60% of the Russell 1000 Published Sustainability Reports in 2018 — Trends Among Large-Cap, Publicly-Traded U.S. Companies Included in the Russell 1000® Index — G&A Institute Shares Research Results

Topline
60% of the Russell 1000 Published Sustainability reports in 2018, however of the smallest 500 by market cap only 34% are reporting, compare to 86% of the largest 500. Click here for more details.

How many times today do you think you looked at or mentioned a stock index to colleagues?

Some days investor and corporate conversations are about stock index performance (up, down and sideways!).  Stock indexes, explains Investopedia, are our powerful indicators for specific economies (such as that of the U.S.A.) and we are of course familiar with the bold face names whose “performance” many media report on constantly  – the “Dow” (DJSI), Nasdaq Composite and S&P 500.

There are thousands more used by investors as benchmarks for the analysis of their own performance “against the benchmark”. Investable products are created using the benchmarks (the intellectual property of their owners (such as the Dow and various S&P indexes, like Real Estate, Energy, Consumer Staples, etc.).

The familiar S&P 500® (launched in 1957) has 500 of the largest U.S. companies by market cap and other factors and represents about 80 percent of the total value of the U.S. stock market (it is market-weighted, or capitalization weighted). This is owned by S&P Global Inc. and its S&P Dow Jones Indices units provide a wide range of indexes/benchmarks for global investors.

The 500 and other large-caps are represented as well in another large index universe — the Russell 1000 Index, owned by LSE (the London Stock Exchange). This benchmark for large-cap companies is used by investors to go beyond the S&P 500 to include up to 1,000 of the large-cap U.S. equities, including the S&P 500 companies.

The S&P 500 Index companies are the largest companies with US$8 billion or more in market cap, 50% float, certain liquidity and positive earnings. 
The Russell 1000 Index is a subset of the broad Russell 3000 Index® and represents the largest 1,000 companies in the U.S. equity market (the largest is Microsoft).  About 90% of the total market cap of all U.S. listed stocks are represented by this important bellwether index, says Investopedia.

Each year since 2011 the analyst team at G&A Institute has tracked the S&P 500 companies’ ESG reporting activities.  That first year we found just about 20 percent of the companies publishing “sustainability, responsibility, citizenship” et al reports. 

In 2012 that number rose dramatically to more than half of the companies publishing such reports (53%).  Then each year after the number steadily rose (to 72% in 2013 and up to 86% in 2017).  We share the research results – you can see the latest “Flash Report” here.

The Russell 1000® Research Results
This year we expanded our research to include the “next 500” – the U.S. large-cap companies not included in the S&P 500 Index.  The top-line results:

  • 60% of the 1,000 companies are publishing sustainability reports in 2018.
  • The top half of the companies align with the S&P 500 universe and comprise 72% of the Russell 1000 universe that does publish a report.
  • Of the reporting companies, only 28% were from the bottom 500 of the Russell 1000 Index.
  • Of the 40% of that do not report, 83% were those smaller in market-cap, and only 17% were S&P 500 Index companies (reflecting the results of our annual S&P 500 research).

Takeaway: While the larger companies by market cap are by a wide margin the publicly-traded firms that publish sustainability and responsibility reports, their smaller peers in the Russell 1000 have a ways to go to catch up. Those non-reporters are or will be hearing from their institutional investors that an annual sustainability or similarly-titled report is expected to be published by the firm, following the example of their larger peer companies in the Russell 1000.  Many of the large caps are already being asked questions about their ESG performance by investors, major customers and other stakeholders. 

Within their sector and specific industry categories, the reporting & disclosure pace is set by larger-cap peers.  The laggards (the large-cap companies in the Russell 1000 that are not reporting) will have ever-rising challenges ahead as the larger pacesetters expand their reporting efforts (usually competing with other large peers) and raising the bar for those companies not yet reporting in the respective industry category or categories for diversified firms.

Note the Russell 1000 was launched in 1984 by the Frank Russell Company and is part of a family of indexes that are market-weighted; today the benchmarks are owned by FTSE Russell, a subsidiary of the London Stock Exchange (LSE).

Governance & Accountability Institute team members help companies publish sustainability and responsibility reports and in various ways disclose data and information about their ESG strategies, performance and results (outcomes of the sustainability journey efforts).  For more information please see our web site at www.ga-institute.com.

Information about our Russell 1000 Index analysis regarding public company ESG publishing is in the Flash Report, our Top Story this week.

Top Stories

FLASH REPORT: 60% of Russell 1000® Are Publishing Sustainability Reports, G&A Institute’s 2018 Inaugural Benchmark Study Shows   
Source: Governance & Accountability Institute, Inc. – In this inaugural benchmark study, G&A found that 60% of the [total] Russell 1000® published sustainability reports in 2018. Of importance to consider is roughly the top half (by market cap) of companies in the Russell 1000® are…

Dramatic Change of Direction For The Business Roundtable With Issuance Of “Purpose Statement” Signed By The CEOs Of America’s Largest Companies

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

The Business Roundtable (BRT) is an organization of CEOs of the largest companies in the U.S.A. — firms that generate a combined US$7 trillion in revenues, employ 15 million people, invest $ 147 billion annually in R&D, and provide healthcare and retirements benefits for tens of millions of Americans.

