The Circular Economy is Coming Our Way. Here Are Some Things to Think About for Your Product Development and Product Delivery…

February 13, 2020

by Hank Boerner – Chair and Chief Strategist, G&A Institute

During your travels, or even going about your usual business and personal activities, do you recall the days when… 

For example, experienced pilots remember having to use cockpit instruments (going “IFR”) when flying over large cities because the “smog” (usually thick yellow) eliminated visibility below. 

That was caused by belching smokestacks as dirty coal was burned for industrial use or for generating electric power. Con Ed in New York City was a prominent “smokestacker” in those days.

Or, you may have seen deep and wide gouges in our good Earth where giant machine scoopers were pulling a variety of minerals out for manufacturing products.  The American west and south (and north and east!) are filled with these gaping holes. Wonderful vistas?

As a young pilot, up there as the “Eye in the Sky” on weekends as a hobby to build flight hours, flying and broadcasting beach traffic to WGBB and WGSM (radio) below, I often had to fly in and out of the yellow mists IFR. With choking effects as the cockpit air filled.

Or as you traveled past a flowing river you may have seen thick flows of rubber or petroleum-based factory discharges…don’t worry, downstream the ocean will take it away, we were told.

(I remember seeing the US Royal plant outflow into the Connecticut River, with the rocks in the river all rubber-covered! The river flowed south to Long Island Sound and out to the Atlantic Ocean. Where the junk disappeared. Or did it!

In many countries, especially in Europe and North America, the good news is we have been moving far away from those days. In the U.S., the Clean Water Act, the Clean Air Act, RCRA, Superfund/CERCLA, and a host of other environmental regulations helped to make this one of the cleanest (relatively) countries by the end of the 20th Century.

That’s the good news!

And as the linear model of many years in old-line production methods continues to recede in many factories – that is, the traditional  take, make, use, dispose – and that model moves farther into the past (as described by Tom Tapper of “Nice and Serious” writing for Sustainable Brands), the “circular model” has been steadily emerging. The positive effects are being felt all along the value chain.

So what does this mean for branded company leadership?  Whose brand out there in the consumer or B-to-B marketplaces signals “we hold these values dear” or “look to us for sustainability leadership” or “corporate and societal responsibility is at our core”?

Tom Tapper cites examples of products and practices new and old from such firms as Unilever, CIG, Haagen-Dazs, Coca Cola, Stella, and Aesop, with a focus on their distinct product delivery (packaging, bottles, capsules, other means).  

He offers us his perspectives in a sometimes whimsical but always firmly- grounded style on what to expect in the coming years in brand marketing.

In a circular economy, the author sees five trends to watch:

  • We’ll be thinking of Bottles as “objects of desire”.  (Remember the classic, dark brown 1890’s voluptuous-evoking stylized Coca-Cola bottle of yesteryear?  And whatever happened to the little plastic Pez dispensers!) These were ions of yesteryear.
  • Product and Story. Or, as story.  The quality of and qualities of the product will be the main story told by marketers.  (The smart brand marketing leaders have been doing this for years!)  The drive to reduce plastics use, as example, gives smart marketers new ways to talk about product and packaging that has plastic workarounds (in product and packaging). Not that plastic will go away; it will be “different” in many ways.
  • “Hermit Crab Branding”.  If the brand does not have that beautiful bottle or packaging to offer consumers, they can offer stickers in packs to enable consumers to do their own packaging customizing. Or to cover over the branding on a competitor’s bottle. That is thinking like the Hermit Crab, which live in other sea critters’ cast-off shells.
  • The Coming of Dispenser Wars.  Push here for soap – the product dispenser becomes the competitive battleground, thinks author Tom Tapper. Will consumers want “memorable refill experiences”? Will marketers entertain the customer as he/she refills their containers?  (With music, sounds?) Maybe.  Non-branded containers may become the choice of the merchant (more profit!), like store brands are today.
  • Refill Truck Revolution.  Push here for the soap. If individual product packaging and products in bottles as today’s primary delivery modes recede into the past, will a fleet of electric vehicles someday be visiting your neighborhood to bring you “a premium refill experience”?  Filling your vat when you run low?

So the opportunities inherent in the coming of the Circular Economy, Tom Tapper tells us, present challenges for us as well, especially in that we have to discard the old ways and adapt to change, as in the relationship of the brand and product to the buyers. 

Progress is always about adapting to change.  Risk and opportunity. Welcoming and forbidding.

Just consider for a moment the work involved in the disappearance of those old belching smokestacks and smog over our heads and junk flowing into rivers from outflow pipes and deep gouges in the Earth.  Pilots don’t need to wear smoke masks anymore as they pass over U.S. cities.

We are certainly more productive as a society today than ever before!  U.S. industry is booming, turning out various goods.

And that presents many challenges as well – which the coming of the Circular Economy could help us deal with.

We’re reminded here of the favorite quote of the late Lee Iacocca (he was a leader of both Chrysler and Ford Motor Company.  Lead, follow or get out the way – good advice today: the Circular Economy is coming our way.

Top Stories for This Week

What Will a Circular Economy Mean for Branding?
Source: Sustainable Brands
While a circular economy will present huge challenges to most brands’ conventional business models, there are huge opportunities for those who embrace and adapt to this change — while those who drag their heels with incremental changes will undoubtedly fall behind.

Which Are the “Best Of” Sustainable Companies in the Important Annual Rankings? Mirror, Mirror on the Wall – What Reflection for Our Company?

