For the third year in a row, Report on Business magazine has joined with Jantzi Research Inc. to rank companies that operate in Canada on the basis of their corporate social responsibility performance. Jantzi is one of Canada's leading authorities on social investment and CSR issues. The firm also provides a full range of research and consulting services to institutional clients and financial professionals.
This year, we focus on just five industries-big retail chains, shoe and clothing manufacturers and stores, food producers, fast food chains, and food and drug stores-rather than on a broad range of sectors, as we've done in previous years. Our aim is to provide greater detail on the industries we examine, and each year we will profile five different sectors. This year's companies were selected based on their size and their importance to investors and consumers. Some companies, such as Mountain Equipment Co-op, are included because of their reputation as CSR leaders.
Jantzi starts by compiling information from public documents, government and NGO sources, media reports and correspondence with key stakeholders. Each company also receives a questionnaire about its CSR practices.
Some well-known companies are not included-for example, Burger King and the Overwaitea Foods supermarket chain. Without a company's co-operation, there isn't enough information in the public domain to fairly compare it with its peers. Few private companies are ranked because most are unwilling to disclose their social and environmental data.
In the case of international companies whose Canadian operations are closely linked to their corporate parents, our evaluation is based on the parent's performance. For these companies, Jantzi relies on information provided by its partners in the SiRi Network, a group of 11 socially responsible investment research firms in Europe, North America and Australia.
Companies are evaluated and scored in six key areas: community and society, corporate governance, impact on customers, treatment of employees, the environment and human rights. Jantzi translates the combined scores into a letter grade that is meant to convey the overall impact of a company's social and environmental practices on employees, consumers, investors and communities, as well as the company's success in tackling ongoing CSR issues. The scoring criteria are weighted differently for each sector, but the letter grades give some indication of a company's performance relative to those in other sectors. Companies in the same sector with the same letter grade are ranked by their underlying numeric score.
1. Mountain Equipment Co-op B+ (Vancouver) Revenue: $178.4 million Scores well above its peer group across the board, and its co-operative membership structure encourages employee and customer involvement. Also the only Canadian retailer that is a participant in the Fair Labor Association, a non-profit coalition that works to improve labour standards and working conditions worldwide. Bragging rights: MEC is committed to generating zero waste in its operations. In 2004, it diverted about 76% of waste from its stores that would otherwise have gone to landfill.
2. Ikea B (Sweden) Revenue: 14.8 billion euros The furniture giant aims to reduce greenhouse gas emissions, seeks alternatives to potentially harmful substances and promotes sustainable forestry. Like other big-box retailers, however, Ikea has faced significant community opposition to traffic near its stores. Bragging rights: Family-friendly Ikea offers progressive work-life balance incentives for working mothers and child care for customers.
3. Hudson's Bay Co. B- (Toronto) Revenue: $7.1 billion HBC's chains include the Bay, Zellers, Home Outfitters, Fields and Designer Depot. HBC ranks high for employee benefits and has made efforts at ethical sourcing, but its recent endorsement of the China Code of Conduct has been criticized. Bragging rights: HBC has cut energy use by pumping in water from Lake Ontario to cool its Toronto head office and flagship store.
4. The Home Depot C+ (U.S.) Revenue: $73.1 billion (U.S.) Home Depot has innovative policies and programs to manage product safety and to treat customers fairly. But it has faced several workforce discrimination lawsuits in the U.S. Executive pay is also high--U.S. CEO Robert Nardelli's 2004 compensation of $30.5 million (U.S.) was the highest among the retailers we surveyed. Bragging rights: Home Depot's community initiatives, particularly projects to build housing for the underprivileged, are supported by employee volunteer programs. In Canada, the chain's Team Depot donated more than 400,000 hours in 2003.
5. Sears Canada C (Toronto) Revenue: $6.2 billion While three of 10 directors are women, the company's employee programs and benefits pale in comparison to other large retailers. Bragging rights: Its charitable donations are the most generous among this group--$4 million in 2004, or 2.1% of pretax profits.
