For reference, here’s what the Dietitians Association of Australia says is the recommended daily intake we should be eating, known as RDI or %DI: 8700kJ of energy, 70g fat, and 90g sugar. The Iced Signature Hot Chocolate with Whipped Cream (Venti size with Whole Milk) is a whopping 2317kJ of energy (26.6% RDI), 34.6g of fat (49% of your RDI), and 46g of sugar (51% of your RDI). That’s half your sugar and fat intake for the day in one hit, plus more than one fifth of your energy for the day.
5. Walt Disney
Fortune 500 Rank: 57
Starting in 1923 in California with just one pilot of a cartoon series, Alice’s Wonderland, the Walt Disney Company is now responsible for Walt Disney Studios, Walt Disney Parks and Resorts, the Disney Channel on TV, and more. With Star Wars: The Force Awakens having now made over $2 billion globally, we were curious to see what the ethics of this giant conglomerate were like.
Ethical sourcing and labour:
Walt Disney’s multi-billion dollar merchandise industry rests on the need to ethically source materials and labour, with 30,000 factories in more than 100 countries. They require human rights to be followed in all factories and demand no child labour. In December 2015, Walt Disney told several factories in China that were not meeting international labour standards to shape up or they would lose their Disney contracts, which is promising.
When it comes to Conflict Minerals, the news is a little more disappointing. Of their 1,365 suppliers of retail merchandise, only 40% responded to the 2014 survey on use of conflict minerals, and only 69% of their top 100 suppliers responded. A large number of suppliers said they don’t know and can’t find out where their raw materials came from, so they couldn’t rule out conflict minerals.
Walt Disney also sees a vital need for safety in manufacturing since most of their products are for children, so their Chemical Guidelines include mechanical, toxic, microbiological, flammable, electrical, and chemical safety requirements.
In 2014, Walt Disney announced a new focus on minimal and sustainable packaging, an initiative that is unique in the toy industry. We look forward to seeing how much this initiative can achieve. Walt Disney has reduced emissions by 31% since 2014, and diverted 48% of waste from landfills. They also have a paper sourcing policy (2012), but have not yet reported on its effectiveness to date.
The Disney Worldwide Conservation Fund (DWCF) does a great deal towards Disney’s footprint, and even surpassed its $25 million giving goal in its 2014 round of conservation grants.
Walt Disney’s 2014 Citizenship Report shows they are doing well at helping communities and families grow closer, by supporting and building play spaces, connecting 35 million kids and families with “Nature Experiences”, and donating 18 million books to children (with 23 million books donated to date). In 2014, Disney’s charitable giving included more than $315 million just to non-profit organisations helping kids, families, and communities in need. Disney VoluntEARS have contributed 1.7 million hours of employee community service to date, and they aim to reach 5 million hours by 2020.
In terms of transparency about community support, Walt Disney even disclose which political candidates they give monetary support in the US.
Industry: Insurance – Property and Casualty
Fortune 500 Rank: 4
Warren Buffett’s holding company Berkshire Hathaway owns a stunning number of household name companies, such as Heinz, Acme Brick Company, Dairy Queen, and Oriental Trading Company … and soon, we’re told, Duracell batteries. Berkshire Hathaway began in 1839 as the Valley Falls Company, and was a failing textiles company when Buffett bought it in 1962-4, and he sold the textiles section in 1985. Today, the GEICO insurance company forms a large part of the company’s revenue.
The company’s official website tells us virtually nothing about their activities, so we had to research further afield. For this reason, we will address just two companies per ethics category in our analysis.
Ethical sourcing and labour:
Berkshire Hathaway’s clothing businesses include the Union Underwear company Fruit of the Loom (FOTL). FOTL monitors their entire supply chain every year, or more frequently if non-compliances are found. They also do not source any cotton from Uzbekistan, an area known for child labour and forced slave labour. FOTL also helps prevent poverty by helping 67 Honduran workers per year achieve their high school certificate. They also donated more than 1,500 pairs of undies to homeless ladies in South Carolina in 2015.