February 7 2020

By Hank Boerner – Chair & Chief Strategist – G&A Institute

Mirror, mirror on the wall – who is the most sustainable company of them all?  (Paraphrasing that most memorable line from the Queen in the Walt Disney Studios’ 1930s big screen classic, Snow White and the Seven Dwarfs,)

“Best Of” is being regularly applied now by a ever-widening range of third party players in examining the performance and achievements of U.S., North American and global companies’ sustainability efforts (and applying their methodologies to focus on an ever-widening list of ESG criteria for users of the lists, rankings and so on). 

The results are published for many or all to see – such as this week’s Corporate Knights’ “2020 Global 100” unveiling at the World Economic Forum in Davos — which we are sharing in our Top Stories of the week.

Looking at (or for) the “fairest” of them all, or the best-in-class, or most sustainable, or leading in corporate citizenship rankings, et al — there are now many more ESG ratings organizations, publishers, NGOs, investor coalitions, trade / professional associations, and others in the “ratings, rankings, scores and other recognitions” arena.

And these ratings, rankings, scores, best-of lists are published in many more forms and value-added variations.  Keeping current and in the ESG ratings & rankings game is a full-time job at many companies today.

The third party evaluation approach can be better understood in how they apply their research to arrive at rankings and ratings, and assigning scores, with shared (privately or publicly) rationale to explain the selections of the individual company for benchmark, or the rankings assigned. 

Therein, important stories are being told about companies on the list or assigned a high ranking or in an index. Investors can better understand the why and how of the selection.

(And, we should say, stories are told in the ratings & rankings et al processes about those companies that are omitted or not selected or having a lower rating compared to peers).

For example, look at investable products. S&P Global recently launched an index based on the widely-used benchmark, the S&P 500(R), focused on ESG performance. The bottom 25% — 100 companies! — were not included in the first go-round. Story subtly told – company is in or out.

Besides the welcomed opportunity for corporate leaders to bask in the sunshine of the valued third party recognitions (“look, we got in this year’s best companies list focused on…”), and to admire the reflection in the “best of mirror mirror” on the board room or C-Suite wall, there are very practical aspects to these things.

Such as: As explained, the inclusion of a corporation in a key ESG equity index / investing benchmark or investable product offering and more recently, reflections of the company in the mirror mirror of credit risk ratings and ratings opinions on fixed-income instruments.  

The decision to issue a “green” bond to the market may or will be affected by third party views of the planned issue – green enough or not! That’s beginning to happen in the EU markets.

The Positives

With the many in-depth third party examinations of companies’ ESG strategies and resulting outcomes (considering company’s actions, performance, achievements) now taking place, and with the results becoming more transparent, some of the scoring / ranking / etc results have the effect of enabling a more complete, accurate and comparable corporate ESG profile to be developed by the company.

With better understanding of the ranking & rating etc the issuer’s leadership can assign more resources to improve their public ESG profile, especially those developed by the key ESG rating agencies for their investor clients.

Important to understand in 2020: These close examinations of companies’ ESG performance are becoming more and more decision-useful for portfolio management for asset owners and managers.

And lenders, And bankers. And the company’s insurers. And business partners. And customers. And present and future employees wanting to work for a more sustainable, doing-the-right-thing company.

As board room top leaders better understand the importance of these ratings, rankings etc. exercises (and the importance of engaging with raters & rankers & list makers), with more internal resources allocated to the task of improving the profile — the company will tend to make more information publicly-available for the third party examinations.

The virtuous cycle continues — more information disclosed and explained, better ratings could result, year-after-year. As we always say, it is a sustainability journey.

More ESG information is now being made public by companies for delivery on critical ESG delivery platforms (such as on “the Bloomberg” and the Refinitiv Eikon platforms, in S&P Global platforms).

This in turn leads to better packaging of ESG data and narrative to inform and influence investors; and, leads to improved investment opportunity for being recognized as a leader in a particular space by key investor coalitions (ICCR, INCR, Investor Alliance on Human Rights, Climate Action 100+, and other).

The latter means a multiplier effect — quickly bringing the company’s sustainability news to more investors gathered in a community-of-interest on a topic.

(Think of the volumes of information now being made available by companies focused on GHG emissions, climate change risk, diversity & inclusion, labor rights, human rights, reducing ESG impacts on communities, greater supply chain accountability, use of renewable energy, water conservation, and more,)

Mirror, Mirror 2020: At the recent World Economic Forum meeting Davos, Switzerland, the “100 most sustainable companies of 2020” report was announced. 

Publisher Corporate Knights’ much-anticipated annual ranking of “most sustainable companies in the world” was the basis of the announcement. 

That annual survey looks at 7,400 companies having more than US$1 Billion in revenues, examining 21 KPIs. The stories of the companies from Fast Company and The Hill provide the details for you.  (This is the 17th year of the survey.)

At the Davos gathering this year, participants learned that almost half of the most sustainable companies were based in Europe (49); 17 were HQ in the U.S.A; 12 in Canada; 3 in Latin America, 18 in Asia, and one company in Africa.

For the U.S.A., Cisco Systems is highest ranked (at #4, thanks to $25 billion generated for “clean revenues” from products with “environmental core attributes”). The #1 company is worldwide is Orsted of Denmark (renewable energy).

Our G&A Institute team closely monitors these and many other third party rankings, ratings, scores, corporate ESG profiles, and other critical evaluations of companies. 

This is an example of the knowledge we gain in this [ratings/rankings] arena, which becomes a vital part of the various tools and resources we’ve created to help our corporate clients qualify for, get selected for, and lead in the various “best of lists”.

In sum, achieving better rankings, ratings, scores — so their mirror mirror on the wall question reflects back a very welcoming image! 

In these newsletters, we work to regularly share with you the relevant news items and other content that helps to tell the story of the dramatic changes taking place in both the corporate community and in the capital markets as as the focus on corporate ESG sharpens. Like this week’s Top Stories.