Member companies operate in every one of the 50 states and through the organization the nation’s top business leaders work to influence major societal issues — tax policy, infrastructure needs, trade and other issues..

This universe of large companies is where many institutional and retail investors place their bets on the economic future and enjoy some of the fruits of the efforts of the enterprises they invest in. 

Investors provide much of the capital that make the wheels go ‘round for the BRT companies.  Consider: investors in the BRT member companies received almost $300 billion in dividends.

And so investors have been a priority concern for the CEO members for the almost half-century existence of the Business Roundtable. 

The BRT’s long-term guiding philosophy seemed to many to have been rooted in the period four decades ago when influential economists such as Dr. Milton Friedman of the University of Chicago advised the CEOs that their primary duty was to look out for the shareholders first…and all else would fall in place.

Professor Friedman famously set out the agenda for major company CEOs and boards in his essay in The New York Times magazine in September 1970: A Friednzan Doctrine.

“When I hear businessmen speak eloquently about the ‘social responsibilities of business in a free-enterprise system’…the businessmen believe that they are defending free enterprise when the declaim that business is not concerned merely with profit but also promoting desirable social ends, that business has a ‘social conscience’ …” he began.

In doing this, he explained, those running companies believe they “have responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers…”

Only people can have responsibilities, the professor said. A corporation or business as a whole cannot be said to have responsibilities, even in this vague sense.

He concluded his 3,000 word anti-CSR screed with this: “…the doctrine of social responsibility taken seriously would extend the scope of political mechanism to every human activity. It does not differ from the most explicitly collectivist doctrine…” (Read: Communism; this was written in the days of the Cold War.)

Dr. Friedman saw corporate social responsibility as a “fundamentally subversive doctrine and that business had one and only one social responsibility: to increase profits so long as it stays within the rules of the game…”

In fact, the business managers / owners are, or would be if anyone else took them seriously, “preaching pure and unadulterated socialism.”

We Are In a New Era

We are almost 50 years away from the 1970 essay by the good professor.

The game has changed. The world has changed. The nature of the former Russia-USA standoff of the Cold War era has changed. Attitudes in the business (corporate) community have changed (witness the BRT “purpose statement”). Institutional investor attitudes have changed (see: sustainable investing). A vast array of stakeholders have entered this discussion since the 1970s.

So What Is The Purpose of The Corporation in the 21st Century – in 2019?

In 1997, the Business Roundtable issued its statement of the purpose of the corporation:  “The paramount duty of management and of boards of directors is to the corporation’s stockholders.”

No more.  This week, the Business Roundtable moved beyond the long-term “shareholder primacy” operating principle, releasing its revised “Statement on the Purpose of a Corporation” — representing a dramatic course change in the principle operating philosophy of this powerful, CEO-led organization.

The almost 200 CEO signatories pledged to: 

–invest in employees;

–deliver value to customers;

–deal fairly and ethically with suppliers;

–support communities in which they work; and, –generate long-term value for shareholders.

Each of stakeholders is essential, the Purpose Statement reads.  We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.

Jamie Dimon, CEO of JPMorgan Chase is the current head of the BRT and played an important role in the dramatic shift of attitude in the official stance of the organization.  He sees this as “an acknowledgement that business can do more to help the average American.”

Adding color to this critical public re-positioning:  “Society gives each of us a license to operate. It’s a question of whether society trusts you or not,” Ginni Rometty, CEO of IBM told Fortune.

On its web site, BRT states “as leaders of America’s largest corporations, BRT CEOs believe we have a responsibility to help build a strong and sustainable economic future in the United States.”

We can say here that it appears that ESG and Sustainability basic principles are now “officially recognized” by the members of the CEO association — and have been enshrined in the declaration of the purpose of the U.S. large corporation.

The Purpose Statement does touch on numerous concerns of the sustainable investor – a good step forward for this powerhouse organization.

Perspective: This new BRT direction is about ESG / Corporate Sustainability / Corporate Responsibility / Corporate Citizenship — the issues and topic areas we deal with every day here at G&A Institute!

The BRT was created two years after the Milton Friedman essay appeared in The New York Times magazine (October 1972). Institutional investors were flooding into the equities market with relaxation of “prudent man/prudent investor” rules or guidelines of that the day. Large publicly-traded companies were the crown jewels of cities and towns (think: IBM, Hudson Valley, NY; GE, Connecticut; GM, Detroit).

The CEOs of that day — the predecessors to today’s BRT leadership — were operating in very different societal environments than in the 21st Century.

