Can an Oil & Gas Company Be Greener Than a Clean Energy Firm?
A recent tweet by Elon Musk in which he expressed his dismay at S&P 500’s inclusion of ExxonMobil in the top 10 in their ESG index and the total omission of his own Tesla, marked a high-profile attack on the way ESG ratings are formed.
While we cannot support Mr Musk’s strong words against ESG as a whole, we acknowledge that ESG ratings have shortcomings that lead to potential inaccuracies in the rankings, especially with regards to what metrics are being reported and, more importantly, how.
In our Green Public Procurement Contracts Data Feed, we felt that looking at total green tender awards count in isolation would not provide the full picture. Therefore, we developed and introduced the Green Company Supplement.
The Supplement is a database of companies - both publicly-listed and private - that shows the relative weight of green contract awards as a share of all public procurement activity for these companies.
The Green Company Supplement’s significance lies in that it shows which companies choose to tender predominantly for green public contracts, as opposed to companies that may win a lot of green contracts, which, however, represent a fairly small percentage of their total contract awards count.
If we extend the concept to wider ESG reporting, we believe that the relative weight of a company’s environmentally-friendly activities could play a major role towards making ESG rankings more objective.
Reports about company activities tend to speak in absolute terms, instead of factoring in their relativity to other aspects of the business. For example, a business may have achieved brilliant results with regards to water use reduction, but if it consumes lots of electricity, we cannot say that its use of resources is particularly efficient, even if it tries to highlight its reduced use of water as much as possible in order to appear more environmentally-friendly.
Our Green Company Supplement is one tool that can alleviate the issue by displaying an objective ranking of the companies with the highest percentage of green public contracts won as a share of their total procurement activity. To learn more about the Supplement and our green data, get in touch here.