6. Canadian Tire C- (Toronto) Revenue: $7.2 billion Corporate employees at Canadian Tire--whose banners include Mark's Work Wearhouse and PartSource--enjoy top-level programs and benefits. But dealer outlets employ almost 80% of Canadian Tire's staff, and there are no minimum standards for benefits or workplace conditions in their stores. Bragging rights: Four of 16 directors are women, as are four of the 15 senior officers.
7. Costco D+ (U.S.) Revenue: $52.9 billion (U.S.) The company is a laggard in transparency and reporting on community initiatives, employee diversity and the environment. Bragging rights: Costco was included on American Rights at Work's 2005 Labor Day List, based on its positive labour relations and relatively high wages.
8. Wal-Mart D (U.S.) Revenue: $285.2 billion (U.S.) Wal-Mart has a strong charitable donations program and is top-ranked for its workforce diversity policies. But it rates poorly on diversity performance and currently faces a U.S. class-action lawsuit filed by 1.6 million women alleging wage discrimination. Despite improved supplier programs, Wal-Mart continues to be embroiled in controversies. Last December, for instance, Radio-Canada reporters discovered children under 14 working for a Wal-Mart supplier in Bangladesh, prompting Wal-Mart to cut and run. Bragging rights: Wal-Mart actively recruits at colleges and universities with diverse student populations. The company staged more than 50 diversity career fairs in 2004.
9. Best Buy D (U.S.) Revenue: $27.4 billion (U.S.) Best Buy--which also runs Future Shop, Geek Squad and Magnolia Audio Video--has, since 2004, faced lawsuits alleging deceptive business practices in Ohio, New Jersey and Wisconsin. It ranks poorly for management practices and fair treatment of customers. Disclosure on human rights and the environment is rare. Bragging rights: Scores high for community relations, with annual charitable donations averaging 1.5% of pretax profits in recent years.
10. Rona D- (Boucherville, Que.) Revenue: $3.7 billion Building products have a high level of environmental exposure, so Rona's lack of programs or reporting in this area is disturbing. The company reports no significant initiatives on sustainable forestry standards, waste management or energy efficiency. Bragging rights: About 35% of Rona's employees are unionized, the highest percentage in its peer group.
11. The Forzani Group E+ (Calgary) Revenue: $985 million The company that owns Sport Chek, Coast Mountain Sports, Sport Mart, National Sports, Sports Experts, Intersport, Econosports, RnR, Atmosphere, Tech Shop and Nevada Bob's does not report any policies or programs that address the treatment of customers, suppliers or the environment.
1. adidas-Salomon A- (Germany) Revenue: 6.5 billion euros Adidas-Salomon acquired Reebok in January. Both companies have been cited for their positive environmental initiatives and for requiring suppliers to comply with certain standards. In 2005, both firms were accredited by the Fair Labor Association. Reebok had earlier been certified for its footwear. Bragging rights: Adidas-Salomon encourages factory owners in Asia to reduce dangerous chemical compounds used in manufacturing.
2. Nike B+ (U.S.) Revenue: $13.7 billion (U.S.) The company continues its tradition of charitable contributions that focus on underprivileged youth and females in developing countries. Donations totalled about 2% of its worldwide pretax profits in the 2005 fiscal year. Nike also matches employee contributions. Bragging rights: Nike shocked activists in 2005 when it complied with calls for factory disclosure by listing its more than 7,000 suppliers.
3. Gap B (U.S.) Revenue: $16.3 billion (U.S.) Gap has a solid record of charitable giving in Canada and the U.S. The company has also committed to reducing greenhouse gas emissions at U.S. stores, distribution centres and offices by 11% between 2003 and 2008. Its annual social responsibility report details conditions at more than 99% of its suppliers' factories worldwide. Bragging rights: 43% of the Gap's senior executives are female, as are 23% of its directors.
4. Puma B- (Germany) Revenue: 2 billion euros Puma is one of 19 companies in the Fair Labor Association, although the firm is not accredited. Last year, Puma vowed to phase out hazardous chemicals in several products following a campaign by Greenpeace. Bragging rights: The only firm in the group that issues an annual sustainability report detailed enough to meet all the guidelines of the U.N.-backed Global Reporting Initiative.