Congratulations to the CEOs who signed on to the new Purpose — no doubt the conversations with institutional investors will be centered in some ways on the new “official” BRT perspectives in the days ahead.

For the record, note that the BRT released its first sustainability report — “SEEing Change” — in April 2008 with 32 companies contributing to the report. The tally was 155 companies involved by 2017, with goals being set for E and S improvements.

We are following the discussion kick-started by the Purpose Statement and will have more to perspectives to share in the weeks ahead.

Our Top Story is the excellent Fortune feature on all of this by veteran business writer Alan Murray. It’s a great summary of the dramatic move by the CEO signatories this week.Click here to read the Business Roundtable’s “Statement on the Purpose of a Corporation” and see the list of corporate CEO signatories. 

The Top Story

America’s CEOs Seek a New Purpose for the Corporation
Source: Fortune – For more than two decades, the influential Business Roundtable has explicitly put shareholders first. In an atmosphere of widening economic inequality and deepening distrust of business, the powerful group has redefined its mission…

How Do We Get Board Room Attention For Our Corporate Sustainability Efforts? And Help Directors Understand and Support The Corporate Effort?

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

Those questions and more are often raised by managers trying to get the board room and C-suite attention – and support and resources needed — to launch or advance their company’s sustainability journey.

Here at G&A Institute our team has ongoing conversations with corporate managers about ESG / corporate sustainability and related topics.  What often comes up:  the “G” is challenging.  The questions raised include…

What metrics can we apply to show “governance progress” in our reporting?  Governance – that’s clearly a board room responsibility. What is measurable…and then reportable to be part of the ESG profile of the company?

How can we get the board’s attention to be able to keep them updated and involved in our company’s sustainability efforts? 

If we are staring out, how can we get the board’s attention to be able to help them understand the importance of corporate sustainability (we hear this from managers trying to get the program going and needing resources to be allocated).

What information does the board need to understand the whole topic area? (Corporate Sustainability / Sustainable Investing et al.)

Some answers to these and other questions are at hand in the advice from the World Business Council for Sustainable Development (the WBCSD) in the form of a commentary by the organization’s associate of redefining value, Johanna Tahtinen.  She offers perspectives and advice on Ethical Corporation’s platform.

To move from “nice to have” to “need to have”, she cites a McKinsey & Company report that found that a quarter of assets under management (globally) are now invested considering ESG factors, and what was a niche practice is now large and fast-growing.  Good for the board to know.

And, the World Economic Forum (WEF), the Davos meetings organizer, in its third Global Risk Report identified ESG as “…clearly becoming part of the everyday business realty and well as a fiduciary duty.  Good for the board to consider.

Governance metrics are a starting point and focus area for many investors, creating expectations for companies to integrate ESG “meaningfully into governance structures, management processes and disclosure”.  Clearly in the board room list of duties and responsibilities to address.

The influential WBCSD, Johanna Tahtinen explains, recently launched a project on governance and oversight to elevate ESG-related issues to the board room by supporting stronger decision-making, risk management and business resilience.

Good governance – assuring that this a high-priority in the board room – sends strong signals to the capital markets.  How do we know that? 

A recent study by WBCSD and Big 4 accounting firm PwC shows that investors (generally) have more confidence in the information reported and that governance metrics are a starting point and focus area for many investors today.

For the board room audience — the report put ESG in the risk category — it is all about risk, said Paula Loop, Leader-Governance Insights Center at PwC. She talked in February 2019 about risks, common misperceptions and the three stages of ESG with FEI Daily (the publication of Financial Executives International).

Her comments are of real value for you in assembling your board room presentation – check here:
https://www.financialexecutives.org/FEI-Daily/February-2019/ESG-in-the-Boardroom-A-Q-A-With-PwC%E2%80%99s-Paula-Loop.aspx

The advice for managers and senior executives for communicating the importance of ESG  to the board room from WBCSD includes:

  • Integrating material ESG information into the corporate reporting processes and decision-making.
  • Using consistent and comparable standards and metrics.
  • Making sure the board of directors understands the importance of ESG.

You’ll find details on these and more information in the Top Story.

The Top Story

From nice to have to need to have: how companies can push ESG up the boardroom agenda
Source: Ethical Corporation – Johanna Tahtinen of the World Business Council for Sustainable Development explains how boards can improve governance systems to meaningfully integrate ESG 

How To Build a Better – More Sustainable! – Brand … Advice From an Adweek Commentator

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

We seem to love our “top 10” [etc.] lists; these are typically eye-catching headlines for published news and commentaries about certain subjects. (As in: the 10 things you need to know about…). 

In Adweek, the authoritative news and insights publication for brand marketers over the past four decades, we learn about “the five truths needed to create a sustainable brand”. 

This is from a commentary by columnist Bruce Mau (he’s a prominent designer, co-founder of Massive Change Network and Visiting Professor at Pratt Institute).

