Doing the Right Things in Business — Making the Business Case – Making the Financial Case — Also Incorporating the Moral Case?

It’s an age-old topic of discussion:  Where in American business do the issues of morality, ethical behaviors, and “fair and equitable” fit in?  Andrew Winston, author of the best-selling “Green to Gold,” explores the topic (“morality”) in an essay on Sustainable Brands’ “New Metrics” web platform.

Morality:  moralizing; degree of conforming to moral principles.  So — in exploring the subject of morality in business, Andrew Winston thinks managers should crank the “moral” arguments into making-the-business case-for-corporate-sustainability discussions.  Making-the-financial-case (“investors want to know…”) is occurring more frequently now with many more mainstream investors focused on the firm’s ESG performance and the sustainability journey of especially large-cap enterprises.

“This is the right thing to do…” may be the persuasive argument in making the business case to decision-makers.  The moral positions of companies and their leaders are facing greater scrutiny now, says Winston.  Will companies defend LGBT rights — or protect immigrant employees?  Will they publicly argue for greater attention and action on climate change issues?  (It’s the right thing to do, many of you, dear readers, will agree.)

In our Top Story, author Andrew Winston sets out four “buckets” of arguments as to how the initiatives companies pursue create value — and three “mainstream” arguments (have some element of making-the-business-case, such as “short-term financial wins”).  The fourth argument — improve the shared commons –  and is it time to broaden how we talk about sustainability and bring in a moral dimension.

The traditional business case is still critical – but broadening the arguments in making the sustainability business case has Winston wondering if a combined logic or “good for business” and “good for the soul” will work.  He welcomes your thoughts after reading the essay.

Governance & Accountability Institute, Inc. is now in the 10th year of operations.  When we founded G&A back in 2007, we adopted the tagline:  Helping our clients do the right things for the right reasons.  That’s guided us to 2017 and benefited many of our corporate clients and our partners-in-progress.

Is it Time to Add Morality to the Business Case for Sustainability?
(Monday - February 06, 2017)
Source: Sustainable Brands - Every manager (or consultant) who has pitched an initiative under the banner of “sustainability” has faced the same question nearly every time: What’s the business case?

State Street CEO to Boards of Companies in Portfolio: Disclose More About the Impact of Climate Change on Your Business — Be More Transparent…and More

State Street Corp is one of the world’s leading asset managers, with US$2.47 trillion in AUM.  State Street Global Advisors CEO Ron O’Hanley in late-January sent a message to the boards of directors of public companies whose stock is in State Street portfolios:  SSGA is increasing focus on climate change, safety, workplace diversity and various other ESG issues.  Especially climate change.  Tell us more about what you are doing.

How?  The State Street Global Advisors CEO is asking, how is the board [of the company] preparing the enterprise for the impacts of climate change?  He is communicating to these directors that it is necessary for boards to disclose more about those plans.  The CEO’s letter was accompanied by a description of the framework that SSGA uses to evaluate public companies’ sustainability efforts.

In this week’s first Top Story, the highlights of the approach are described for you. Three criteria are used to evaluate and rank companies — as Tier One, Two and Three.  Tier One companies satisfy the three criteria.  The results are reflected in the proxy voting of SSGA, the #3 asset manager of ETF’s in the USA (Exchange Traded Funds).

There were 177 companies in the portfolio that SSGA evaluated in 2016; a mere 7% qualified as Tier One.  Tier Two totals 72%, which meant that companies had a sustainability program but had not integrated it into its overall business strategy, articulated how ESG factors affected long-term strategies, or established long-term goals aligned with ESG strategy. (Tier Three companies were described as not doing anything ESG-wise, 21% of companies in the portfolio, according to the Think Advisor story.)

Company boards and C-suite should consider that State Street is an active player in the coming proxy voting season.  SSGA supported 46% of climate-related proposals in 2016.  That’s important when you consider the competition:  the vote count was zero (voting) at Vanguard, American Funds, Black Rock and Fidelity — a source of concern and a growing level of activism on the issue among sustainable & responsible investing advocates.

In an interview with Bloomberg’s top environmental reporter, Emily Chasan in January (our second Top Story below), SSGA CEO O’Hanley said:  “We’re asking companies to make sure they are identifying and communicating both their risks and opportunities.  Climate change may be the poster child for risk out there.”

