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May 13, 2004
Honda, Toyota, Volkswagen, and Renault Lead Movement Toward Sustainable Mobility
by William Baue
Two Japanese carmakers rank highest on the environmental rating of Innovest's latest sector report,
while two European companies rank highest on the social rating.
Automobiles straddle the line between the competing human aspirations of mobility, or the ability
to travel where we will, and sustainability, or the responsibility to steward our environment for
future generations. The latest report from Innovest Strategic Value Advisors, a sustainability
research firm, assesses how well the global automotive sector reconciles this apparent paradox of
As with the majority of other industries Innovest has evaluated,
the report finds a positive correlation between sustainability performance and economic
performance. Companies with above-average EcoValue'21 (EV21) rankings, Innovest's environmental
rating system, outperformed below-average companies by 20 percentage points (or 2000 basis points)
over the past three years, from December 2000 to December 2003.
Outperformance was even
more dramatic on social issues. Companies with above-average Intangible Value Assessment (IVA)
rankings, Innovest's social and corporate governance rating system, outperformed below-average
companies by 22.8 percentage points (2280 basis points) over the same time period.
Japanese companies Honda (HMC) and Toyota (TM) topped the EV21 environmental
rankings with AAA grades on a scale ranging from AAA to CCC that mimics bond ratings.
"Japanese car manufacturers are the most aware of the importance of the sustainable mobility
issue . . . and Japanese companies are in general more advanced than Western competitors in terms
of sustainable product development, both in vehicle safety and energy-efficiency," said Eve
Morelli, an Innovest analyst who co-authored the report.
Honda has the most eco-efficient
vehicle fleet in the US, with the lowest CAFÉ (corporate average fuel economy) in the US for both
the car and light truck segments, according to its EV21 rating. It is also the best company in the
US in terms of vehicle exhausts, according to the report. On the recycling front, Honda's vehicles
are currently 85.8 percent recyclable, above the 85 percent target set in Japan for 2002 and in the
European Union for 2007. The company is also "working at developing the ultimate dismantling line
as a reverse assembly line," according to the EV21 rating.
Toyota is a world leader in
hybrid electric-gasoline (HEV) technology, which is considered the best alternative technology
until fuel cells mature, according to its EV21 rating. The Toyota Prius is the first mass-produced
HEV family car in the world, and Toyota has sold more HEV vehicles throughout the world (125,000)
than any other car company.
On the IVA social and corporate governance ratings, European
companies Volkswagen (VOW), based in Germany, and Renault
(RNO), based in
France, ranked highest with AAA and AA grades, respectively.
Innovest praises Volkswagen's
innovative corporate policies, such as its 1993 introduction of a four-day week, a flexible working
model that "allows the company to adopt to market fluctuations without having to recruit or dismiss
permanent staff." This innovative thinking also led to the introduction of a "Time Asset Bond
Scheme" that allows employees to save up long-term "time assets." Innovest's IVA rating attributes
this commitment to human capital to the fact that the State of Lower Saxony owns 13.7 percent of
the company's stock, so "the socio-economic interests of local stakeholders are well represented on
Innovest applauds Renault's supply chain management, noting that it is "one of
the few companies that has implemented a practical system to address sustainability issues
throughout its supply chain," according to the company's IVA rating. Renault collaborates with its
suppliers from the very early stages of product development, allowing the manufacturer and its
suppliers to create common language and common working methods, which results in more streamlined
processes. Renault nurtures long-term, mutually beneficial relationships with suppliers, who can
achieve preferred status and in exchange for priority access to new innovations.
of the top-ranking companies in both environmental and social performance are members of the Sustainable Mobility Project of the World
Business Council for Sustainable Development (WBCSD). This project
promotes more efficient, more equitable, and less environmentally and socially disruptive mobility
systems. However, membership in the project does not necessarily correlate to high Innovest
rankings. For example, Ford (F) scored below average on both the
EV21 and the IVA ratings, with a BBB in each.
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