The “mad scramble to make brands more sustainable is in full swing,” he advised his corporate marketing and advertising agency executives audience.  And many companies are still getting it wrong.  So what are the correct steps?  He suggests five – and explains the nature of each.

The first misconception to address (and change) is that a new, splashy product is not true sustainability, which comes about through a series of incremental improvements. 

Think of a product that is recyclable and (then) what that may take to create, produce and market successfully (in the end, that benefits the society by addressing the challenge of too much waste still going to landfill).

Then, (another step) in the lesson learned is usually that “you can’t do it alone” – society is facing an ecosystem of problems, and we all need help in addressing these.  

No firm can address an industry’s issues all alone.  Collaboration is key; imagine when a client on the scale of a McDonald’s says it will be sustainable, what happens if every of its vendor follows suit.  (Wal-Mart has been the prime corporate / retailer example of this over recent years.)

As we here at G&A tell our corporate clients and the many corporate managers we speak to each week, sustainability is not a destination; it is a journey! And the journey involves many people beyond those few taking the first steps in the company…the crowd will grow as the journey ensues. The excitement builds with more people involved.

“Strategy” is of course a very familiar (and over-used) word in the corporate world. This comes down to us from Ancient Greece, deriving its meaning from the concept that this is the work of generalship – being a leader.

Successful strategy comes from the top and begins with “clarity,” and understanding, author Bruce Mau tells us. Pursuit of sustainability should be a key strategy of the corporate enterprise.

Finally, today there is capacity to track the world’s energy and material flow and create metrics to enable those who manage brands to make better decisions and build “reasonable, actionable sustainability strategies”. 

Simple lesson is (for corporate leaders) — the impact that brands and brand marketers make can be better measured and managed. For better or worse.

Giving all of us – brand marketers and consumers and a widening range of stakeholders – a better way to track our progress (or lack thereof) and to determine the impacts we are making on our planet and society.

There’s a small treasure of insights for you in author Mau’s Adweek commentary – our Top Story for you this week.

Click here for more about Bruce Mau and his “Massive Change Network.

Please let us know how we’re doing with our selection of news, research and commentary that we present in our Highlights! 

This Week’s Top Story

The 5 Truths Needed to Create a Sustainable Brand
Source: Adweek – The mad scramble to make brands more sustainable is in full swing. And while companies are right to tackle this issue, the truth is that quite a few of them are still getting it wrong. That’s because there are still a few glaring… 

About Those Assembled “Best Of” Lists of Companies – What Lessons Are There For The Managers Of Other Firms…Those Not On The List Of The Chosen Corporates?

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

There are a number of “best of” lists that corporate managers and investment professionals scour to see which companies are judged to be doing well (by the list makers)…whether they be industry peers & competitors, or possible acquisitions or partners.

Where do we stand is on the minds of the corporate managers in viewing the many best of lists.

And — for investors, considering whether the listed firms (at or near the top of the lists) might be the right choices for investment portfolios.

One annual list that we do follow closely is produced by Corporate Knights – this is the “Global 100 Most Sustainable Corporations”, published for the 15th year in 2019. 

This list begins with around 7,500 possible inclusions in the top 100, all of the firms generating $1 billion or more in revenues.  Analysts devote 5,000 hours scouring almost 4 million data points to narrow the field to the chosen 100.

Examining the results, Holly Johnson of The CEO Magazine shared her perspectives with her readers.  There were top takeaways she learned from examining the work of Corporate Knights analysts:

  1. The top companies “live longer” (average age for the top 10 was 87 years!).
  2. They are better governed than peers, with lower CEO-to-worker pay ratio. They pay more in taxes.
  3. They’re “greener,” generating more revenues from clean (positive green or social impact) goods and services.
  4. More women are found in their ranks, and in the board room; there’s bound to be found a link between exec compensation and sustainability measures.
  5. Revenue is “cleaner” – generated through sustainable products. The Top Company is Chr. Hansen, generating 80% of revenues from development of natural solutions for food preservation and crop protection, as well as alternatives to using antibiotics for food animals.
  6. Investors are happier with these firms. 

You can find the details from each of these findings in our Top Story. There’s a link to the Top 100 Corporate Knights list in The CEO Magazine post.

The company names you’ll find in the Top 10 of the Top 100 firms include Prologis (USA); GlaxoSmithKline Plc (UK); Banco do Brasil S.A. (Brazil); Taiwan Semiconductor (Taiwan).

Author Holly Johnson is staff writer and digital producer with The CEO Magazine, in Australia, where “she now delves into the world of leading business executives.”  The magazine is Australia’s leading business publication.

Top Story

Green leaders: The world’s most sustainable companies in 2019
(Tuesday – July 02, 2019) Source: CEO Magazine – According to Corporate Knights’ list of the 2019 Global 100 Most Sustainable Corporations, it encompasses carbon and waste reduction, gender equality in leadership and even revenues derived from clean products. 