5. Liz Claiborne C+ (U.S.) Revenue: $4.6 billion (U.S.) Liz Claiborne has strong employee diversity and work-life balance programs. However, its environmental score lags some of its peers. Bragging rights: Not surprisingly, about 33% of Liz Claiborne's senior managers and 30% of its directors are women.
6. Gildan Activewear C (Montreal) Revenue: $533 million (U.S.) Gildan has improved its supply-chain labour policies and practices recently. However, there are no women among the company's senior officers.
7. Phillips Van-Heusen D (U.S.) Revenue: $1.6 billion (U.S.) Phillips-Van Heusen has a strong employee diversity policy, but there is little evidence of any corresponding systems, programs or targets to support it. CSR reporting is limited, and the company does not detail the charitable activities of the Phillips-Van Heusen Foundation.
8. VF D- (U.S.) Revenue: $6 billion (U.S.) VF sells more jeans worldwide than any other company; its brands include Nautica, Lee, Wrangler, Tommy Hilfiger and North Face. It has a labour policy for suppliers. In 2005, however, animal rights activists charged that trim for some jeans came from Chinese "fur farms" where animals were reportedly beaten and skinned alive.
9. Le Château D- (Montreal) Revenue: $241 million Le Château has a policy prohibiting the use of fur in its products, and this extends to its suppliers. The company's vendor program makes weak commitments to labour rights and appears to have no mechanisms to ensure compliance. Bragging rights: Has a female president; as well, 29% of its directors and 50% of its senior executives are women.
10. Reitmans E (Montreal) Revenue: $922 million Corporate governance proponents don't like Reitmans' dual-class share structure, which allows the Reitman family to maintain voting control with only a minority equity position. None of the company's directors is female, although 42% of its senior officers are women. Reitmans has human rights policies for workers at its suppliers' factories, but does not appear to have any systems in place to ensure adherence.
Jones Apparel Group E- (U.S.)
Revenue: $4.6 billion (U.S.) Very little CSR reporting. The company does not report having any policies, programs or targets related to charitable giving, employee diversity, the environment or human rights. It has policies on supplier labour standards, but does not indicate that it has any monitoring or enforcement mechanisms.
Polo F (U.S.) Revenue: $3.4 billion (U.S.) Scant reporting on CSR. Polo provides no indication that it has policies to address workers' rights at supplier factors, or any related management systems.
1. Starbucks B- (U.S.) Revenue: $5.3 billion (U.S.) Provides extensive CSR reporting, right down to CO2 emissions. Starbucks also donates more than 1.7% of pretax profits to charity. But an overwhelming majority of Starbucks coffee is still not certified fair-trade, provoking accusations that some of the company's marketing on the issue amounts to "greenwashing." Bragging rights: Starbucks' 2004 CSR report was independently verified and set performance objectives in areas such as the environment and selling organic and fair-trade coffee.
2. McDonald's C- (U.S.) Revenue: $20.5 billion (U.S.) Decent marks for policies and reporting, particularly animal welfare guidelines and nutritional information. Marketing to children remains a concern, underscored by its partnership with the Walt Disney Co. McDonald's has also been criticized recently for failing to ensure fair wages for tomato pickers in Florida. Bragging rights: Progressive initiatives, such as serving fair-trade coffee in the U.S. northeast, show that McDonald's can be sensitive to consumer demand.
3. Darden Restaurants D (U.S.) Revenue: $5.3 billion (U.S.) Darden's chains include Red Lobster and Olive Garden. It scores points for healthy items at its new Seasons 52 grill and wine bar chain. But Darden has struggled with industry issues such as toxic metals in seafood and threats of a U.S. boycott of Canadian seafood imports because of the seal hunt. Darden contributes money to environmental research, but has zero reporting on the environmental impact of its own operations. Bragging rights: Darden's employee benefits are among the best in the industry, including a retirement savings plan, health plan, financial aid for education and a commitment to work-life balance.
