Assessments of the environmental performance of global companies need to account for company size

Abstract

While the awareness of the corporate world toward sustainability is growing, how to assess corporate environmental performance objectively and efficiently remains an open question. Here we estimate the relationship between company size and four environmental indicators to understand the environmental performance of nearly 6500 companies, building on the concept of allometric scaling and using Thomson Reuters EIKON data for the year 2018. We highlight that carbon dioxide emissions, energy use, water and waste production scale with the size according to a power law. This can be used as a benchmark to assess unambiguously a company’s environmental performance. We find that the adopted Environmental, Social & Governance rating is uncorrelated with the environmental performance. Our results suggest that a fair and effective environmental policy should consider the nature of the scaling relationship. Scaling laws suggest the existence of a nexus between an underlying network and corporate metabolism, whose understanding would help in discerning the determinants of environmental impacts.

The environmental impact of companies from carbon dioxide emissions, energy use, water withdrawal and waste production increases more slowly than the size of the company, according to an analysis of 6500 companies’ data for 2018.