Top Stories for This Week

The 100 most sustainable companies of 2020   
Source: The Hill – A ranking of the most sustainable organizations was unveiled at the World Economic Forum in Davos, Switzerland, Tuesday. 

These are the most sustainable corporations in the world   
Source: Fast Company – Canadian research firm Corporate Knights releases its annual list of most sustainable corporations in the world, with some new entries in the top 10. 

For a the complete list and important background, go to:
Corporate Kings’ 2020 Global Ranking 

And also from Davos:
World Economic Forum calls on business chiefs to set net-zero targets   
Source: Edie.com – In a letter from the Forum’s Founder and executive chairman Klaus Schwab and the heads of Bank of America and Royal DSM Brian Moynihan and Feike Sijbesma, businesses have been urged to respond to climate science through the… 

The Year 2020: Off To Great Start For News About Sustainable Investing

by Hank Boerner – G&A Institute Chair & Chief Strategist

January 2020 — Here we are now in a new year, and new decade (already, the third decade of the 21st Century) and much of the buzz is all about (1) climate change and the dramatic impacts on business, finance, government and we humans around the globe; and (2) many investors are moving their money to more sustainable investments.

Oh, of course, there are other important conversations going on, such as about corporate purpose, corporate stewardship, human rights, the circular economy, worker rights, supply chain responsibility, reducing GHG emission, conserving natural resources, moving to a greener and lower carbon economy, workplace diversity, what happens to workers when automation replaces them…and more. 

But much of this is really part of sustainable investing, no?  And corporate purpose, we’d say, is at the center of much of this discussion!

The bold names of institutional investors/asset management are in the game and influencing peers in the capital markets – think about the influence of Goldman Sachs, BlackRock (world’s largest asset manager), State Street/SSgA, The Vanguard Group, and Citigroup on other institutions, to name here but a handful of major asset managers adopting sustainable investing strategies and approaches.

This week’s Top Story is about Goldman Sachs Group Inc’s pivot to “green is good”, moved by Reuters news service and authored by Chris Taylor.  The GS website welcome is Our Commitment to Sustainable Finance

The company announced a US$750 billion, 10-year initiative focused on financing of clean energy, affordable education and accessible healthcare, and reduction of or exclusion of financing for Arctic oil-gas drilling.

Head of GS Sustainable Finance Group John Goldstein explains the company’s approach to sustainable financing and investment in the Reuters story. 

Our other Top Story is from Morningstar; this is an update on the investors’ flows into sustainable funds in 2019…what could be the leading edge of a huge wave coming as new records are set. 

For 2019, net flows into open-end and ETF sustainable funds were $20.6 billion for the year just ended – that’s four times the 2018 volume (which was also a record year). There’s always information of value for you on the Morningstar website; registration is required for free access to content.

And the commentary on the January 2020 letter from BlackRock CEO Larry Fink to the CEOs of companies the firm invests in – we’ve included a few perspectives. 

We’d say that 2020 is off to an exciting start for sustainability professionals, in the capital markets, and in the corporate sector! Buckle your seat belts!

Top Stories for This Week

Green is good. Is Wall Street’s new motto sustainable?   
Source: Reuters – If you have gone to Goldman Sachs Group Inc’s (GS.N) internet home page since mid-December, it would be reasonable to wonder if you had stumbled into some kind of parallel universe. 

Sustainable Fund Flows in 2019 Smash Previous Records   
Source: MorningStar – Sustainable funds in the United States attracted new assets at a record pace in 2019. Estimated net flows into open-end and exchange-traded sustainable funds that are available to U.S. investors totaled $20.6 billion for the… 

G&A Institute Now Accepting Applications for Spring & Summer 2020 Sustainability Reports Research Analyst Internship

G&A’s non-compensated remote internship opportunity is for qualified students interested in learning more about corporate sustainability and corporate ESG performance (“Environmental, Social, Governance”) issues.

G&A Institute Interns during their remote internship learn and master important elements about the Global Reporting Initiative (GRI) Standards for sustainability reporting, along with other common reporting frameworks used by investors, such as, CDP, RobecoSAM CSA (DJSI), SASB, IIRC, the UN SDGs, and other frameworks. An example of topics and issues of discussion and research during this internship include the concepts of materiality, stakeholder engagement, external assurance, reporting balance, comparability, and many others. All of which is valuable knowledge and experience that can be applied in your studies and future careers

The work will support G&A’s pro-bono (uncompensated) relationship as the Global Reporting Initiative (GRI) data partner for the USA, UK, and Ireland, along with contributing to associated research on sustainability reporting trends made available to the public with recognition of the intern’s contributions to the research.

GRI’s reporting framework and standards are the most widely used in the world for these types of reports. However, G&A interns will analyze all types of sustainability reporting and frameworks; beyond the GRI framework.

This is a rapidly growing area of interest to Wall Street, investors and various corporations from all sectors and industries. In 2019, G&A interns contributed to G&A’s annual research publication tracking sustainability reporting trends and found that 86% of S&P 500 companies were publishing sustainability reports, up from 20% in 2011! Additionally, G&A 2019 interns team contributed to G&A’s inaugural research tracking sustainability reporting trends of the Russell 1000, finding 60% of Russell 1000 companies are publishing sustainability reports.

Opportunity:  

  • Discover the ins and outs of the world’s leading sustainability framework (GRI)
  • Learn to analyze data and interpret content from GRI sustainability reporting
  • Gain insights into the rapidly growing field of ESG from industry-experts
  • Assist in team research supporting G&A publications; public recognition will be given to all interns involved in research and publications

Internship Identification:  Sustainability Report Research Analyst (supporting G&A’s GRI Data Partner relationship)

Virtual Location: Work is done remotely – at your own location with a flexible work schedule.  Initial training via virtual meeting tools. There will be opportunities to attend industry networking and training events with G&A’s network of event and training partners.