Do Consumer Favor Sustainable Brands for Their Products and Services Needs? NYU Stern School Research Dives Deep into the Data For Answers

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

Many people in consumer marketing are wondering about consumer preferences for “sustainable” products! In our weekly newsletter the G&A Institute team offers media and experts’ shared perspectives on various issues and matters related to corporate sustainability, responsibility; and, sustainable, responsible and impact investing.

In recent months the content shared frequently has focused on trends in the consumer market — to help answer the question of whether or not consumers reacting to brand-facing companies positioning themselves as sustainability leaders.

Is this type of brand marketing a successful strategy?  Worth the effort? 

So the important question in all of this “wondering” is: Are consumers now favoring sustainable or green (or pick your term of definition) for their products & services at retail? 

In our ongoing monitoring of news, feature and research results — such as for the fashion and footwear industries, the auto industry, food & beverages, and certain other categories — the results tell us brand leaders are now often introducing sustainable products alongside their usual cash cows. We included several items for you in this week’s newsletter along these lines. This was our top story:

Writing in the Harvard Business Review, Tensie Whelan, professor at New York University Stern School of Business, and leader of the NYU Stern Center for Sustainable Business, and Randi Kronthal-Sacco, director of Corporate Outreach for the Center (and formerly with Johnson & Johnson) describe the results of their recent in-depth research project. 

This research centered on trying to answer the question — do U.S. consumers actually purchase sustainably marketed products?  (Spoiler alert: yes – you must read the HBR article to find out more.) 

Whelan and Kronthal-Sacco used volumes of data sets from bar scan codes at retail for food, drug, dollar, and mass merchandisers, looking at 36 categories and 71,000+ SKUs, accounting for 40% of consumer products goods (CPG) sales over a 5-year period.

So, what did they find to be the largest share of sustainability-marketed products? 

Almost $1-in-$5 purchases at retail are for toilet tissue, facial tissue (think: forest products); milk, yogurt (the yield of countless dairy farmers); coffee (lots of attention on the global coffee-growing belt circling the Earth, and worker conditions therein); salty snacks (really?); and bottled juices (you’ll notice that Coke and Pepsi and other beverage marketers are advertising their shift away from sugary drinks). 

At the bottom of market share:  laundry care, floor cleaners and chocolate candy (accounting for a 5% share).

Say Tensie and Randi:  Pay attention, marketers and those all along the retail value chain, from grower field and factory floor to shelf space.  Consumers are voting with their dollars, for sustainable and against un-sustainable brands. 

Winners in the corporate sector include PepsiCo and Unilever; laggards include Kraft Heinz. (For the leader, Unilever:  think of the company’s sustainable labels like Seventh Generation, Sundial Brands and Pukka Herbs.)

And we are seeing in the many stories we bring you each week about consumers and sustainability, the future for sustainable CPG at retail is looking bright – look at the apparel industry.for examples  The agora is alive and well with many more sustainably-branded products on the shelves.  That’s the good news for sustainability professionals.

The NYU researchers used data from IRi (the research house for CGP, retail and health and beauty – information at: https://www.iriworldwide.com/en-US/Insights)

Congratulations to our colleagues Tensie Whelan and Randi Kronthal-Sacco at NYU Stern Center for Sustainable Business for sharing their insights and perspectives.

This Week’s Top Story

Research: Actually, Consumers Do Buy Sustainable Products
(Thursday – June 20, 2019) Source: Harvard Business Review – NYU Stern’s Center for Sustainable Business just completed extensive research into U.S. consumers’ actual purchasing of consumer packaged goods (CPG), using data contributed by IRI, and found that 50% of CPG growth from 2013 to… 

In the Skies Overhead – Global Airline Passenger Volume Set to Double Over Next Two Decades. What Could the Environmental Impact of More Air Travel Be?

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

Once upon a time in the early days of jet travel, business travelers accounted for three-quarters or more of the total passenger business of the major U.S. airlines (known as “trunk” carriers back in the day).  Fares were long set by Federal regulation and family-friendly, tourista-friendly fare packages were scarce or non-existent.  Airlines relied on the “have-to-travel-for-business” crowd. At full fare (regulated until the late-1970s).

As the U.S. transport regulations were significantly relaxed (scheduled carriers through Federal “de-regulation” in 1979), the number of U.S. airlines soared from 75 or so to 400 companies…and then began to steadily shrink as carriers merged or went out of business. But passenger travel continued to grow.