4. Denny's D- (U.S.) Revenue: $960 million (U.S.) Has worked hard on employee diversity following a major discrimination lawsuit in the U.S. in the 1990s. About 45% of Denny's U.S. restaurants are now run by franchisees belonging to minority groups. While Denny's tries to promote suppliers from minority groups, accusations of discrimination persist. Bragging rights: One-third of Denny¹s directors and more than 40% of senior executives are women, the largest percentages in this industry.
5. Wendy's E- (U.S.) Revenue: $11.6 billion (U.S.) Wendy's, which also owns Tim Hortons, continues its mediocre performance. Strong animal welfare policies are offset by a lack of environmental policies and limited accountability among suppliers. Tim Hortons does not sell any fair-trade or organic coffee, and while it says it has progressive and responsible supplier policies, it has not disclosed any details.
6. Yum! Brands E (U.S.) Revenue: $9 billion (U.S.) The owner of five major chains--KFC, Pizza Hut, Taco Bell, A&W and Long John Silver's--has recently generated animal rights controversy. Several members of a special animal welfare committee of third-party experts quit because they believed their opinions were being ignored. Last winter, animal rights activists, including celebrity Pamela Anderson, urged consumers to boycott KFC because of suppliers' mistreatment of chickens.
7. Triarc Cos. E- (U.S.) Revenue: $328.6 million (U.S.) Owner of Arby' restaurants, Triarc scores poorly because of a lack of disclosure in all areas, especially corporate governance, employee diversity and the environment. The only positive note is Arby's introduction of "natural chicken" (no hormones, antibiotics or artificial ingredients) in some markets.
Domino's E- (U.S.) Revenue: $1.4 billion (U.S.) Domino's has not done enough to protect its pizza delivery drivers from risks such as holdups and carjackings. In the U.S., driver sales delivery is the fifth most dangerous occupation, and two Domino's drivers have been murdered on the job in recent years. This company has the furthest to go in ensuring a safe working environment for employees.
1. Unilever B (Netherlands) Revenue: 40.4 billion euros The consumer-products giant's food brands include Becel, Bertolli and Lipton. Unilever is a leader in CSR reporting and assessing the environmental impact of its products over their life cycle. Its margarine and vegetable oil products plant in Rexdale, Ont., participates in the Canadian Greenhouse Gas Challenge Registry, a voluntary emissions reduction program. Bragging rights: Unilever has several green sourcing initiatives, including a sustainable fisheries program in co-operation with the World Wildlife Fund.
2. General Mills C+ (U.S.) Revenue: $11.2 billion (U.S.) Has announced commitments to workplace diversity and to reducing or eliminating pesticide residues in food. But the company's codes of conduct for overseas operations and suppliers merely require compliance with local labour laws. Community and CSR reports are short on detail. Bragging rights: General Mills was named a "pesticide environmental stewardship program champion" by the U.S. Environmental Protection Agency in 2005.
3. Heinz C (U.S.) Revenue: $8.9 billion (U.S.) Heinz's employee diversity record is above average--programs include specific targets and mentorship initiatives, and the company has an above-average number of women in senior management and on the board of directors. But the company's labour codes for its own global operations and its suppliers generally only require compliance with local laws.
4. Campbell Soup C (U.S.) Revenue: $7.5 billion (U.S.) Employee diversity programs and performance are better than the industry average, and managers are required to meet yearly diversity objectives. But Campbell has no human rights policy for suppliers. Bragging rights: Voluntary employee wellness programs include on-site exercise classes, meditation rooms and in-house massage therapy.
5. Kellogg's C- (U.S.) Revenue: $9.6 billion (U.S.) Charitable initiatives include donations to non-profit organizations where employees or retirees volunteer. Kellogg¹s loses marks, however, for insufficient environmental reporting--apart from a brief outline of initiatives, the company discloses no details on programs or performance. Bragging rights: Michigan-based Kellogg¹s has used recycled paper to make cartons since it was founded in 1906.