Time Period & Commitments: Internship position requires approximately 10 hours per week and runs Spring 2020 through Summer 2020.  The timing of the work is flexible for a majority of the time required and can be done remotely. 

Compensation: This is an unpaid learning experience only internship.

MORE ABOUT THE INTERN POSITION
In this role, you will work as part of a team to analyze sustainability reports for inclusion in the largest global database of sustainability reports, the GRI’s Sustainability Disclosure Database (database.globalreporting.org).

Learning to read, analyze, use and structure data from reports using the GRI Standards, GRI G4, GRI-Reference, as well as NON-GRI corporate and institutional reports, will comprise the majority of this assignment.  The research will also contribute to several published research reports on various trends in sustainability reporting which are made public and widely referenced by media, academics, business, capital markets players and other important sustainability stakeholders.

Student(s) selected will have the opportunity to experience a fast-paced, highly-adaptive, mentoring culture in a small but growing company with a unique niche. This is a hands-on position with considerable learning opportunity for those headed into corporate responsibility / sustainability / citizenship or sustainability / impact investment careers.

G&A interns get public recognition for their work in published reports, on G&A’s web platforms, blogs, and public press releases.

G&A’s is proud of its Intern Alumni and are happy to share their success with the world, as they accomplish great things through their careers navigating the way to sustainability. 

To see what past G&A Interns have been doing (and their backgrounds) check out G&A’s Honor Roll at http://www.ga-institute.com/about-the-institute/the-honor-roll.html  

INTERNSHIP CANDIDATE REQUIREMENTS

  • Must be in senior year of Bachelors program or in a Masters program with major/studies focused on business, capital markets, ESG, environmental and/or sustainability issues and topics.
  • Demonstrate strong background / keen interest or past work experience in ESG and sustainability-related issues / topics.  
  • Having a basic understanding of business and the capital markets is mandatory.
  • Must have strong skillsets and experience in independent online research and analysis.
  • Must be excellent at using Excel / Google Sheets and researching on Google.
  • Have strong technical, communication and organizational skills. 
  • Must be self-driven and able to work independently to meet expectations and deadlines.
  • Must be fluent in English, additional languages are a plus.
  • Applicants with good writing and editing abilities will have a preference.

APPLICATION PROCESS
If you meet the above requirements, interested students should send:

  1. A cover letter outlining why you would be a good fit for this role.
  2. Resume including your education, skill sets, and work experience.
  3. A one-to-two page introduction essay on what you would like to learn more about (in terms of your career goals), what your interests are, and anything else you feel may be relevant to the job/our organization. Include sectors or industries you may be particularly interested in regarding ESG / Sustainability.
  4. Samples of writing or research on sustainability or other topics are also a plus.

Send application materials to Governance & Accountability Institute at:
lcoppola@ga-institute.com & agallagher@ga-institute.com

ABOUT GOVERNANCE & ACCOUNTABILITY INSTITUTE
Founded in 2006, Governance & Accountability Institute is a New York City-based company that specializes in research, communications, strategies and other services focused on corporate sustainability and corporate ESG performance (“Environmental, Social, Governance”) issues. 

G&A is the data partner for the United States, United Kingdom and the Republic of Ireland for the Global Reporting Initiative (GRI).  The Global Reporting Initiative is a non-profit organization that promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development.

GRI provides all companies and organizations with a comprehensive set of sustainability reporting standards that are the most widely used and respected around the world.  Currently, thousands of global organizations use the GRI to report on their Environmental, Social, and Corporate Governance (ESG) strategies, impacts, opportunities and engagements (www.globalreporting.org).  

As the US, UK and Ireland data partner of the GRI, G&A’s role is to collect, organize, and analyze sustainability reports that are issued by corporations, public entities, not-for-profits and other entities in the United States, United Kingdom and the Republic of Ireland for the benefit of all stakeholders. 

Send application materials to Governance & Accountability Institute at:
lcoppola@ga-institute.com & agallagher@ga-institute.com

BlackRock’s CEO’s 2020 Letter to Corporate CEOs – Explaining the World’s Largest Asset Manager’s Perspectives and Actions on the Global Climate Change Crisis

by Hank Boerner – Chair & Chief Strategist, G&A Institute

The big news this week for sustainability professionals:  The publication of the much-anticipated annual letter to corporate chief executive officers by Larry Fink, Chair and CEO of BlackRock –– the world’s largest asset manager (with almost US$7 trillion in Assets Under Management). 

Every year CEO Fink as fiduciary for his firm’s clients communicates BlackRock’s positions on key issues — and signals the steps ahead as BlackRock enhances its sustainable investing actions as influential global fiduciary.

This week the 2020 annual letter to corporate CEO’s describes what is headlined as “A Fundamental Reshaping of Finance”.   The focus is on climate change – a defining factor in companies’ long-term prospects, explains Mr. Fink.

 About the impact of climate change on investors:  “Awareness is rapidly changing, and I believe we are on the edge of a fundamental re-shaping of finance.”  Consider some quotes from the letter:

 “In the near future – and sooner than most anticipate – there will be a significant re-allocation of capital.”

 “Climate risk is investment risk.”

 “As I have written in past letters [to CEOs in 2019, 2018] a company cannot achieve long-term profits without embracing purpose and considering the needs of considering the needs of a broad range of stakeholders.  Ultimately, purpose is the engine of long-term profitability.”

 “Every government, company, and shareholder must confront climate change.”

Separately the BlackRock CEO wrote to the firm’s investor clients; he communicated to the corporate CEOs what he is saying to clients about BlackRock actions that will affect them. 