Consider:  The Federal Aviation Administration reports 2.7 million passengers move across 29 million miles of controlled airspace on 44,000 flights within the U.S. each day! (See Air Traffic by the Numbers for full details): https://www.faa.gov/air_traffic/by_the_numbers/media/Air_Traffic_by_the_Numbers_2019.pdf

IATA reports four billion annual passengers traveled on a global basis between 20,000 “city pairs”, doubling the global 1995 city pairs available to fliers (the airport centers) in 2017. Passenger traffic was heaviest in Asia-Pacific (more than one-third of the total); Europe and North America each had a quarter of the total number of passengers.  More information for you at: https://www.iata.org/pressroom/pr/Pages/2018-09-06-01.aspx

In response to this steady growth in passenger demand, as set fares were de-regulated airlines and seat price points steadily fell, airlines developed a bewildering array of fare offerings (“stay overnight on Saturday” etc).  And those reduced fares helped to bring many more non-business fliers to the American skies.  

Outside of the U.S., what were once “national flag carriers” (like British Airways, Air France, KLM, Al Italia (up for sale to private sector) and many others owned by governments) are now private sector companies — and these long-established carriers and their newer competitors are similarly filling their planes through offer of attractive fares and generous “packages” for retail customers, and connecting business and tourism fliers with many more cities.

And so – as author Stephan Rice points out in his Forbes commentary – IATA, the industry’s International Air Transport Association — sees the global commercial airline passenger business doubling over the next 20 years. 

More flying customers means more passenger airliners will be needed (with much more fuel consumed), more airports needed to accommodate the “to and from” of air travelers (or airports will have to be expanded and upgraded) …and all this means more pollution

Passengers are now becoming more aware of the impact of air transport on the environment and demanding more sustainable practices.  And they are willing to pay for it, some surveys show.

As air travel volume builds, what can be done to reduce the impact of air travel on the global environment? 

Dr. Rice suggests airports can be re-designed to be more sustainable (he cites enhancements at SFO International and Boston Logan as U.S. examples). Indira Ghandi International in Delhi has the first Leadership LEED Gold certificate.

Airlines could use biofuels; KLM had a biofuels test flight from Amsterdam to Paris; Honeywell arranged a flight over the Atlantic using petro-based fuel and camelina (a derivative of a flowering Mediterranean plant!); Singapore is using biofuels over the Pacific.

A 2017 survey of 700+ consumers showed that passengers were willing to pay an additional fee (up to 13% more) for a flight using biofuels — “…a portion of consumers value green initiatives and appear willing to contribute financially to support it…”

The U.S. carriers’ trade organization is “Airlines for America”; it promotes the “A4A’s Climate Change Commitment” for member airlines and is part of a worldwide aviation coalition committed to a global framework on aviation and climate change with emissions target goals. (The “Aspirational goal” is 50% reduction of CO2 emissions by 2050 relative to 2005 levels.)
Information at: http://airlines.org/a4as-climate-change-commitment/

IATA – the airline industry’s global trade association – has set three targets and four pillars to mitigate CO2 emissions from air transport. Information and fact sheets are available at: https://www.iata.org/policy/environment/Pages/climate-change.aspx

Author Rice describes the results of additional consumer surveys on the topic in his Forbes commentary.  He concludes:  “It is clear that the public wants sustainable aviation…and are willing to pay at least some costs for this. Some airlines and manufacturers are taking the lead, but the rest of aviation need to follow very quickly or get left behind.”  Read the details in his commentary, which is this week’s Top Story for you.

Stephen Rice is a professor at Embry-Riddle Aeronautical University and received his Ph.D. from the University of Illinois.

Hank Boerner personal note: I spent most of the first two decades of my career in the air transport industry. After my time as an aviation business journalist I was the first “corporate citizenship” manager of American Airlines and later, senior advisor to Royal Jordanian Airlines, then the fastest-growing airline in the world (for two years). In the 1970s, I served as organizer and executive director of the two “MECACON” conferences (Middle East Civil Aviation). On September 11, 2001 I was on duty again, with our team, serving my client, American Airlines in the New York City region in crisis management; and again, for the Flight 587 tragedy in November 2001. It’s a great industry creating opportunities for so many individuals and nations!

This Week’s Top Stories

The Public Supports Sustainable Aviation and They’re Willing Pay for It
(Friday – June 07, 2019) Source: Forbes – The International Air Transport Association has predicted that the number of commercial airline travelers will double in the next 20 years. This means that there will be more airplanes, more airports, and more pollution. The…

And – adding to the discussion – the Simple Flying web platform has an interesting story by Joanna Bailey on “sustainable jet fuel” – can it save the planet?  This is an ideal companion piece to the Top Story this week: 

What On Earth Is Sustainable Jet Fuel? Can It Save Our Planet?
(Friday – June 18, 2019) Source: Simple Flying – The use of sustainable aviation fuel is on the increase around the world. But what is this newfangled propulsion juice exactly, and is it the magic bullet to make aviation kinder to the environment?

For the Board Room and C-Suite –Questions and Advice From the Harvard Business Review About Corporate ESG and Sustainability

Corporate managers & executives: is your board “sustainability/ESG fluent”? And if not – why not?

