7 Reasons Why America is Rethinking Capitalism Now

Guest Post by Linda E. Dunbar

Global Public Affairs Executive: PR Strategist, Spokesperson, Employee Communications Leader Adept at Engaging Key Stakeholders.

7 Reasons Why America is Rethinking Capitalism Now

There is a move afoot to change capitalism as we know it. A radical overthrow by futuristic anarchist forces? Hardly. Actually, the US business community is bravely harking back to its pre-Milton Friedman roots.

In September 1970, the 5”0’, Brooklyn-born Friedman, a well-known American economist who would earn a Nobel prize in economics six years later, published an opinion piece in The New York Times.

The title — “The Social Responsibility of Business is to Increase Profits” — summed up his thesis succinctly. In his piece, he accused US business of “preaching pure and unadulterated socialism” in attempting to address social issues of the day.

Friedman’s dismissive view: “The business men believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscious’ and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers.”

To set the scene, when Friedman wrote his piece, life was very different from today although there remains no shortage of societal issues for the US business community to address.

In 1970, a woman needed a man, any man, even her 17-year-old son, to sign a business loan, get a mortgage or a credit card regardless of her income. Her income would then be discounted by the lender by as much as 50 percent when deciding how much credit to extend. In those days…

Equal access to credit for all, at least on paper, would not come to be in the US until the Congress passed the Equal Credit Opportunity Act of 1974.

Just the year before, in 1969 Rep. Charlotte Reid (R-Ill.) became the first woman to wear trousers in the U.S. Congress and Barbra Streisand became the first woman to attend the Oscars in pants.

Also, in 1969 the Stonewall Inn riots in Greenwich Village launched the gay pride movement.

The unpopular Vietnam War would rage on another five years until the fall of Saigon in 1975.

Despite the passage of the historic Civil Rights Act of 1964, discrimination against minorities continued to be rampant. In Loving vs. the State of Virginia, the U.S. Supreme Court case that overturned “miscegenation” laws in the US, was decided in favor of the plaintiffs a mere three years after in the year 1967.

The first Earth Day was proclaimed in April 1970.

The animal rights movement had not yet gotten momentum. In fact, People for the Ethical Treatment of Animals (PETA) was not founded until 1980.

Following Friedman’s pronouncement, Corporate America and its corporate governance practices made shareholder value the end-all-and-be-all of corporate thinking.

Even if that approach clearly didn’t make any sense. Anyone in business today knows intuitively no customers no business no employees no business. But along with that pronouncement came the opportunity for many major U.S. companies to take a pass on societal issues, even issues that might have been caused by business practices (extractive industries and their activities affecting the environment come to mind).

Thankfully, we have come full circle and Corporate America — in fact the global corporate business community — is coming together to rethink capitalism and its societal impact. Recent comments by asset management giants and others have been well-received as we look toward creating change.

What does rethinking capitalism mean? And why now?

Better Capitalism. Tempered Capitalism. The New Capitalism. Conscious Capitalism.

Whatever it is called, helping to transform the short-term, insular thinking currently stifling the potential of American business and its ability to effectively connect with stakeholders is an important element of the movement.

Understanding that although businesses have an important fiduciary responsibility to shareholders, the enterprises exist for reasons other than to solely enrich shareholders (and business leaders who understand that perform better than those who don’t).

And the core: understanding your reason for existing, your purpose, what business you are really in is critical for long term success. As in do what you love and the money will follow.

“Purpose” turns out to be an effective organizing principle for many businesses. This thought process is catching on.

Here are my seven reasons why I think the time is ripe to rethink capitalism and mesh social impact and success.

1. Social media – Businesses just can’t ignore customers and employees any more. Before social media an unhappy consumer complained to roughly 17 other people. Now unhappy customers have a direct impact on reputation in a way they just could not before social media and a poor reputation eventually leads to lost revenue.

2. The Age of Authenticity — People in the US are tired of literal and figurative airbrushing. People want companies to do what they say they will. And they want them to strike the right note. If your advertising firm has advised you to be edgy, you have no margin for error. See number 1.

3. Millennials – There are over 79 million Millennials and the numbers of men and women Gen Z are close behind. They expect a different relationship between society and business — and they are not taking no for an answer. The idea that life is too short to be someone you are not or spending time in a way that you do not want to is part of their DNA. Gay, transgender, what have you, Millennials and Gen Z are not batting an eyelash. Equality, diversity, and inclusion are table stakes. They expect diversity, inclusion, equality where they shop, eat, work. If not, they will go somewhere else. Period.

4. Additional demographic shifts – The minority is becoming the majority and in 2019, the majority of U.S. children will be minorities. As demographics shift no business can be successful by leaving people out, be they customers or employee or potential customer or employees. This loops back to numbers 1, 2, and 3.

5. Climate change and the detrimental impact of humans on the planet is real – some problems we — business, government, NGOs, activists, the general public — have no choice but to tackle together. Like having air to breathe and water to drink.

6. The #Me too, #Times up Movement – Dignity, respect, and equality in the workplace, everywhere actually, are a given. And these movements have ramifications beyond sexual harassment. According to CNN, #MeToo and #TimesUp have pushed 48% of companies to review pay policies. Gender pay equity has been an issue since possibly the beginning of time and now we are seeing movement on this issue.