Consider: sustainability will be integral to BlackRock’s portfolio construction and risk management; certain investments will be exited (those presenting high sustainability-related risk, such as coal producers).  There will be new investment products that screen fossil fuels and strengthen BlackRock’s commitment to sustainability and transparency in its investment stewardship activities.

“Over time,” CEO Larry Fink posits, “companies and governments that do not respond to stakeholders and address sustainability risks will encounter growing skepticism from the markets, and in turn, a higher cost of capital. Companies and countries that champion transparency and demonstrate responsiveness…by contrast, will attract investment more effectively, including higher-quality, more patient capital.”

BlackRock was a founding member of the Task Force on Climate-related Financial Disclosures (the TCFD) and is a signatory of the UN Principles for Responsible Investing (PRI) as well as the Vatican’s 2019 statement advocating carbon pricing regimes.

CEO Larry Fink is one of the signatories of The Business Roundtable’s statement on corporate purpose.  BlackRock has just joined the Climate Action 100, a coalition of almost 400 investment manager managing US$40 trillion in AUM. 

There’s a volume of important information for both corporate boards and executives and sustainable investing professionals in the 2020 Larry Fink letter to CEOs of companies in BlackRock’s portfolio.

We can expect going forward in 2020 that many business & financial media will pick up on the BlackRock letter and capital market and corporate sector leaders will weigh in with their perspectives.

We are now a long way from the Professor Milton Friedman school of “shareholder primacy” advanced by the professor, in his books such as “Capitalism and Freedom” (1962) and his September 1970 essay proclaiming “shareholders first” in The New York Times.

Link to the letter.

Top Stories – Start of 2020 Coverage of the BlackRock / Larry Fink Missive

Fortune Magazine’s Coverage:
BlackRock CEO Larry Fink puts climate change at the center of megafund’s investment strategy

Barron’s Coverage for 400,000 Reader-Investors:
BlackRock CEO Larry Fink say’s it’s time to tackle global warming – starting with coal

Bloomberg News:
BlackRock puts climate at center of $7 trillion strategy

Hello to Year 2020 and the Start of the Third Decade of the 21st Century – Climate! Climate! Climate! is The Dominant Theme of News & Commentary!

It is a favorite pursuit of journalists and commentators at each year-end and the start of the new calendar year to look back and look forward to identify “top stories” and significant trends of the year past.  And to look ahead at “what might be” in the new year.  We present a few of these musing for you in this first newsletter of the year 2020.

Writing in the Harvard Business Review, author Andrew Winston (best-seller “Green to Gold”) in reviewing “big themes” of 2020 in sustainability, explains that “changing climate” has always been included in yearly wrap-ups.  After 2019, it is to be a permanent “big story”.

The 2019 weather headlines were about heat in Europe; floods in the USA; fires in Australia and the USA; vicious storms in the Caribbean and in Africa…all of this becoming our norm now. (As we write this in 2020, the Australian nation is in crisis, personal, business, national, as fires consume millions of acres, destroy homes and businesses, kill wildlife, and tragically, humans are dying as fires spread.)

There are eight “fascinating developments” of 2019 presented for you in our Top Story from the HBR/Andrew Winston, starting with the global climate protest movement – and a few forecasts for 2020.

We also present three other 2019/2020 selections from Eco-Business, AdAge and Food Drive on the themes of look back/look ahead.

Our G&A Institute Sustainability Update blog has been featuring commentaries about climate change over the years; we presented a new running series focused on climate as we approached the end of 2019 —  “About The Climate Change Crisis” — here are the first posts of many to follow:

Click here to sign up and receive alerts whenever news and commentary posts appear on G&A’s Sustainability Update Blog.

Top Stories

The Top Sustainability Stories of 2019   
Source: Harvard Business Review – The list of extreme, tragic, and very costly weather events this year — record heat in Europe, hail in June in Mexico, record floods in Nebraska, endless Australian bush fires, and epic destruction from storms in Mozambique and…

Here’s a Look-Ahead into 2020

5 Trends That Will Shape Sustainability & Business in 2020   
Source: Eco-Business – As a world in climate crisis enters a new decade, Eco-Business highlights five major trends that will shape society and business in the coming year.

Ideas About Sustainability That Stuck With Us In 2019 … And What They Might Mean For 2020   
Source: AdAge – 2019 saw a marked increase in the roles that corporate responsibility—and particularly sustainability—played in major marketers’ overall business plans. And that trend is likely to accelerate in 2020. Here are some things that…

2020 Will Be the Year Sustainability Goes from Buzzword to Necessity   
Source: Food Drive – Everybody wants sustainable products, and retailers are putting pressure on manufacturers to deliver goods that satisfy consumers’ new preference for green and clean options.

Brief Updates on Corporate Audit Committee and Auditor Oversight

Guest post by Daniel L. Goelzer
Board Member, Sustainable Accounting Standards Board and Co-Founder, The Audit Blog

When it Comes to the Ability to Deal with Risk, Boards are More Confident, But Less Well-Informed, Than Management

A new study from the Institute of Internal Auditors (IIA) raises questions about how well-informed boards are about the risks facing their company and whether directors tend to be unrealistic about the company’s ability to handle those risks.

In OnRisk 2020: A Guide to Understanding, Aligning, and Optimizing Risk, the IIA concludes that “Boards are significantly overconfident when it comes to addressing the thorniest issues facing organizations today. Board members have greater confidence in their organizations’ ability to manage key risks than members of management.”

The IIA attributes this over-confidence to the “incomplete or misleading” nature of the information concerning risk that boards receive information from management, along with the failure of directors to ask critical questions.

