Barron’s 100 Most Sustainable Companies

Many companies would love a break on labour, after a year of strife when workers from Hollywood to Detroit flexed their muscle. It may be wishful thinking to expect a reprieve.

A resilient economy isn’t likely to shift leverage from workers to corporate bosses. Despite pockets of layoffs, namely in technology, the job market remains tight, with unemployment near record lows. A backlash against “diversity, equity, and inclusion” initiatives, or DEI, is jumping from colleges to companies— Alphabet and Meta Platforms have reportedly pulled back, for instance. Throw in a virtual lockdown on immigration, combined with a spike in U.S. manufacturing, and many companies may have another rough year of labour challenges.

Some companies are navigating these issues better than others—finding ways to reward workers and meet DEI goals without taking big hits to their profits or reputations for social responsibility. Several of those faring well made it into Barron’s ranking of the 100 most sustainable companies .

To make the list, our seventh annual ranking, companies were scored on a variety of environmental, social, and governance, or ESG, measures. Barron’s worked with Calvert Research and Management, a leader in responsible investing, to rank the companies. The top 100 firms—winnowed from the largest 1,000 publicly traded U.S. companies—achieved the highest scores across 230 ESG metrics, from workplace diversity to greenhouse-gas emissions. (See below for the complete list and more about the methodology.)

Home-products company Clorox sits at the top of the leader board for the second straight year, edging out Kimberly-Clark , CBRE Group , Hasbro , and Agilent Technologies in the top five. The overall lineup spans a wide range of industries, with tech, industrials, and consumer companies all well represented.

Many of the companies delivered solid results for shareholders. The top 100 returned an average 19% in 2023, versus 26%, including dividends, for the S&P 500 index. That doesn’t look great. But the S&P 500 is weighted by market capitalisation and last year’s “Magnificent Seven”— Apple , Microsoft , Amazon.com , Nvidia , Meta Platforms, Tesla , and Alphabet—fuelled almost all the market’s gains. Strip away that influence, and the equal-weighted S&P 500 returned 14%, trailing the 100 most sustainable companies.

Several stocks delivered standout returns in 2023, led by chip maker Nvidia, ranked 41st with a 239% gain. Other tech winners included HubSpot , Intel , Applied Materials , and Lam Research . Strong performers in other industries were Trex , Lennox International , Williams-Sonoma , Insight Enterprises , and Owens Corning .

A big theme in this year’s rankings was progress on corporate governance and labor relations, says Chris Madden, a managing director at Calvert, which is owned by Morgan Stanley Investment Management. “A lot of the companies on this list have done a stellar job dealing with employees,” he says.

Strikes were big in 2023 as Hollywood screenwriters and Detroit auto workers took to the picket lines, winning concessions and pay raises. Pilots and other unionised groups fared well, breathing life back into the organised labor movement, which had been in decline since the 1950s. New technologies such as artificial intelligence and electric vehicles are upending vast industries, prompting workers to demand more protections.

Tensions between companies and employees are spilling over in more public ways, thanks in part to social media; workers are using platforms like X and TikTok to amplify their message or try to shame their employer, says Alison Taylor, clinical associate professor at NYU Stern School of Business and author of a new book, Higher Ground . One of the most interesting recent trends, she says, has been the rise of “strategic leaking, where young employees undercut sunny messaging from the top with their own lived experiences.” She cites the trend of sharing layoff experiences on TikTok as an example.

Battles are also brewing over DEI, including a political backlash by conservatives, complicating corporate efforts to meet their own DEI goals. Last year, a number of high-profile chief diversity officers exited their roles at some of the biggest U.S. companies, including Walt Disney and Netflix . This month, Zoom Video Communications fired a team focused on DEI initiatives as part of a round of layoffs.

The issue is also bubbling up in the presidential race. During a rally in Philadelphia last year, presidential hopeful Donald Trump promised to eliminate all diversity, equity, and inclusion programs “across the entire federal government.”

Many companies say they remain committed to DEI goals. According to a Conference Board survey late last year of chief human resource officers, none planned to scale back their diversity efforts, while 75% said improving the employee experience and organisational culture would be a top focus in 2024. Alphabet said in a statement that it is inaccurate to suggest it is “deprioritising our longstanding efforts for underrepresented communities.”

One company that scored well on labor and other sustainability factors was Walmart . The world’s largest retailer landed at 61 on the list. “Walmart stands out for its strong labor practices,” says Helen Mbugua-Kahuki, Calvert’s director of research. “We’ve seen Walmart do a really good job as it pertains to increasing wages for its workers.”

