08/03/2011 04:39 pm ET Updated Oct 03, 2011

Unraveling the Mystery of 'Green': Things to Consider When Assessing Environmental Rating Systems

Anyone who has surfed the Internet looking for third-party environmental evaluations of their favorite (or least favorite) corporations has probably found a plethora of conflicting and often confusing results. My role as Founder and CEO of Greenopia has given me a unique vantage point into the various complexities of creating such sustainability scales. For those who do not know, one of Greenopia's most popular features is its various corporate guides where it rates the environmental performance of some of the biggest brand names in close to 20 industries.

When it comes to rating environmental performance, one might think it would be relatively straightforward to figure out if Company A is more ecologically efficient than Company B. But the truth is that there are many ways to assess green initiatives across an industry that are equally valid. Having said this, there are still many groups out there, some of which are very well known, that do a poor job evaluating the greenness of major corporations accurately.

One of the most complicated issues when trying to assess overall environmental performance is choosing the green criteria on which you focus. You have to ask yourself if you want to focus on emissions, water, toxicity, waste, energy and/or social concerns. It would be great if they all tended to line up, but this is rarely the case in practice. What you typically find is that one firm may be the most efficient in emissions, while another may excel in water or waste. Or a firm might have incredible ethical initiatives, but its environmental footprint is through the roof.

We feel the best approach is to do a balanced assessment where you consider as many indicators as information availability allows. There can also be cases in some industries where one or two issues are clearly head and shoulders above the rest in terms of magnitude/importance.

This concept, though, has been very difficult for many groups to navigate. There are countless studies that I have seen that focus on only one hyper-specific area of environmental impact and make no considerations for other impacts. Such a narrow focus can be problematic and, at times, even misleading.

Hypothetically, let's say that a company is pressured to modify part of their product because of a material that has a 1 in a 100 million chance of having some negative impact. The alternative material suggested by the external party can bring the hazard level down to 1 in a billion. At first glance it seems that the second material is better, right? But, what if the second material requires more resources and energy to manufacture, transport, etc.? If the firm sources dirty energy, the health effects from additional resource usage and energy needs may have a negative affect that is bigger than what was saved from the initial material substitution. And although this example is abstract, you'd be surprised just how common tradeoffs such as these occur in various production cycles.

Using a lifecycle approach to determine environmental impact almost never generates a simple solution. Anyone who tells you that it does is probably leaving out a significant part of the story.

One other issue that we see many groups failing to do is to normalize the environmental data against a company's production or revenue to get a sense of overall efficiency. It's not fair to attack Company A for emitting 3 million tons of GHG and promoting Company B for emitting 2 million tons, when Company A produces twice as much of their product. It seems simple, but you'd be amazed at how common this is in the environmental field.

Over the past several years, we've been trying our best at Greenopia to assess environmental footprints in the most accurate and fair ways possible. It's been a challenge to stay on top of the information curve, as newer and better data become available all the time, but we feel it's important for consumers to have the best and most rational data to make their green purchasing decisions.