Sustainability Reporting Continues to Grow—Both Inside and Outside SEC Filings

Two recent reports provide snapshots of the growth of public company sustainability or ESG disclosure:

  • From NACD: ESG Risks Trickle Into Financial Filings, an October 21 item in BoardTalk, the blog of the National Association of Corporate Directors, analyzes ESG disclosure in the Risk Factors and MD&A sections of Form 10-K filings of companies in the Russell 3000 index.

This research found that, in 2019, 66 percent of companies in the Russell 3000 Index discussed ESG risks in their Form 10-K.

  • Separately, a report issued by the Governance & Accountability Institute found that, while 60 percent of the Russell 1000 published sustainability reports in 2018, only 34% of the smallest half of the Russell 1000 issued such a report.

The “second 500” sectors with the highest percentages of companies that release a sustainability report are Utilities (82%, Materials (63%), and Consumer Staples (53%).

The analysis is at: https://www.ga-institute.com/press-releases/article/flash-report-60-of-russell-1000R-are-publishing-sustainability-reports-ga-2018-institutes-in.html

# # #

Note:  These items are highlights from the Audit Blog. Daniel Goelzer is co-founder; see https://medium.com/the-audit-blog

Recent posts on the blog include –
• The Impact of Disclosing Engagement Partner Identity: No Clear Answer (Dan Goelzer, November 7, 2019)
• Would Auditing Improve if the PCAOB Brought More Enforcement Actions? (Dan Goelzer and Tom Riesenberg, September 16, 2019)

# # #’

Daniel Goelzer is a retired partner of the Baker McKenzie Law Firm (in Washington DC offices) and Board Member, SASB, serving as Chair of the Service Sector Committee. He was Acting Chair and Board Member, PCAOB for almost a decade (appointed by the SEC as founding member).

Contact information:
Daniel L. Goelzer – Bethesda, MD 20816

301.775.8692 (cell)
dangoelzer@gmail.com
@dgoelzer (Twitter)

Purpose – This Was the Buzzword of 2019 for The Corporate Sector & Investment Community. The “Purpose” Debate Will Continue in 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Another in the series about The Corporate Citizen and Society

As 2019 draws to a close — we look back at a year with a lively discussion about The Corporate Citizen and Society…and “Purpose” discussions…

The year 2019 began with an important challenge to corporate leaders from Larry Fink, chairman and CEO of the world’s largest asset manager, BlackRock (with more than US$6 trillion in AUM). 

The very influential investor writes each year to the CEOs of companies that his firm invests in on behalf of BlackRock clients. There are literally hundreds of publicly-traded companies in the BlackRock portfolio (managed and indexed funds).

At the start of 2018, CEO Fink wrote that every company needs a framework to navigate difficult landscapes and it must begin with a clear embodiment of the company’s purpose (in the business model and corporate strategy).

He explained to the many CEOs: “Purpose being not a mere tagline or marketing campaign; it is a reason for the company’s being – what is does every day to create value for its stakeholders.”

Then (in January 2019) Larry Fink explained in his start-of-the-year letter to CEOs as he expanded on the theme, Purpose is not the sole pursuit of profits but the animating force for achieving them.  And, profits are in no way inconsistent with purpose; in fact, profits and purpose are inextricably linked.

This 2019 communication to CEOs pointed out that the world needs their leadership (especially) in a polarized environment. Stakeholders are pushing companies to tackle social and political issues as governments fall short of doing that.

And (very important) Millennials, now outnumbering the Baby Boomers in the workforce, represent a new generation’s focus – on various expressions of, and clear demonstrations of corporate purpose.

The January 2019 letter of course created a buzz in the corporate sector and in the capital markets as people thought about the meaning and weighed in on all sides of the issue.  What many agreed with was that there were now clear signals that the half-century doctrine for the corporate sector of “shareholder primacy” was giving way to “stakeholder primacy.”

As the purpose discussion rolled on, in August 2019 the influential Business Roundtable issued a revision of its Statement on the Purpose of a Corporation, signed by 181 of the CEOs of the largest of American companies (firms both publicly-traded and privately-owned). 

Important step forward: the CEOs publicly committed to lead their companies for the benefit of all stakeholders: customers, employees, suppliers, communities, and shareholders.

The Roundtable’s Principles of Corporate Governance has been issued since 1978; from 1997 on this endorsed the principle of shareholder primacy (that corporations existing principally to serve shareholders).  The new statement, said the BRT in summer 2019, outlines a modern standard for corporate responsibility. 

The team at G&A Institute looked at the companies whose CEOs are members of the Business Roundtable (almost 200 in all), examining their public disclosures and structured reporting on “walking-the-talk” of “purpose” and “responsibility to stakeholders” 

What are the companies doing — and how are they telling the story of the doing — the walking the talk?

Our approach was to analyze the means of disclosure and reporting “on corporate purpose” and the focus on any related content of sustainability / responsibility / ESG / corporate citizenship reporting by the BRT member companies.  (The good news to share:  there’s plenty of relevant information on purpose in the leadership corporate reporting. You can read through the respective corporate reports to divine the meaning and expressions of purpose in the pages.)

The analysis is available on the G&A Institute web site – see this week’s Top Story for the headline and link to our Resource Paper. There are relevant links there as well.

What will the purpose of the corporation discussion be in the new year, 2020?  Stay tuned to the perspectives shared that we’ll have in our G&A Institute Sustainability Highlights newsletter and on this blog.

Best wishes to you for the holiday season from all of us at G&A!

BlackRock CEO Larry Fink’s 2019 letter: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter

G&A Institute Releases Analysis of The Business Roundtable Companies’ ESG Reporting Practices
Source: Governance & Accountability Institute

Highlights:

 Governance & Accountability Institute’s research team examined the ESG / sustainability reporting practices of the BRT signatory corporations to examine trends and create a baseline for tracking progress and actions going  forward.  G&A released these initial benchmark results in a resource paper available on our website.

