Benchmarking Against Chemical Companies Judged to have good Sustainability Management

The Dow Jones Sustainability Indices (DJSIs) include public companies that are evaluated to have good sustainability performance (management).  A company’s economic, environmental and social performance is evaluated.  You can read more about the DJSIs by clicking here.   Details on what is evaluated, with respect to sustainability, and how that evaluation is conducted can be read by clicking here.  From this evaluation, companies are selected to be placed on a DJSI.  You can read more about the actual indices by clicking here.

The DJSIs include companies that are evaluated to have the best sustainability management (practices) within their industrial sector. Chemical companies that are found on the DJSIs include:

Akzo Nobel NV	Koninklijke DSM NV
BASF SE	LANXESS AG
Braskem SA	LG Chem Ltd
Clariant AG	Linde AG
DowDuPont Inc.	Mitsubishi Chemical Holdings
Ecolab Inc	Novozymes A/S
Evonik Industries AG	Praxair Inc
Givaudan SA	PTT Global Chemical PCL
Indorama Ventures PCL	Solvay SA

Of these 18 chemical companies, I chose 12 to go to their latest annual reports and to see if I could determine how a company’s annual report might be used to evaluate how that company is doing with respect to sustainability practices.  The 12 companies’ annual reports I analyzed are:

Air Liquide SA	Koninklijke DSM NV
Akzo Nobel NV	LANXESS AG
BASF SE	Mitsubishi Chemical Holdings
Clariant AG	Novozymes A/S
Evonik Industries AG	Praxair Inc
Indorama Ventures PCL	Solvay SA

What I settled on in using annual reports to determine a company’s propensity for sustainability practices is what I would call textual, or content, analysis.  My textual (content) analysis was conducted by searching the annual report (in PDF file format) using certain words, which I judge to be indicative of the interest of the company in what might be represented by the word.   (PDF files can be easily and quickly searched on a word, which gives the number of appearances of that word in the file.)  The number of times the word appears in the annual report, relative to other companies’ annual reports, I am thinking, represents the relative degree of interest that company might have in the sustainability practices represented by that word.

As indicated in the first paragraph above, economic, environmental, and social performance is used to evaluate sustainability performance (with respect to the DJSIs’ requirements).

For environmental sustainability performance, searching on how many times such words as greenhouse, energy, water, and waste appear in the annual report might represent the company’s interest in environmental sustainability.  For the 12 companies in the table above, I found the following averages for the appearance of these words in their annual reports:  greenhouse – 24; energy – 105; water – 77; and waste – 35.

Social considerations as they relate to sustainability include, it seems to me, a company’s emphasis on employees.  In this regard, I searched on the following words (with the average times the word appears):  code of conduct – 15; human rights – 17; training – 36; and occupational – 13.

Another aspect of social sustainability performance, I believe, is a company’s approach to diversity.  Searching on the word diversity found an average appearance of 21 for the companies.   The average number of women on the companies’ board of directors (or supervisory board) is 3.

The number of times the word social appears in an annual report could be an indication of the emphasis a company places on social (society or social welfare) sustainability practices.  The word social appears on average 43 times for the 12 companies.   (Broadly, good sustainability management would consider a company’s impact of society (community) welfare.)

And finally, for economic management (performance) related to sustainability, the following words were searched (with averages):  risk – 217; customer – 144; and brand – 14.  In addition, certain economic metrics would seem to me to be good indicators of promoting sustainability.  These include: revenues/employees – average for the 12 companies, $446,045 per employee; return on investment in an employee – 200% average; and return on equity – 15% (with equity being a proxy for how much is put back into a company, enhancing its sustainability).

The averages provided above might serve as good benchmark metrics in determining how a company is doing with respect to sustainability against companies judged to be doing well.