One of America’s largest employers, with 1.6 million U.S. workers, Walmart raised entry-level pay for store workers last year, taking its average hourly wage to $18, well above the federal minimum of $7.25. The company also increased wages for store managers to an average $128,000, plus better bonuses. A Walmart spokesperson said the retailer has been “investing in its front-line hourly associates for the past several years.”

Walmart’s other positives include education and training benefits, which the company says have saved workers nearly $500 million over the past five years. Calvert gives the company high marks for being more open to worker feedback through new digital forums . “It’s a form of open communication and provision for employees to freely express themselves,” Mbugua-Kahuki says.

Walmart still has its labour critics. The company has faced multiple lawsuits over gender discrimination. None of its roughly 4,700 U.S. stores have unionised, making it the largest U.S. employer without any unionised workers. In January, the National Labor Relations Board’s San Francisco office issued a complaint against a Walmart store in Eureka, Calif., alleging violations of labour rights. The NLRB said there are 21 other unfair labor practice cases open against Walmart.

Walmart has denied the NLRB’s allegations in a legal response . The company didn’t respond to a request for comment.

Other Faces of Sustainability

Calvert says Clorox, whose brands include its namesake bleach, Burt’s Bees cosmetics, and Glad trash bags, took top honours thanks to its strong governance structure and pay equity, among other factors. The firm’s board is diverse, with 50% women and 25% people of color. In 2023, Clorox once again achieved pay equity, which means “no statistically significant differences” in pay by gender globally and race or ethnicity in the U.S., according to Clorox. “Pay equity is important because it creates a better culture,” says Madden.

Clorox’s shares underperformed the market in 2023, in part because of a cyberattack that caused wide-scale disruptions and hurt financial results. But its workers, at least, appear to be well treated, with perks including more flexible time for all. “We really intend for people to use this to refuel their tanks,” says Kirsten Marriner, chief people and corporate affairs officer.

About a fifth of this year’s list consists of newcomers. Game publisher Electronic Arts made the list for the first time, debuting at No. 32. Calvert says the company is making strides in DEI, including a push for better representation of women in its games. EA’s hugely popular Ultimate Team mode saw women football players introduced for the first time last year . Calvert also lauds the company for hiring “underrepresented talent” above the average rate in the industry for the fifth straight year and placing more minorities in executive roles. EA declined an interview but confirmed Calvert’s information.

Also making its debut this year is Trex, landing at No. 68. The company is a leading maker of “wood-alternative” home decking and railings made from a blend of recycled and reclaimed raw materials.

Some companies made a big leap up in this year’s ranking, among them Tetra Tech , which jumped from No. 56 to No. 8. Calvert singled out the consulting and engineering firm for its efforts to remediate toxic per- and polyfluoroalkyl substances, or PFAS, better known as “forever” chemicals. But it noted that Tetra Tech “could improve on human-capital management and offer more incentives for its employees.”

How We Ranked the Companies

To build our list of most sustainable companies, Barron’s worked with Calvert, a leader in ESG investing. Starting with the 1,000 largest publicly traded companies by market value—excluding real estate investment trusts—Calvert ranked each one by how it performed in five key constituency categories: shareholders, employees, customers, community, and the planet. Specifically, it looked at more than 230 ESG performance indicators from seven rating companies, including ISS, MSCI, and Sustainalytics, along with other data and Calvert’s internal research.

These data were organised into 28 topics that were then sorted into five categories. In the shareholder category, for example, topics included board structure, business ethics, and executive compensation. For employees, workplace diversity was a key topic. The planet category included greenhouse-gas, or GHG, emissions and related policies; biodiversity; and water stress. Calvert assigned a score of zero to 100 in each category, based on company performance. Then it created a weighted average of the categories for each company, based on how financially material the category was in its industry. To make Barron’s list, a company had to be rated above the bottom quarter in each material stakeholder category. If it performed poorly in any key category that was financially material, it was disqualified.

Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.

This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.

Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.

Here are three strategies useful for functional families.

Intrafamily loans

It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.

But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.

If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.

To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.

In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.

If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.

Asset gifts

Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.

The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.

Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.

However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.

These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.

But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.

Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.

The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.

Sellner doesn’t worry about his children using the funds for another purpose.

“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.

Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.

Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.

Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”

Disclaimers

A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.

Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.

Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.

Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.