Sustainable Investing Has Moved Into the Mainstream — and UBS Survey Results Send Strong Signals This is a Lasting Trend

December 2019

by Hank Boerner – Chair and Chief Strategist – G&A Institute

There is no doubt now — the world’s largest asset managers are definitely focused on corporate sustainability and sustainable investing (the two go hand-in-hand) as survey upon survey of investment professionals tells us.

In recent years we seen considerable momentum as asset owners and their managers adopt or further enhance their sustainable investing / ESG investing approaches. And to gauge the progress we’re seeing major, global asset managers busily taking the pulse of the capital market players.

For example UBS, the findings from one of the world’s leading asset managers, which regularly surveys asset managers.  James Purcell, Global Head of Sustainable and Impact Investing at UBS Wealth Management shares the latest survey findings in a sponsored editorial post in the Harvard Business Review, and assures executive-level readers:

“Sustainability doesn’t mean one potentially has to give up returns. In fact it may be contributing to the investment process by adding more pertinent non-financial information. In this, we have reached a ‘why not’ moment.”

UBS, the commentator explains, is ambitious in wanting to shape the future of sustainable investing because the company believes these investments can help clients pursue investments according to their values.  And – because UBS is confident that sustainable investing will remain a widely-accepted way of investing.

In the content shared on the HBR platform, the company explains the signals that sustainable investing should be seen as a lasting, major force in the capital markets.  Among these signals:

  • Urgent challenges such as climate change (presented to both companies and investors).
  • The Paris Agreement on Climate Change, the UN Sustainable Development Goals (SDGs), the aims of the EU High Level Expert Group on Sustainable Finance – all of these actively suggest solutions to global challenges that are now at a scale demanding critical mass. (We have but 10 years to go to change the direction of perilous global warming, science experts tell us.)
  • At the same time, customers, shareholders and employees are aligning their values and leveraging their investments for the public good. That is impacting (positively) sustainable investing.
  • In turn, this trend creates new demands on institutions to make ESG performance and sustainable investment part of the long-term strategy.
  • Asset owners are heeding the call – see the Principles for Responsible Investing (PRI) for reports on the progress of asset owners (the PRI signatories) and their asset managers. (PRI was launched in 2006 with 63 investment companies committing to incorporate ESG issues into investment decision.  This year there are 2,450 signatories representing US$82 trillion in collective AUM!)
  • Three of four asset owners surveyed by UBS say that they consider ESG management approaches and results as one of the key issues looked at when choosing an asset manager.
  • These and other factors (outlined in the Harvard Business Review commentary) are clear demonstration – important signals! — of the extent to which the mainstreaming of ESG has evolved over the most recent years.

In the 2018 UBS Investor Watch Global Survey, 81% of respondents said they wanted to align their consumer spending patterns with their values.

In the 2019 UBS survey of investors (“ESG: Do You, or Don’t You?”) more four-of-ten respondents said they already have sustainable investments in their portfolios and expect a positive impact on financial performance. Eight-of-ten respondents said they thoughts “sustainable companies” were good investments (they’re perceived as better managed, more forward-thinking).

In 2019, UBS teamed with Responsible Investor to gauge the extent of ESG investing.  Europe had the highest proportion of asset owners active in ESG investing (82% of owners). North America is catching up with 70% of respondents saying they were “do-ers” (making ESG material their day-to-day activity) and 19% were “adopters” (not yet focused day-to-day on ESG but planning to integrate in the future).

Just in time!

Opening this week’s COP 25 meetings, UN General Secretary Antonio Guterres challenged those assembled at the Conference of Parties’ gathering (and millions more tuning in)  by asking – Do we really want to be remembered as the generation that buried its head in the sand, that fiddled while the planet burned? (Or, follow of path of resolve, of sustainable solutions).

The UBS commentary is a message of hope – and there is a handy sidebar explain sustainable investing which is of value.  We invite your reading of this week’s Top Story and the other items (including more sustainable investment items) that Editor-in-Chief Ken Cynar and the G&A team has selected for you this week.

Top Stories

Is Sustainable Investing Moving Into the Mainstream?
Source: Harvard Business Review – Sustainable investing, which incorporates environmental, social, and governance (ESG) criteria into investment decisions, has been gaining more attention among both individual investors and asset managers in the world’s largest…

The World Economic Forum on Corporate Citizenship Topics – With Focus on the Fourth Industrial Revolution

Another in the series – The Corporate Citizen and Society – the Dynamics of the Relationship

by Hank Boerner – Chair & Chief Strategist – G&A Institute

“Davos” – the annual gathering of the elite in business, politics, popular culture and journalism (and other corners of society) in the Swiss winter is familiar to most of us.

This event attended by more than 2,000 global thought leaders is staged by the World Economic Forum (WEF). Each January the meeting is convened and a steady stream of proclamations comes forth with positions discussed and often adopted by participants.

The steady stream of news from Davos, Switzerland not only in winter but throughout the year frequently touches on matters to be categorized in the wheelhouses of managers in corporate governance, corporate sustainability, corporate responsibility, investor relations, and corporate citizenship (and other functions).

The WEF stages conferences during the year in East Asia, Africa and South America; also, in the Middle East, China and India. But “Davos” is the well-known appellation for the winter meeting in the city of that name.

Because so many corporate leaders make commitments and “promises” for future action at Davos and other WEF regional meetings, it’s important for those reporting to the C-suite as well as in the suite and in board rooms to be aware of the promises of strategy to be adopted or adjusted, and expected actions to follow.

Here is a brief look at some of these recent proclamations to illustrate this.