7. The data – The data says inclusive, diverse companies perform better.
How much better will companies perform when their purpose is at the core of what they do, long-term strategy is understood and embraced by everyone from the board on down, and stakeholders are effectively engaged? That remains to be seen but the prognosis is good!

If this article resonated with you, please feel free to connect with me directly and also like, comment or share.

7 Reasons Why America is Rethinking Capitalism Now

Email me at: linda.dunbar@outlook.com
Linked In: https://www.linkedin.com/in/lindaedunbar/

U.S. States and Cities — “Still In” to the Paris Agreement — and Great Progress is Being Made

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

This is our second commentary this week on the occasion of the first anniversary of the decision by the Trump White House in June 2017 to begin the multi-year process of formal withdrawal of the United States of America from the Paris COP 21 climate agreement…

The action now is at the state and municipal levels in these United States of America.

Where for years the world could count on US leadership in critical multilateral initiatives – it was the USA that birthed the United Nations! – alas, there are 196 nations on one side of the climate change issue (signatories of the 2015 Paris Agreement) and one on the other side: the United States of America. At least at the sovereign level.

Important for us to keep in mind: Individual states within the Union are aligned with the rest of the world’s sovereign nations in acknowledging and pledging to address the challenges posed by climate change, short- and longer-term.

Here’s some good news: The United States Climate Alliance is a bipartisan coalition of 17 governors committed to upholding the goals of the Paris Agreement on climate change. These are among the most populous of the states and include states on both coasts and in the nation’s Heartland.

The Paris meetings were in 2015 and at that time, the USA was fully on board. That was in a universe now far far away, since the election of climate-denier-in-chief Donald Trump in 2016.

On to the COP 23 and the USA

In 2017, two years after the Paris meetings, the USA officially snubbed their sovereign colleagues at the annual climate talks. A number of U.S. public and private sector leaders did travel to Bonn, Germany, to participate in talks and represent the American point-of-view. This included Jerry Brown, Governor, California (the de facto leader now of the USA in climate change); former New York City Mayor (and Bloomberg LP principal) Michael Bloomberg; executives from Mars, Wal-mart and Citi Group.

While the U.S. government skipped having a pavilion at the annual United Nations-sponsored climate summit for 2017, the US presence was proclaimed loud and clear by the representatives of the U.S. Climate Action Center, representing the climate change priorities of US cities, states, tribes and businesses large and small who want action on climate change issues.

Declared California State Senator Ricardo Lara in Bonn: “Greetings from the official resistance to the Trump Administration. Let’s relish being rebels. Despite what happens in Washington DC we are still here.”

# # #

As the one year anniversary of President Trump’s announcement to leave the global Paris Agreement (June 1, 2018), state governors announced a new wave of initiatives to not only stay on board with the terms agreed to in Paris (by the Obama Administration) but to accelerate and scale up their climate actions.

Consider: The Alliance members say they are on track to have their state meet their share of the Paris Agreement emission targets by 2025.

Consider: The governors represent more than 40 percent of the U.S. population (160 million people); represent at least a US$9 trillion economic bloc (greater than the #3 global economy, Japan); and, as a group and individually are determined to meet their share of the 2015 Paris Agreement emissions targets.

Consider: Just one of the states – California – in June 2016, according to the International Monetary Fund, became the sixth largest economy in the world, ahead of the total economy of France (at #7) and India (#8).

Consider: The US GDP is estimated at $19.9 trillion (“real” GDP as measured by World Bank); the $9 trillion in GDP estimated for the participating states is a considerable portion of the national total.

The states involved are: California, Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, and the Commonwealth of Puerto Rico.

The initiatives announced on June 1, 2018 include:

Reducing Super Pollutants (including hydrofluorocarbons (HFCs), one of the Greenhouse Gases, and harnessing waste methane (another GhG).

Mobilizing Financing for Climate Projects (through collaboration on a Green Banking Initiative); NY Green Bank alone is raising $1 billion or more from the private sector to deploy nationally).

Modernizing the Electric Grid (through a Grid Modernization Initiative, that includes avoidance of building out the traditional electric transmission/distribution infrastructure through “non-wire” alternatives).

Developing More Renewable Energy (creating a Solar Soft Costs Initiative to reduce costs of solar projects and drive down soft costs; this should help to reduce the impact of solar tariffs established in January by the federal government).

Developing Appliance Efficiency Standards (a number of states are collaborating to advance energy efficiency standards for appliances and consumer products sold in their state as the federal government effort is stalled; this is designed to save consumers’ money and cut GhG emissions).

Building More Resilient Community Infrastructure and Protect Natural Resources (working in partnership with The Nature Conservancy and the National Council on Science and the Environment, to change the way infrastructure is designed and procured, and help protect against the threats of floods, wildfires and drought).

Increase Carbon Storage (various states are pursuing opportunity to increase carbon storage in forests, farms and ecosystems through best practices in land conservation, management and restoration, in partnerships with The Nature Conservancy, American Forests, World Resources Institute, American Farmland Trust, the Trust For Public Land, Coalition on Agricultural Greenhouse Gases, and the Doris Duke Charitable Foundation).

Deploying Clean Transportation (collaborating to accelerate deployment of zero-emissions vehicles; expanding/improving public transportation choices; other steps toward zero-emission vehicles miles traveled.