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

Attorney Silda Wall Spitzer and John Mandyck, CEO of Urban Green Council, writing in Harvard Business Review explain that while “some” board members have become increasingly “sustainability/ESG fluent” many companies [still] don’t expect their directors to understand sustainability or ESG and don’t provide board room education on the subject matter.

Those enterprises are at a competitive disadvantage, the authors believe. 

An important game-changer for the board room and C-suite to understand is the profound influence of ESG as investment professionals (institutional asset owners and their management firms) increasingly use ESG data, ratings, rankings, and scores to analyze their portfolio holdings (and screening prospective investments).

These ratings, rankings, scores and comprehensive ESG profiles provide a foundation of corporate ESG data and information from the independent ratings agencies that the asset owners and managers use to refine their models and apply to portfolio management policies and practices.

The HBR authors explain the basics of this for the publication’s broad management audience – those men and women at the top of the corporate pyramid who should be aware of, understand and be focused on their company’s ESG strategies, actions and outcomes (or current lack thereof!).

The company’s sustainability scores provided by third party organizations are based on corporate disclosure and performance in three main categories (environmental, social, governance).

Here at G&A Institute we see the leaders in large-cap space embracing sustainability / ESG as evident by the results of our annual survey of the S&P 500 Index® companies’ sustainability & responsibility reporting. 

From the rate of about 20 percent eight years ago, we now find 86% of the 500 large-cap firms are now publishing such reports — many using very innovative and robust approaches.

We’re seeing that the mid-cap and small-cap companies are catching on to the trend and beginning their own sustainability journey that will result in still broader disclosure and reporting.  But not all mid- and small-caps are on board yet. 

This is an area of tremendous opportunity for leadership by companies who make the first move in their sectors and differentiate themselves from their industry and investment peers.

In our conversations with managers at companies just starting out on their sustainability journey (or contemplating same), we explain that there is already a “public ESG profile” of the company “out there” and being studied by investors.

Perhaps, being studied by a good portion of the company’s current shareowner base, depending on the size of the company (the market cap), geography, sector or industry classification, or other factors.

The often- scattered and diverse elements of the existing ESG public profile come from the company’s financial filings, regulatory filings (such as for environmental data), financial and other analyst reports, the company’s web site postings, ESG “brochure-type” reports — and a host of ratings and scores created by the ESG ratings providers and used by investors.

There are more than 200 such ESG / sustainability ratings organizations of varying size and type.  The major influencers for institutional investors include ESG raters such as MSCI, Sustainalytics, and Institutional Shareholder Services (ISS), and ESG data providers such as Bloomberg and Thomson Reuters.

What directors and executives of all public companies need to understand is that important decisions about their companies are being made in large measure now by the foundational work of these organizations and their many peers around the world.

And if the company does not tell the story of its sustainability journey, others will (and are).

Potential Impacts:

The work of the ESG ratings firms also can affect company-customer relationships; employee recruitment and retention; business partnerships and collaborations; relations with civic leaders and the communities the company operates in; for global players, the countries they operate in; the stock exchanges their issues trade on; their insurers and re-insurers views of the enterprise…and other aspects of corporate finance.

While “ESG” and “sustainability” may be seen as touchy-feely and “non-financial” concepts in some board rooms and C-suites, the material ESG issues are really about the company’s risk management profile, the quality of leadership at the top, competitive advantage, sustainability in the traditional investment view (the company has lasting power and is a long-term value proposition), and more.

As for being “non-financial”, the HBR authors point to a Harvard B-School study that found that $1 invested in a company focused on ESG resulted in $28 return vs. $14 for those companies not yet focused on ESG.  What director would not want to brag about this kind of achievement that is real and financial? It’s time to stop thinking of ESG as being touchy feely and squishy!

The HBR commentary is good basic overview for directors to help them understand the role of the board in overseeing and helping to shape the strategies and actions that will comprise their company’s sustainability journey. 

Author Silda Wall Spitzer is the former First Lady of New York State and co-founder and CEO of New York Makers, which curates NYS-made gifts and events that “define New York State”.  She is a former private equity director. Information at: https://newyorkmakers.com/

Co-author John Mandyck is CEO of Urban Green Council; its mission is to transform buildings in New York City and around the world through research, convening, advocacy and education. More information at: https://www.urbangreencouncil.org/aboutus

This Week’s Top Stories

What Boards Need to Know About Sustainability Ratings
(Friday – May 31, 2019) Source: Harvard Business Review – Corporate boards of directors must tackle questions about sustainability in a new and urgent manner. If they don’t, they will hear from investors about their lack of action. In just the latest indication of the investor… 

S&P 500® Index Companies’ ESG/Sustainability, Responsibility Reporting Hits 86% For Year 2018 – Latest G&A Institute Research Results…

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

The G&A Institute’s S&P 500 Index(r) analysis for the constituent companies’ 2018 reporting is complete.

