Steel recycler beats wind firm to become world's most sustainable company

© Reuters. FILE PHOTO: A general view shows Davos Congress Centre, the venue of the World Economic Forum (WEF) 2023, in the Alpine resort of Davos, Switzerland, January 14, 2023. REUTERS/Arnd Wiegmann/File Photo

By Virginia Furness and Simon Jessop

LONDON (Reuters) - As boardroom bosses and billionaires mingle in the snowy streets of Davos, corporate sustainability is a key topic of discussion. Yet which company is the world's most sustainable?

Rather surprisingly, research firm Corporate Knights says the answer is Schnitzer Steel Industries (NASDAQ:SCHN), a U.S. scrap steel recycler, which has knocked wind turbine maker Vestas Wind off the top spot.

Portland, Oregon-based Schnitzer Steel reported improvements in energy, carbon, water and waste productivity in 2021 to lead the 2023 Global 100, a list of companies which Corporate Knights deems to do the most good for people and planet.

"Schnitzer Steel is the first steel company to top the Global 100," said Corporate Knights CEO Toby Heaps.

"If one of the world's dirtiest sectors can produce the most sustainable company in the world, then there is no excuse for any company in any sector not to step up."

Companies are assessed on 25 indicators including sustainable revenue and investment, carbon productivity, racial and gender diversity and must have sustainable solutions at the heart of their business models and invest to reduce their carbon footprint.

Schnitzer Steel bagged the top spot with a 74% increase in energy productivity, 69% increase in water productivity and 55% increase in carbon productivity in 2021 - with productivity meaning using more efficiently when measured against revenue. It also reported 100% of its $2.8 billion revenues and all of its $0.1 billion investment went to sustainable projects in 2021, though the report did not detail the projects.

Schnitzer Steel did not respond to a request for comment.

Corporate Knights' Global 100 is used by the likes of Goldman Sachs (NYSE:GS) to construct private wealth portfolios and will serve as the benchmark for a new index fund and exchange traded fund from Canada's Mackenzie Investments this year.

Though the index does not factor profitability, the benchmark has outperformed the MSCI All Country World Index (ACWI) on an annual basis for seven of the past 11 years.

In 2022, the Global 100 beat the ACWI on an annual returns basis by 2.8% though both were significantly down on 2021 at -15.6% and -18.4% respectively. Between 2013 and 2022, the Global 100 returned 145.1% compared to 115.4% for the MSCI ACWI.

"The sustainability outperformance story is resilient even in a period of oil stock inflation," said Heaps.

Graphic: World's most sustainable companies outperform https://www.reuters.com/graphics/DAVOS-MEETING/SUSTAINABLE-COMPANIES/gkplwxbonvb/chart.png

Advocates of sustainable investing say that picking companies with better environmental, social and governance (ESG) scores can deliver higher returns. But the strategy has faced pushback from U.S. politicians and policymakers who claim ESG-investing runs counter to fiduciary duty.

Second-placed Vestas' head of sustainability Lisa Ekstrand said the ranking was valuable for comparing companies in different industries on the same transparent scale, which is "notoriously difficult."

Vestas uses the ranking to identify improvement areas, she said.