Think About The Societal Impacts

The powerful effects of all of this state-level collaboration, partnering, financial investment, changes in standards and best practice approaches, public sector purchasing practices, public sector investment (such as through state pension funds), approvals of renewable energy facilities (such as windmills and solar farms) in state and possibly with affecting neighboring states, purchase of fleet vehicles…more.

California vehicle buyers comprise at least 10% (and more) of total US car, SUV and light truck purchases. Think about the impact of vehicle emissions standards in that state and the manufacturers’ need to comply. They will not build “customized” systems in cars for just marketing in California – it’s better to comply by building in systems that meet the stricter standards on the West Coast.

US car sales in 2016 according to Statista were more than 1 million units in California (ranked #1); add in the other states you would have New York (just under 400,000 vehicles sold); Illinois (250,000); New Jersey (250,000) – reaching to about million more. How many more vehicles are sold in the other Coalition states? Millions more!

(Of course, we should acknowledge here that the states not participating yet have sizable markets — 600,000 vehicles sold in Florida and 570,000 in Texas.)

Project that kind of effect onto: local and state building codes, architectural designs, materials for home construction; planning the electric distribution system for a state or region (such as New England); appliance design and marketing in the Coalition states (same issues – do you design a refrigerator just for California and Illinois?).

There are quotes from each of the Coalition governors that might be of use to you. (Sample: Jerry Brown, California: “The Paris Agreement is a good deal for America. The President’s move to pull out was the wrong call. We are still in.”) You can see them in the news release at: https://static1.squarespace.com/static/5a4cfbfe18b27d4da21c9361/t/5b114e35575d1ff3789a8f53/1527860790022/180601_PressRelease_Alliance+Anniversary+-+final.pdf

# # #

In covering the 2017 Bonn meetings, Slate published a report by The Guardian with permission of the Climate Desk. Said writers Oliver Milman and Jonathan Watts: “Deep schisms in the United States over climate change are on show at the U.N. climate talks in Bonn, where two sharply different visions of America’s role in addressing dangerous global warming have been put forward to the world.

“Donald Trump’s decision [to pull out of the Paris Climate Agreement] has created a vacuum into which dozens of city, state and business leaders have leapt, with the aim of convincing other countries that the administration is out of kilter with the American people…”

# # #

At the US City Level

Jacob Corvidae, writing in Greenbiz, explains how with the White House intending to withdraw, cities are now in the driver’s seat leading the charge against climate change.

Cities have more than half of the world’s populations and have the political and economic power to drive change.

The C40 Cities Climate Leadership Group is the Coalition helping cities to make things happen. The C40 Climate Action Planning Framework is part of a larger effort to make meaningful progress toward carbon reduction goals and build capacity at the municipal level. Cities are expected to have a comprehensive climate action plan in place by 2020. This will include 2050 targets and required interim goals.

The cities have the Carbon-Free City Handbook to work with; this was released in Bonn in 2017 at COP 23. There are 22 specific actions that can (1) drive positive impacts and (2) create economic development. This September the Carbon-Free Regions Handbook will be available. There is information for you about all of this at: https://www.greenbiz.com/article/every-action-how-cities-are-using-new-tools-drive-climate-action

The clarion call, loud and clear: We Are Still In!  Watch the states, cities and business community for leadership on meeting climate change issues in the new norms of 2018 and beyond.

Food & Ag Sector – Sustainability is in Focus from Farm-to-Table As Companies Make Progress / Stakeholders Say “More”

Hey, a Cuppa Joe – the morning treat for many people around the world.  That first hot cup of dark coffee can set the tone for us for the day. And when our spirits (and energy) may lag, the cuppa joe can perk us up again for a while at any time of day.  But – how many of us give thought to how that wonderful dark liquid arrived in our grocery stores, at the local Starbucks or Dunkin’ Donuts or other coffee counters?

The Ecologist took a close look at the business of coffee recently and their commentary (and report on the industry) is our Top Story for you this week.

The writer set out characterizing the global coffee industry as one that has been mostly “unsustainable” but lately, major coffee producers have been working to create more sustainable business models.

Guest Writer Emily Folk explains:  the coffee industry spans countries and cultures, is centuries old, and from harvesting the beans through roasting to the final retail product, the industry is recognizing public expectations about some practices – and is undergoing changes.  She ventures that “people have begun to take note and hold companies accountable” – like Starbucks – and in response, major coffee companies are making promises to do better.  But are they keeping the promise? Doing enough?

Alas, there is a lack of progress to be reported, she says.  As well as some progress to cheer about.  Starbucks according to a news report in the UK runs water 24 hours a day in the production process.  Bad practice?  The company has also been selling reusable cups and installing recycling bins at every store.  Certainly good practices.

Should the buying public pressure brand name companies like Starbucks to do more?  The writer delves into that.

It would be good to recognize that progress is being made by growers through retail food marketing companies and to be thoughtful about what is next in that company’s (and other companies’) sustainability journeys.

The G&A Institute team has been working with food and agriculture companies on various issues over many years.  This is a sector (Food & Ag) rich in traditional practices and ripe for positive change as stakeholders and consumers present their expectations for the firms to be more sustainable – and accountable to society.  Every week in the newsletter we present Food & Ag news, commentary and research content for your consideration.  There are several items in this issue on the topics.