The Bloomberg Business Week story has a neat chart for you, with the voting records of “shares of proxy votes in favor of climate-related proposals.”  The Top 20 of the world’s asset managers’ voting records are presented.  State Street is the fifth-ranked (at the top).

Stay Tuned, as we often say, to the coming 2017 Proxy Voting Season at public companies.  ESG issues are front and center at some large corporate issuers and the action will be in the maneuvering around the shareholder-offered resolutions on climate change and other ESG issues by the entire voting body.

Story links below:

State Street Wants Companies to Focus on Sustainability
(Wednesday – February 01, 2017)
Source: Think Advisor - State Street Global Advisors, the third-largest provider of ETFs, wants more companies to incorporate sustainability practices into their long-term business strategies and will consider such corporate efforts in its upcoming

State Street Asks Boards to Disclose More on Climate Preparation
(January 26, 2017)
Source: BloombergBusinessweek - Climate change is no longer listed as a top issue on the White House website, but it’s very much at the forefront for $2.47 trillion asset manager State Street Corp.

The Best Intentions of C-Suite On Corporate Sustainability — Results in Are In With Sharing of Bain & Co Survey

This is not encouraging: the respected management consulting company Bain & Company surveyed the leaders of 300 companies engaged in “sustainability transformation” and conducted interviews with heads of sustainability recognized for outstanding results.

The question: What are the results of instituting sustainability as a top priority? The answer: Alas, not really encouraging for stakeholders, says Bain & Company. There’s an important “but” here with tips for CEOs and C-suite on how to overcome the odds of losing forward momentum in corporate sustainability efforts.

The management consulting firm published the results of its research in: “Achieving Breakthrough Results in Sustainability.” This effort found that for the 300 companies, only two percent (2%) of their corporate sustainability programs achieved or exceeded their aims when compared to the companies’ other transformation programs (which had a 12% success rate). There are “change traps” that keep companies from reaching their goals.

Key quote: “Too often, sustainability gets stuck in first gear, while the need for change is accelerating,” said Jenny Davis-Peccoud, who leads Bain’s Sustainability & Corporate Responsibility practice. “Once companies learn to navigate common roadblocks, they open the door to a transformational journey and the potential to leave a legacy,prompting companies to redefine what it means to be a leader in their industry.”

We see this in our analysis of corporate sustainability reporting as the Global Reporting Initiative data partners for the United States, United Kingdom and Republic of Ireland. The corporate leaders in sustainability have made “the journey” an integral part of strategy-setting, operations, marketing, employee motivation, stakeholder (including investor) engagement, and incentivizing internal behaviors. The “leaders” and “laggards” in sectors and industry categories self-identify through their reporting on achieved progress (and stalled progress is also apparent).

For 2016 our analysts reviewed more than 1,500 corporate sustainability / responsibility / environmental progress / citizenship reports published by companies and databased key characteristics, data sets, achievements, and more. This intelligence is leveraged in our client services, shared research and teaching programs.

One of the issues Bain found in its survey effort and conversations with managers is that the rank and file employees do not see sustainability as a business imperative — even though those at the top of the organization understand that enhancing the firm’s “public reputation” is a key driver for sustainability change. Two important factors emerged from the Bain effort: Less than 1/4 of the firms surveyed said employees were held accountable for sustainability through incentives; and, there was a lack of resources as well as competing priorities to deal with.

G&A Institute analysts look for the winning characteristics that overcome these obstacles in their report analysis. G&A has designed a series of tools and services to help companies engage more effectively with their employees on sustainability goals and initiatives that is proving to be very successful among our clients. Please let us know if you’d like to set up a call to discuss how we can help your company.

Among the four tips for CEOs and corporate leadership from Bain: “Highlight the Business Case.” (Helping to make the case: for brand marketers, those with a demonstrated commitment to sustainability grew four times faster than their peers in 2015, according to the Nielsen Global Corporate Responsibility Report.)

There’s more in the Top Story this week, along with information on requesting a copy of the report from Bain & Company. Inc.

Corner Office Sustainability Passions Get Trapped at the Top: Why 98 Percent of Companies Do Not Achieve Their Sustainability Goals
(Wednesday – January 25, 2017)
Source: CSRWire - A new report from investment leader and management consultants Bain & Company — “Achieving Breakthrough Results in Sustainability” — finds that only 2 percent of corporate sustainability programs achieve or exceed their aims, compared to 12 percent of other corporate…