For the eighth year, the G&A Institute research team has examined the ESG, Sustainability, Responsibility & Citizenship disclosure and reporting practices of the S&P 500® Index companies — and determined for year 2018 that 86 percent of the almost 500 public companies were publishing reports in various formats for public viewing.

This is a 1% increase over the 85% reporting trend determined by G&A researchers for year 2017. When the research effort began eight years ago (for 2010 reporting, in the 2011 examination) the number of companies among the 500 was just below 20%.

In the beginning of January each year, the current team of G&A analysts begin their examination of the prior year’s reporting trends. 

The S&P 500 companies (not always an exact number) are closely examined to determine public disclosure and reporting practices for activities that may be branded “corporate sustainability, or responsibility or citizenship, or even environmental” that appear in print, web or hybrid versions.

The initial results are double checked by other analysts and by EVP Louis Coppola, the architect of G&A’s research efforts since 2011.  G&A Institute Senior ESG Analyst Elizabeth Peterson assists as team leader in the coordination of the analysts’ research (she has been involved in the effort for several years now).

G&A’s team report analysts who contributed to the research this year are: Minalee Busi, Jessica Caron, Emilie Ho, Jess Peete.

The S&P 500 Index research results are widely cited by investors, analysts, company managers and other stakeholders in their own work and have become a standard reference for those citing the dramatic increase in corporate sustainability reporting. 

Institutional investors cite the results in urging non-reporting companies to begin reporting to shareholders on their sustainability journey.

You can see the full report in the news release that is linked as the Top Story this week.

FLASH REPORT: 86% of S&P 500 Index® Companies Publish Sustainability / Responsibility Reports in 2018
(Thursday – May 16, 2019) Source: Governance & Accountability Institute, Inc. – Highlights from Governance & Accountability Institute, Inc. Research: “Sustainability reporting” rose dramatically from 2011, when roughly 20% of companies published reports, to 72% just three years later in 2013. From 2013 to…

Today, We Have Corporate ESG Comparisons Galore – The Institutional Investor Has Access to Volumes of ESG Data Sets & Information – Where Can Others Find Scores, Rankings and Ratings of Public Companies?

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

These days the comparisons of companies ESG strategies and performance in sectors and industries and among investment peers (those companies chasing similar sources of capital) are continuing to gain momentum. 

There is a sizable universe of third party players — ESG raters, rankers, scorers — busily analyzing, measuring and charting company ESG performance.

These organizations assign proprietary scores, rankings, ratings and various kinds of comparisons (company-to-company, company to industry etc) for their investor-clients. (The institutional asset owners and their asset management firms.)

Companies typically get to see how they are doing when they inspect their ESG service provider profiles…but those data and information sets are not always publicly available. They are the secret sauce provided to investors — institutions holding equity or bonds or researching candidates for investment.

So how should the person without access to the major ESG service providers’ confidential output understand where the public company sits in the views of the analysts (at least the highlights, such as scores assigned)? 

Slowly but steadily some of the volumes of information provided to investor clients by the major ESG ratings agencies are making their way into public view. 

For example, you can see a public company’s Sustainalytics highlights on Yahoo Finance. For Apple Inc. / NASDAQ: AAPL “ESG Total Score” information, click here.

Our colleagues at CSR Hub® share a number of Ratings & Rankings and other CSR and ESG highlights on their web site and their “ESG Hub” information (which is available on the Bloomberg Terminal®)  CSR Hub is at: https://www.csrhub.com/

Now a neat presentation comes our way from Visual Capital, authored by Jenna Ross.  This is a mapping of “The Countries with the Most Sustainable Corporate Giants”. 

Remember BlackRock CEO Larry Fink’s letter to corporate CEOs urging them to serve a social purpose to deliver not only financial performance but also show how it makes a positive contribution to society? 

Following on that theme, Corporate Knights “2019 Global 100 Report” data and ranking of the “most sustainable corporations in the world” is presented in visualization format.

Corporate Knights scores companies on a mix of metrics after screening for those with at least US$1 billion in revenues and sufficient sustainability reporting:  resource management; employee (or human capital) management; financial management; “clean” revenue; supplier performance. 

The United States comes out at the top of the charting with 22 of the 100 companies on the list, followed by France (11), Japan (8), Finland and United Kingdom 7), and Canada (6).  No company in China or India made the list.

Of the “Top 10-star players” only one is from the USA – the REIT Prologis Inc.  Denmark has two companies; the rest are one-off listings from other countries.

Author Jenna Ross sums up: “It’s clear that sustainability is a strong differentiator in the business community.  The world’s largest – and smartest – companies are leading the charge towards a greener, more equitable future.” 

We think you’ll find the charting of this Global 100 fascinating and very useful – and there are many other clever and useful visual presentations on the web site.  Check out our Top Story for this week.

This Week’s Top Stories

Mapped: The Countries With the Most Sustainable Corporate Giants   
(Wednesday – May 08, 2019) Source: Visual Capitalist – Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.