Top Stories

Making the coffee industry sustainable
(Wednesday – May 23, 2018)
Source: The Ecologist – Sustainability is increasingly important for implementation in businesses. One of the industries that has been unsustainable since its inception is coffee. However, some major coffee producers have been working to make a more…

We Are “Out” of the Paris Accord — Really? What a Year! Signs of Great Progress in the Trump Denial Era

June 1, 2018

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

It was just one year ago – ah,, but it seems much longer…

WASHINGTON — The New York Times – June 1, 2017: “President Trump announced on Thursday that the United States would withdraw from the Paris climate accord, weakening efforts to combat global warming and embracing isolationist voices in his White House who argued that the agreement was a pernicious threat to the economy and American sovereignty.

In a speech from the Rose Garden, Mr. Trump said the landmark 2015 pact imposed wildly unfair environmental standards on American businesses and workers. He vowed to stand with the people of the United States against what he called a “draconian” international deal.

“I was elected to represent the citizens of Pittsburgh, not Paris,” the president said, drawing support from members of his Republican Party but widespread condemnation from political leaders, business executives and environmentalists around the globe.”

What was to follow?

A Year of Significant Progress!

Today — interesting perspectives are shared in The Washington Post on where we are one year after President Donald Trump “withdrew” from the Paris Climate Accord. The United States of America is the first – and perhaps will be the only – nation to join and then withdraw the Agreement. Sort of.

Participation in the agreement for the USA runs to year 2020 so we are “still in” (officially).  The withdrawal process will take the next three years.

By that time, there might be a new occupant in the White House. 

This nation is still in by examination of various other factors that are explained by writer Chris Mooney in the WaPo. (He covers climate change, energy and the environment, reported from the Paris negotiations in 2015, and has published four books on the the subjects he covers.)

The key points we took away from Mooney’s excellent wrap up today:

  • The Trump Administration still has no consistent message about climate change,  and no clear policy, except for the antics of EPA Administrator Scott Pruitt, with his slash & burn attacks on environmental and climate-related regulations.
  • There is a positive development: NASA Administrator Jim Bridenstine embraced climate science.  (See notes at end.)
  • There has been unrelenting attack on President Barack Obama’s skilled moves to protect the country – and the planet! – such as the Clean Power Plan.
  • But, while the White House is the cheerleader for the coal industry, market forces reward renewable energy and natural gas as powerful drivers for change.
  • Other countries are sticking with the Paris Accord, but some of those countries may find it challenging to stay the course without U.S. leadership (says John Sterman of MIT).

Background:  The Obama Administration agreed in Paris with many other nations to the goals of a 26%-to-28% reduction of emissions below the 2005 levels — and today the U.S. and the whole world is off that metric, writes Chris Mooney.

Even if the commitments were realized, there would be a temperature rise of 3.3 degrees Celsius (almost 6% F) over time (according to MIT’s Sterman). So the USA would have to do even more than agreed-to in Paris. (The USA is the world’s second largest GhG emitter.)

Where are we? According to the Climate Action Tracker produced by NewClimate Institute and Ecofys, the USA is on track for an 11% to 13% decrease by year 2025, which is about halfway to the Obama Administration pledge.

What may interfere: the move to rollback auto fuel efficiency standards; an analysis by Rhodium Group projects adding 100 million tons (annually) by year 2035 for auto emissions alone if the rollbacks move forward.

The good news – from the “We Are Still In” front: the states of Virginia and New Jersey are making moves to cut emissions and the states of Colorado and California are developing new electric vehicle policies.

Vicky Arroyo (director of the Georgetown Climate Center is quoted:   At least we are not losing the momentum that was feared (one year ago today).

Kate Larsen, who directs climate change research at the Rhodium Group, thinks that the country is on track to meet or even exceed the Obama-era Clean Power Plan goals — thanks to the use of lower-cost renewable fuel sources and natural gas.

Greenhouse Gas Emissions in the United States are “hardly set to explode” and the country is moving toward lower GhG emissions over time, writes Mooney.

But. What the Trump announcement did last year on June 1 was to create fog about US national policy regarding climate change. The thing we all have to face: the slow progress exhibited and achieving climate change goals (those coming out of Paris) are not compatible.

The WaPo commentary is at: https://www.washingtonpost.com/news/energy-environment/wp/2018/06/01/trump-withdrew-from-the-paris-climate-plan-a-year-ago-heres-what-has-changed/?utm_term=.782d3cb38b3f&wpisrc=nl_most&wpmm=1

Counterpoint!

The EDF – a/k/a Environmental Defense Fund – today trumpeted the Year of Climate Progress (since June 1 2018).

EDF members and environmentalists immediately began the counter-attack in June 2017 and in EDF’s words, that led to a year of extraordinary climate progress. The organization presents a timeline on line.  Highlights:

  • June 5, 2018 – EDF helps launch a coalition of organizations, businesses and state and local civic and political leaders to pledge “We Are Still In!” – today there are 2,700 leaders participating.
  • On to July 2017 – California Governor Jerry Brown signs into law an extension of the state’s cap-and-trade program out to 2030.  The state is the sixth largest economy in all of the world!
  • September – North of the border, Ontario Province links its cap-and-trade program to the California-Quebec carbon market, creating a huge market covering 580 million tons of emissions. Sister province British Columbia intends to increase its carbon tax for April 2018 through 2021.
  • Nine Northeastern US States in the Regional Greenhouse Gas Initiative complete their second program review and agree to reduce emissions by 30% from 2020 to 2030.
  • Halfway around the world in December 2017 China announced its national carbon market (to be largest in the world); this will start with electric power and expand to seven other industrial sectors. (So much for the Trumpian claim China is doing nothing to meet Paris Accord conditions.)
  • We move further into 2018 and the Federal Energy Regulatory Commission (FERC) rejects the DOE coal and nuclear proposal.
  • Despite shouts and threats and Trumpian boasting, the U.S. Congress adopts the 2018 budget in March 2018 that leaves the EPA budget mostly intact (EPA Administrator Scott Pruitt wanted to cut the agency’s budget by 30%. Other environmental / energy agencies see budget increases.)
  • April – the UN’s International Maritime Organization adopts a climate plan to lower emissions from container ships, bulk and oil carriers, by at least 50% below 2008 levels by 2050.
  • Also in April — In the key industrial State of Ohio, the Public Utilities Commission approves AEP’s Electric Security Plan – this, EDF points out, will enhance and diversify the state economy, unlock millions in funding, provide customers with clean energy options and overall, will reduce pollution.
  • Next door, in April, the Illinois Commerce Commission approves the state’s Long-Term Renewable Resources Procurement Plan to have a pathway for electric utilities to produce 25% of power from renewable sources by 2025 and put incentives in play for development of wind and power.
  • April — EDF President Fred Krupp gives a TED Talk, outlining the plan to launch methane-detecting satellites in orbit above Earth to map and measure oil and gas methane emissions. The data and information gathered will help countries and companies spot problems, identify savings opportunities and measure progress.
  • April sure was a busy month – Canada issued policies to cut oil and gas emissions by 40% to 45% at new and existing facilities. This was part of a pledge made in 2016 (when President Obama was in office) for the USA, Canada and Mexico to decreased such emissions in North America by that amount by 2025.
  • On to May – and recently-elected New Jersey Governor Phil Murphy – a former Goldman Sachs exec – signed into law the plan to cut GhG emissions by almost half by 2030 (hey, that’s twice what the Clean Power Plan would have required!). The Garden State will require 50% of NJ electric needs to be met from renewable sources.
  • And on to May – ExxonMobil announced plans to reduce oil and gas methane emissions by 15% and flared gas volume by 25% — worldwide – by 2020.

Yes – a remarkable year, kicked off on June 1st 2017 by a vindictive head of state set on reversing the significant progress made under his predecessors.

But many individuals, companies, investors, civic organizations, NGOs proclaimed: We are still in.  The movement represents city halls, board room, college campuses, investors, and more…interests representing US$6.2 trillion (one-sixth of the entire American economy) have signed on to the We Are Still In declaration — https://www.wearestillin.com/we-are-still-declaration

Have you?

Notes:

The New York Times story by Michael Shear, June 1 2017 is at: https://www.nytimes.com/2017/06/01/climate/trump-paris-climate-agreement.html

The American Institute of Physics info on NASA, embrace of climate change consensus: https://www.aip.org/fyi/2018/bridenstine-embraces-nasa-science-climate-change-consensus

We Are Still In information at: https://www.wearestillin.com/

The “100 Best Corporate Citizens 2018” Roster -– Published by CR Magazine

by Hank Boerner – Chair, G&A Institute

Now in its 19th year, the well known CR Magazine “100 Best Corporate Citizens 2018” list was just unveiled; this effort recognizes the ESG performance of public companies in the United States. (The publication is now titled Corporate Responsibility Magazine, published by 3BL Media LLC.)

Top Companies:
Microsoft
(MSFT) earned top ranking (#1), followed by Accenture, Owens Corning, Intel, and Hasbro (at #5).

The next five ranked companies are (#6) Altria Group, Cisco Systems, Ecolab, Johnson & Johnson, and NVIDIA Corp (at #10).

The biggest gainers for the year were Becton, Dickenson; IBM; Owens Corning; and Biogen.  The complete list is available in our Top Story (below).

Assembling the list does not rely on responding to a survey, publisher Dave Armon explains.  Each year the rankings measure the success of the “Brands Taking Stands” movement by celebrating the most successful, most transparent companies that report on their responsible practices. “We congratulate the company on the 2018 list for their commitment to corporate responsibility,” he said in announcing the rankings.

Methodology:
The list examines 260 data points of performance measures and disclosure, harvested from publicly-available information for every company in the Russell 1000® Index, in seven categories (environmental, climate change, employee relations, human rights, corporate governance, financial, and philanthropy & community support).  The underlying research is conducted by ISS Corporate Solutions (Institutional Shareholder Services).

The inaugural list was published in 1999 by the former Business Ethics Magazine, which segued into CR Magazine.

Coming up soon, CR Magazine in collaboration with the 3BL Association (formerly the Corporate Responsibility Association), presents the well known annual COMMIT!Forum conference, now re-branded as the 2018 3BL Forum by its new owners.

This year’s event is at MGM National Harbor near Washington DC, October 23-25; the theme is “Brands Taking Stands – The Long View”.

3BL Media LLC is the global leader in disseminating CR and sustainability content. Its brands include Triple Pundit; CSR Wire; 3BL Wire; 3BL Report Alert; Justmeans, 3BL Studio, and others. Corporate clients utilize the platforms for their sustainability, CR and related content distribution, communications and campaigns.

G&A Institute has collaborated with the 3BL Media staff and Corporate Responsibility Magazine on a long-term basis.  3BL content is carried daily on G&A’s news and opinion web-based distribution platforms.

