The Ethisphere Institute, a New York City think tank, has just announced its sixth annual list of the World’s Most Ethical Companies. The selection, open to every company in every industry around the globe, gives its winners an opportunity to trumpet their do-gooding ways. It is not a ranking, so they are all equally winners.
Nearly 5,000 companies were nominated–or nominated themselves–to be considered this year. The record-high number of nominations and applications demonstrates companies’ desire to be acknowledged for high ethical standards. The 2012 list, which includes 145 organizations, is the longest since the award’s inception in 2007.
“There are more companies on the list this year as the process has become even more competitive, and more and more companies are realizing how ethics can be an important competitive advantage in the global economy,” says Alex Brigham, executive director of the Ethisphere Institute. “Companies that are ethical tend to realize that doing the right thing is actually good for business—and they drive and encourage a culture that emphasizes that.”
Ethisphere reviewed nominations from companies in more than 100 countries and 36 industries. Ethisphere’s proprietary rating system, which it calls the Ethics Quotient, is based on a series of multiple-choice questions in a survey that is designed to capture a company’s performance in an objective and standardized way. The winnowing process includes reviewing codes of ethics and litigation and regulatory infraction histories; evaluating investment in innovation and sustainable business practices; looking at activities designed to improve corporate citizenship; and studying nominations from senior executives, industry peers, suppliers and customers.
“Based on the information in that survey, Ethisphere verifies responses before a final score is provided,” Brigham says. “Some of the information is easily verified and publicly available, and other times we request that companies send us non-public information to validate responses. This could include training policies, whistle-blower programs, internal tone-from-the-top communications and so forth.”
Once the pool is culled to a few hundred companies, Ethisphere cross-checks it against governance lists from organizations including Governance Metrics International and FTSE for Good. Any company that has had significant legal trouble over the past five years is dropped. Companies that focus on alcohol, tobacco or firearms also get the boot.
The 145 companies that made the final cut this year include first-time recipients Hasbro, Petco, Realogy and Henry Schein, Inc., and 33 other newcomers. Eighteen companies from last year disappeared, because of litigation or ethics violations, or increased competition from within their industries. Twenty-three companies have been recognized as a WME company for all six years, and 108 more have made the list at least twice.
This year’s list also includes more global companies, with 43 winners from outside of the U.S., including seven from the U.K. and six from Japan. “Much of the growth in the list comes from new foreign markets, as well as private companies,” Brigham says. “The Ethisphere Institute continues to see huge interest and demand overseas for this sort of measurement and we will begin to regionalize scores to accommodate such.”
Why is there so much interest? Brigham says that recognition on the WME list has proven to be beneficial in various ways for the winners. “Many companies use the recognition in their recruitment materials, as studies show that more and more employees want to work for an organization that aligns with their own personal value, and are more loyal to such organizations,” he says. “In addition, to be a competitive advantage in workforce recruitment, many companies use the designation in their marketing materials to attract customers, particularly in new market entries where the company may not be yet well-known.”
The World’s Most Ethical Companies: