For decades, business leaders followed Milton Friedman’s simple mantra: make profits so long as you stay within the rules. By the eve of the pandemic that was changing. Companies across the world lined up behind a new type of capitalism that valued purpose and recognised the cost a profits-above-all approach had on employees, customers and the environment.
Three years and six million Covid deaths later, the world feels a bleaker place. Governments are failing to bring climate change under control; the world’s great powers are divided on how to respond to Russia’s invasion of Ukraine; political polarisation is rampant. The UK economy is sliding into a recession, while households face higher costs unmatched by wage increases.
Businesses still exist to create wealth, but nearly three quarters of consumers now want companies to take a stand on issues such as sustainability and fair employment practice. In a time of climate change and war, a company is intrinsically political too.
In an era of successive crises, business leaders must balance the competing demands of shareholders, consumers and governments. Responsible business leaders must play a part in building a society that is more resilient to shocks.
Tortoise Media launched the Responsibility100 Index in 2019, the first rating to track how FTSE 100 companies’ commitments on social, environmental and ethical issues match their actions.
The index
- uses 200 metrics from a range of public sources
- compares companies’ commitments – their “talk” scores – with their performance across a wide range of areas from poverty to climate change, which we record as “walk” scores.
- The goal is to encourage a data-driven race to the top and keep companies honest by rewarding transparency.
For this update, Tortoise has added 12 new indicators, including the CEO to median worker pay ratio and how much of CEO pay is linked to ESG targets. More firms are engaging with the index; nearly 60 sent feedback on our initial findings before publication.
Companies have changed too. In 2019, roughly one in 10 major companies bought all their power from renewable sources. That has now risen to one in seven. In terms of gender representation, in 2019 there were 334 female directors on FTSE 100 boards. By 2022 that figure had risen to 414 – but 47 FTSE 100 companies still have no female senior executives at all. There has been a fall in the number of senior managers from ethnic minorities.
Unilever was the top-ranked company when the index first launched and it retakes the top spot this year, up from third place. It delivered high performance across climate and social measures, with almost 100 per cent of waste recycled, comprehensive emissions reporting and a low gender pay gap.
Airtel Africa, the telecoms service provider, is a new entry this year at the bottom of the index – it was penalised in the Tortoise rankings because of a scarcity of data by which to measure its performance. Airtel Africa said it had updated its policies to “create a workplace that is more attractive to women” over the past 12 months. Their inaugural Sustainability Report was published on 27 October, after research for the R100 Index had been completed.
Other findings include:
- Less than 10 per cent of emissions generated by FTSE 100 companies are covered by science-based emissions targets, which guide companies to reduce emissions in line with avoiding the worst impacts of climate change. If everyone decarbonised as slowly as the FTSE 100 plans to, the planet would warm by at least 2.8 degrees, dramatically overshooting the Paris limit of 1.5.
- FTSE 100 chief executives’ pay soared by an average of 31 per cent last year.
- But 16 companies, including big employers like Tesco, Sainsbury’s, Compass Group and Primark owner Associated British Foods, have a majority of employees who earn less than £25,200, considered the minimum acceptable standard of living.
- Perhaps unsurprisingly, employee satisfaction fell at more than half of reporting companies.
The past 12 months have revealed a gap in what the index is able to measure. After Putin’s invasion of Ukraine in February, more than 600 companies publicly announced they were voluntarily curtailing or halting operations in Russia to bolster governments’ efforts to punish war with isolation. But six of Britain’s biggest companies, including some of the Responsibility100’s top performers, still operate in the country despite postponing new investments, developments and marketing initiatives.
AstraZeneca and Unilever are among those to have stayed in Russia, justifying their position in terms of safeguarding their employees and preventing the seizure of their assets by the Russian state.
Traditional ESG analysis does not account for companies’ political influence, which means measuring performance in this area remains a challenge. It’s a question we’ll look to answer next year.
The interactive data visualisation on the index webpage was amended on 22 November to make clear that CRH pays its CEO 289 times the UK worker’s wage. The company declined to clarify whether the global ratio was higher or lower.
To see the full rankings and analysis, visit The Responsibility100 Index site here.