The details for the “100 Most are in the Top Story:

Top Stories

Corporate Responsibility Magazine Announces 2018 100 Best Corporate Citizens
(Wednesday – May 09, 2018) Associated Profiles : CSRwire Source: CSR Wire — Corporate Responsibility Magazine (CR Magazine) announced today its 19th annual 100 Best Corporate Citizens list, recognizing the standout environmental, social and governance (ESG) performance of…

Are We Making Progress? Considering Recent News About “Apparel Fashion and Sustainability” — and the Investor Initiative to Help Make East Asian Factory Workers Safer and Better Paid…

by Hank Boerner – Chair, G&A Institute

In monitoring the growing abundance of news stories and commentary about “supply chain,” “globalization” or “trade” topics and issues, our editors often see the focus is on apparel, clothing, textiles, fashionand related topics & issues.

Companies in the developed economies widely source apparel footwear and related items in the developing and under-developed nations – and what happens there can quickly make news that travels around the globe.

Example:  The focus five years ago about this time was on the East Asian nation of Bangladesh and the Rana Plaza vertical factory tragedy in the capital city of Dhaka (or Dacca) that killed more than 1,000 garment industry workers.  The labels of leading western nation marketers were scattered about the debris and ashes — and those familiar brand images as well as images of the collapsed building and details of the tragedy helped to focus attention on worker conditions in the East Asian region in both North America and Europe.

The Interfaith Center on Corporate Responsibility (ICCR) investor coalition is keeping the focus on worker safety as the “Bangladesh Accord on Fire and Safety” is renewed for another three years.

ICCR institutions and their investor allies organized as “The Bangladesh Investor Initiative” (with collective AUM of US$4.5 trillion) on the 5th anniversary are urging a stronger corporate response and demonstrated commitment to local worker safety and adequate wage levels.  The link to our blog commentary on recent developments and background information for companies and investors is below.

Some good news to share is that sustainability is catching on in the fashion industry.  The uber fashion magazine from publishers Conde Nast – Vogue, with more than one million readers — just published a story about the embrace of “eco-friendly” fashion, spotlighting “the best designers of a new generation are stitching sustainability into everything they do…”

“While sustainability has long been considered a “byword for hemp-heavy bohemia,” writer Olivia Singer explains, “a new generation of designers is building brands with a more conscious approach to fashion at their core.”

Fabrics are sourced through collectives in India empowering female weavers as just one example.  In the article designers explain why sustainability is important to their brands (Richard Malone, Le Kilt, Elliss, E.L.V. Denim, Alyx, Marine Serre, Richard Quinn are featured interviews).

A number of creative approaches being adopted by the designers is explained — just think about the contribution to global sustainability of turning recycled plastics and viscose into yarn and fringing, using organic cotton as well as recycled polyester for “new” fashions, creating ECONYL from fishnets to make swimwear, and using recycled cotton and plastics as part of the effort of making sustainability a “pillar of luxury”.

The encouraging details are in our Top Story this week – a cautionary note:  some of the fashion photos are edgy and might offend.

Top Stories

The Young Designers Pioneering A Sustainable Fashion Revolution
(Thursday – April 26, 2018) Source: Vogue – While eco-friendly fashion has never had particularly glamorous connotations, the best designers of a new generation are stitching sustainability into everything they do.

And of interest, our own related content on G&A’s Sustainability Update Blog:  The Bangladesh Garment Factory Workers Tragedy and Investor and Corporate Response Five Years On…

As the Global Demand for Palm Oil Rises, There is More Focus on the Growing Areas – and on Industry Behaviors Such as Deforestation

By Hank Boerner – Chair, G&A Institute

Palm Oil is one of the world’s most popular vegetable cooking oils and in western nations is widely used as prepared food ingredients. Food industry interests promote the benefits: lower cholesterol levels, less heart disease, more Vitamins A and E, and much more, derived from the rich beta-carotene from the pulp of oil palms.

Palm oil also shows up in our detergents, shampoo, cosmetics, pizza slices, cookies, margarine — and even in biofuels. Palm oil is especially used for cooking in Africa, Asia and parts of South America and is growing in favor in other regions such as in North America.

The palm oil plantations are located in such regions of the world as Southeast Asia – and there the industry is linked to the downside of the beneficial consumer product: deforestation, degrading of flora and fauna habitat, abuses of indigenous peoples, and negative impact on climate change as old growth land and tropical forest is cleared to make way for oil palm plantations.

Stakeholder reaction resulted in the creation of “reliable No Deforestation, No Peat, No Exploitation” policies – the “NDPE”.

These were developed for certification (to buyers) by the Roundtable on Sustainable Palm Oil (RSPO) and adopted in 2013 and 2014 by numerous Southeast Asian palm oil traders and refiners.

The policies (spelled out as best practices) are designed to prevent clearing of forests and peat lands for new palm oil plantations. There are 29 company groups, reports Chain Reaction Research, that have refining capabilities and have adopted NDPE policies. (Climate Reaction Research is a joint effort between Climate Advisers, Profundo and Aidenvironment.)

“Un-sustainable” palm oil practices are an issue for investors, customers (buying the oil), companies with sustainable practices, and countries in which palm oil is grown and harvested.

According to a new financial risk report from Chain Reaction Research, major markets with customers that accept “unsustainable palm oil” include India, China, Pakistan and Indonesia.