6. Maple Leaf Foods D (Toronto) Revenue: $6.4 billion Scores well for corporate governance, with a strong contingent of independent directors and relatively modest executive pay. But Maple Leaf's environmental record is poor, with more than 30 convictions and over $1 million in fines in the past five years. Bragging rights: Receives marks for its initiative to create bio-diesel fuel from leftover animal parts.
7. Saputo D (Montreal) Revenue: $3.9 billion Performance in corporate governance is above average. But Saputo is one of the few companies in this sector without a formal environmental management system. The company provides little or no information on its environmental or charitable activities.
8. Sara Lee D- (U.S.) Revenue: $19.2 billion (U.S.) With the exception of business standards for its overseas operations and suppliers, Sara Lee is below average in both its CSR reporting and performance.
9. ConAgra Foods E+ (U.S.) Revenue: $14.6 billion (U.S.) ConAgra--whose brands include Chef Boyardee and Healthy Choice--produces a decent report on employee diversity, but otherwise its CSR report is extremely weak. Health and safety performance is below average, with several workplace deaths in its U.S. operations over the past five years.
10. Tyson Foods F (U.S.) Revenue: $26 billion (U.S.) Arkansas-based Tyson is the world' largest processor of chicken, beef and pork. The company' labour relations and workplace health-and-safety performance are very weak. It recently settled a bitter six-week strike at its Lakeside Packers plant in Alberta.
FOOD AND DRUG
1. Sobeys C- (Stellarton, N.S.) Revenue: $11 billion Consistently solid in most CSR areas, Sobeys rates highly for corporate governance and health and safety programs. But the company suffers from a high number of labour problems relative to the number of union contracts in its stores, including several strikes and threatened work stoppages in Saskatchewan, Ontario and Nova Scotia over the past five years. Bragging rights: One of the few companies in this sector to disclose its annual corporate charitable donations.
2. Loblaw C- (Toronto) Revenue: $26.2 billion An industry leader in environmental management and health and safety, Loblaw also rates well in consumer responsiveness due to lines such as President's Choice Organics and hydrogenated-oil-free PC Blue Menu. Loblaw is the most heavily unionized company in the industry and has better overall labour relations than its peers, despite contentious "wage-tiering" issues. Past consumer-related fines, including penalties for the false or misleading labelling of meat products, also drag down Loblaw's score. Bragging rights: Loblaw is now the largest retailer and distributor of organic food in Canada.
3. Jean Coutu Group D (Longeueil, Que.)
Revenue: $3 billion (U.S.) Employee programs and benefits, and the pharmacy chain's environmental initiatives, get an average rating compared with peers. The group's governance score worsened last year when founder and chairman Jean Coutu reassumed the CEO's job.
4. Van Houtte D (Montreal) Revenue: $328 million The coffee chain scores high for its employee relations, and it has gone further than others in this sector in addressing some supply-chain issues. But Van Houtte¹s reporting on environmental, health and safety, and employment equity programs is poor.
5. Metro D (Montreal) Revenue: $6 billion Metro loses marks in the corporate governance category because of its dual-class share structure and the lack of an anonymous mechanism for employees to report suspected breaches of its code of business conduct.
6. Safeway D- (U.S.) Revenue: $35.8 billion (U.S.) Safeway leads the industry in public reporting on CSR issues, despite a weak environmental report. Employee relations could be better--some U.S. disputes have been particularly acrimonious. Bragging rights: As part of a U.S. federal "Green Power Partner" initiative, Safeway will buy 78 million kilowatt-hours of wind power, enough to supply its 270 gas stations and 15 California stores.
7. Shoppers Drug Mart E+ (Toronto)
Revenue: $4.7 billion The chain's scores for disclosure and charitable donations are above average, but Shoppers is a mediocre performer in other areas. Eighteen associate stores in B.C. have been in mediation with the company since April, 2001, when their contract expired. Shoppers' environmental, health and safety, and employment equity programs remain relatively weak.
8 . Couche-Tard E- (Laval, Que.) Revenue: $5.8 billion The convenience store chain is the industry laggard for CSR disclosure. Its corporate governance performance is weak, and the company's environmental, health and safety, and employment equity programs are poor to non-existent.