The 48th World Economic Forum Annual Meeting (in January 2018) closed with a Call to Action to Globalize Compassion and Leave No One Behind.

This was an important gathering of 2,000+ leaders as the world’s attention continued to shift to “sustainability “ and related topics (such as global warming and transition to a low-carbon economy among the issues).

The meeting “celebrated” the spirit of inclusion, diversity and respect for human rights, putting people at the center of the story with a call to action, said one of the seven female co-chairs at the meeting, Sharon Burrow. “Let’s ensure that Davos 2018 is just the beginning of a movement where we globalize compassion and ensure a world in which no one is left behind.”

There were 400 separate sessions at the meeting, and one theme kept threading throughout: the need to embrace our common humanity in the face of the rapid technological changes ushered in by the Fourth Industrial Revolution.

“The Fourth Industrial Revolution” (FIR) was earlier framed and addressed in spring 2017 by the WEF Center for the FIR with new network centers opening in India, Japan and the UAE; partners for the initiative include the governments of Bahrain, the UK and Denmark, the Inter-American Development Bank, Deutsche Bank, and others.

The year before the January 2018 gathering in Davos, WEF had assembled 700 leaders in September 2017 (during the UN General Assembly and Climate Week meetings in New York City) to announce public-private initiatives:

  • One was the “Fourth Industrial Revolution for the Earth” – a private-public sector initiative to identify and fund new ventures (and scale them!) to “harness technologies” to benefit the global environment.
  • The Global Battery Alliance to “clean up” battery industry supply chains.
  • A “National Task Force” in South Africa to close skills gap.
  • A Disaster Risk Innovation Fund to test and scale innovations using mobile technologies to help in humanitarian emergencies and disasters. This was organized with the help of the United Kingdom for International Development (UK DFID) and the GSM Association (GSMA), the trade group representing almost 1,000 mobile communications operators and 300 industry companies.

The 2017 meeting was the WEF’s inaugural “Sustainable Development Impact Summit” — intended to broaden public-private sector cooperation to meet the challenges of the Fourth Industrial Revolution and work to achieve the goals agreed to at the 2015 Paris climate summit.

What steps can public and private and social sector leadership take to put the “common humanity” theme into action? Here are some things agreed to at Davos:

  • The WEF published a report – “Towards a Reskilling Revolution” — providing guidance need to help millions of people find jobs lost due to technological change.
  • The WEF-led “IT Industry Skills Initiative” whose “SkillSET” portal aims to reach a million IT workers by 2021.
  • A new multi-stakeholder initiative is “Friends of the Ocean Action” — launching an “Ocean Action Track” to protect oceans, seas and marine resources vital to so many coastal and non-coastal nations.
  • Marc Benioff – founder, Chair / Co-CEO of Salesforce.com, pledged US$4.5 million funding through the Benioff Ocean Initiative.

Salesforce Chair/Co-CEO Benioff heads the 30,000 employee company, and was named by Fortune as one of the world’s greatest leaders, and by Harvard Business Review as one of the 10 Best-Performing CEOs. He was the co-chair of the summit.

He explained: “There is incredible tension between the dramatic innovation that is occurring and the issue of equality. The technologies of the Fourth Industrial Revolution offer the opportunity to drive progress to the Sustainable Development Goals (SDGs).”

(CEO Benioff has a new book out now – “Trailblazer: The Power of Business as the Greatest Platform for Change”.)

The summit was designed to accelerate the “successful achievement” of the UN SDGs.

  • The WEF’s “Closing the Gender Gap” is attracting state support in Latin America (Peru, Chile, Panama and Argentina were on board at the time of the meeting).
  • Corporate leaders from Alphabet, Coca-Cola Company, Royal Philips and Unilever teamed with governments of Indonesia, Nigeria, China and Rwanda to create the “Platform for Accelerating the Circular Economy” (PACE) to address the mounting problems posed by discarded electronics and the plastic waste stream through recycling these manufactured items back into economy for future use.

As developing economies bring more people into the middle class, the consumption of meat products rises (more animal protein is consumed).

While this is good for ranchers and meat packers it is seen as not so good for the global environment by climate activists and sustainable food activists.

And so out of Davos comes the “Meat: the Future” initiative, to help identify ways that animal meat and protein production can be made more safe (for all involved, including the animals), affordable and sustainable as the industry players work to meet growing consumer demand.

Thomson Reuters, Europol and WEF announced a partnership to raise greater awareness worldwide to help governments and industry fight financial crime and modern slavers. Key: Promoting more effective information-sharing and step up best practices in compliance.

And that leads to a currently-debated hot issue: the growing prevalence of “fake news”, especially in political circles and affecting local elections in developed democracies.

  • The Craig Newmark Foundation is collaborating with WEF; the aim is to bring tech /social media industry leaders together with stakeholders to address fake news issues. (Craig Newmark was the founder of Craig’s List and his philanthropy includes funding for journalism institutions such as the Poynter Institute and graduate schools for journalists.)

The WEF, through its Davos and regional gatherings, and an array of public-private sector initiatives, provides ample opportunities for corporate citizens – and their CEOs and boards – to identify and leverage opportunities to bolster existing core businesses and develop new and innovative ventures with and without partners.

In 2015, WEF was recognized as The International Organization for Public-Private Cooperation.

We’ll continue to share news of interest related to the corporate sector from the World Economic Forum in this series of commentaries.

Note: In the public dialogue now about “purpose”, WEF developed its “Our Mission” statement years ago. “The Forum engages the foremost political, business, cultural and other leaders of society to shape global, regional and industry agendas. We believe that progress happens by bringing together people from all walks of life who have th4e drive and influence to make positive change.”

Full statement here: https://www.weforum.org/about/world-economic-forum