One of the major centers of production is the huge – more than 3,000-miles wide — Pacific Basin archipelago nation of Indonesia (once known as the Dutch East Indies). Almost half of the world’s palm oil refineries are in Indonesia and Malaysia.

The Indonesian government (the Ministry of Agriculture) reacted to the NDPE policies and proposed changes to its own certification program – known as the “Indonesian Sustainable Palm Oil Standard” (ISPO) – that would appear to be presenting companies with pressure to adopt one or the other of the certifications.  (The ISPO policy focus is on reducing Greenhouse Gas Emissions and addressing environmental issues.)

For Indonesia, palm oil is a strategic product that helps the government to meet job creation and export market goals. “Small holders” account for more than 40% of production in the country.

“Evidence suggests that the need for edible oil and energy will continue as populations grow, “Darmin Nasution, Coordinating Minister for Economic Affairs for Indonesia points out. “Land that can be utilized will decrease, so the question is how to meet those needs in the limited land area. Increasing productivity will be the key.”

Companies using the existing Indonesian ISPO certification were accused of human rights abuses and “land grabs” and so in January the government developed the new certification, which opponents claim weakens protection (the draft changes for the regulation removes independent monitoring and replaces “protection” with “management” for natural ecosystems).

Stranded Asset Risks

CDP estimates that global companies in the industry had almost US$1 trillion in annual revenues at risk from deforestation-related commodities. As the developed nation buyers looked carefully at their global supply chains and sources, “stranded assets” developed; that is, land on which palm oil cannot be developed because of buyers’ NPDE procurement policies. Indonesia and Malaysia have some of the world’s largest suppliers.

Western Corporate Reaction

Early in 2018 PepsiCo announced that it and its J/V partner Indofood suspended purchasing of palm oil from IndoAgri because PepsiCo — a very prominent global brand marketer — is concerned about allegations about deforestation and human rights were not being met.

Institutional Investors are busily identifying companies that source Crude Palm Oil (“CPO”) without paying attention to sustainability requirements, putting pressure on both sellers and buyers and perhaps pushing the smaller players to the sidelines. European buyers import CPO in large quantities to be used in biofuels.

The bold corporate names in western societies show up in rosters of company groups with refining capacity and NDPE policies, including Bunge, Cargill, Louis Dreyfus Company, Unilever, and Wilmar International. These are large peer companies in the producing countries (like IOI Group, Daabon, Golden Agri-Resources) are aiming for “zero deforestation” in their NDPE policies.

Other companies that source palm oil include Kellogg’s, Procter & Gamble, Mars, General Mills, Mondelez International, and other prominent brand name markets.

Your can check out the Chain Reaction Research group paper – “Unsustainable Palm Oil Faces Increasing Market Access Risks – NDPE Sourcing Policies Cover 74% of Southeast Asia’s Refining Capacity” at: http://chainreactionresearch.com/2017/11/01/report-unsustainable-palm-oil-faces-increasing-market-access-risks-ndpe-sourcing-policies

What About Exercise of National Sovereignty?

This situation raises interesting questions for developed nation brand marketers. If the government of Indonesia presses forward with the country’s own standards, should the purchaser in a developed country ignore or embrace the country standard? Instead of the Roundtable on Sustainable Palm Oil (RSPO) standard? What about “sovereign rights,” as in the ability for a sovereign nation to establish its own policies and standards governing the products developed within its borders?

As industry groups create their own standards and invite industry participants to embrace these (such as for product certification), corporations may find themselves bumping up against “nationalistic” guidelines designed to benefit the internal constituencies rather than “global norms” imposed from outside the country’s borders.

# # #

Responding to the streams of negative news coming out of Indonesia, Chain Reaction Research on April 26 reported that Citigroup has cancelled loans to Indofood Agri Resources and its subsidiaries. Citigroup will exit its overall relationship with Indofood other than specific financial relationships that are not related to the palm oil business, says the research organization.

The research firm said that labor and environmental violations by Indofood and other companies related to Anthoni Salim and his family have been documented. The web of companies: Salim and family own 44% of First Pacific, which owns 74% of Indofood.

In April a report commissioned by Rainforest Action Network Foundation Norway and SumofUS and prepared by Chain Reaction Research alleged deforestation of almost 10,000 hectares of peatland by PT Duta Rendra – which is majority owned, the report says, by Salim and PT Sawit Khatulistiwa Lestan, which is associated by Salim.

Notes:

As we prepared this commentary, the Danish Institute for Human Rights and The Forest Trust carried out a Labour Rights Assessment of Nestle’s and Golden Agri-Resources palm oil supply chain in Indonesia.  Nestle’s and GAR and going to share their own action plans in response to the findings and recommendations.

For The Roundtable on Sustainable Palm Oil information: https://www.rspo.org/

There is information from a recent conference in Jakarta for you at: https://www.scidev.net/asia-pacific/forestry/news/science-can-keep-palm-oil-industry-sustainable.html

The Indonesian Government ISPO information is at: http://www.ispo-org.or.id/index.php?lang=en

General Mills Statement on Responsible Palm Oil Sourcing is at: https://www.generalmills.com/en/News/Issues/palm-oil-statement

Rainforest Action Network information is at: https://www.ran.org/palm_oil?gclid=EAIaIQobChMIuJyBg97i2gIVE1mGCh3A-QMYEAAYASAAEgKZePD_BwE#

The Union of Concerned Scientists information is at: https://www.ucsusa.org/global-warming/stop-deforestation/drivers-of-deforestation-2016-palm-oil#.WudvOKjwbAw

A U.S. Corporate Leader Shares His Thoughts on Sustainability – EDF’s Fred Krupp Interviews Tom Linebarger of Diesel-Maker Cummins Inc.

By Hank Boerner – Chair, G&A Institute

Fred Krupp is head of the two-million-member Environmental Defense Fund (EDF), a leading global not-for-profit that creates “transformational solutions” to address environmental problems by linking economics, law, science and innovative private-sector partnerships.  Since the mid-1980s he has been a very vocal thought leader, activist, and champion for change on various climate change issues, striving to use the power of the marketplace to protect the global environment.

Krupp has worked with many business leaders over the years and today characterizes Tom Linebarger – the Chair and CEO of Cummins, Inc. (leaders in diesel engine manufacturing) – as one of the forward-thinkers on sustainability and environmental innovation.  Krupp interviewed the CEO for Forbes, our Top Story for this issue.

Cummins Inc. has publicly committed to set science-based targets for reducing GHG emission across the company’s supply chain, which would help to address stakeholder concerns and help contribute to the future well-being of communities in which the company operates.

Cummins’ innovation efforts will also help to make a difference in terms of the company’s products (such as vehicle and stationary engines), its facilities and the supply chain.  Diesel power is central to the progress of the economy, says Linebarger, moving vast amounts of products and supplying power just about everywhere — and is a factor in driving wealth creation.  While doing this, the Cummins’ products also impact the environment and so the intense focus on corporate sustainability for the company.

Here are some welcome words for us in the Trump/Pruitt era of tearing up environmental rules and regulations and denying the impacts of climate change:  “Regulations play an important role in protecting the environment, and we’ve worked to make sure we’re a positive contributor to the effort,” the CEO explains.

Cummins also pushes industry peers and its suppliers to support tough, clear, science-based, enforceable regulations that are good for the industry.

Also, welcome to other champions of corporate sustainability – this making the business case statement:

“There’s no question that our focus on environmental innovation and leadership has caused our company to grow, to become more profitable, and to increase our appeal with big companies that would like to partner with us because of our leading technologies.”

Cummins (NYSE: CMI) is headquartered in Columbus, Indiana; the company designs manufactures, sells and services diesel and natural gas power engines; and, alternative-fueled electrical generates sets, “emission solutions”, and components for electronics and fuel systems. The company has 58,600 employees and serves customers in 190 countries – sales are US$20 billion (2017).

Disclosure:  The G&A Institute team members were instrumental in 2000 in assisting diesel power and vehicle manufacturers in organizing the Diesel Technology Forum, a not-for-profit advocacy dedicated to raising awareness about the importance of clean diesel engines, fuels and technologies.  Cummins was instrumental in the concept of and the founding of DTF and over the years since has been active in advancing the mission. Our former colleague Allen R. Schaeffer is the organization’s Executive Director.

You’ll want to read and share our Top Story this week with very encouraging comments about sustainability from a respected U.S. corporate sector leader.

Top Stories

Cummins CEO Says Innovation, Sustainability, And Regulations Are Good For Business
(Thursday – April 19, 2018) Source: Forbes – As head of the largest independent maker of diesel engines and related products in the world, Tom has set lofty environmental goals for Cummins, including cutting energy intensity from company facilities by a third by 2020.

The Bangladesh Garment Factory Workers Tragedy — and Investor and Corporate Response Five Years On

By Hank Boerner – Chair, G&A Institute

We are five years on from the Rana Plaza “Savar” five-story factory building collapse and fire that killed more than 1,000 garment workers in Dhaka (Dacca), the crowded capital city of Bangladesh. (The accident was on April 24, 2013). In the ashes and debris there were the labels of prominent developed nations’ apparel marketers. Reputations were at stake — “Reforms” discussions were immediately underway in Europe and North America.

The Europeans moved on with the “Bangladesh Accord on Fire and Safety” while in North America brand marketers were moving on “The Alliance on Bangladesh Safety.”

Where are we today?

The Interfaith Center on Corporate Responsibility (ICCR) is keeping the accident and aftermath in the focus of the investment community and stakeholders. Yesterday ICCR (a coalition of 300-plus institutional members managing $400 billion AUM) and the group of allied investors issued a statement that helps to explain where we are.

About The Accord

Right after the building collapse, the Bangladesh Accord on Fire and Building Safety was created as a model for collective action by brand marketers and retailers that source in Bangladesh.

The Accord is now being extended (as the five-year deadline is reached in May) for another three years to complete the remediation of the 1,600 factories and companies that have not signed on (yet) are being invited by the investor coalition to become signatories and to implement the reforms spelled out in the Accord.

The Accord, the investors point out, is still serving as a model that can be adopted and applied to other at-risk countries and sectors.     

The Bangladesh Investor Initiative – led by ICCR – was a catalyst that brought together 250 institutional investors with US$4.5 trillion in AUM in May 2013 to urge a stronger corporate response to the Rana Plaza tragedy, including urging companies to sign on to the Accord.

The coalition invited companies to commit to strengthening local worker trade unions to ensure a “living wage” for all workers, and to engage with the Bangladesh government.

About the Accord:

  • Corporate signatories agree that global and local trade unions and NGOs could be invited to inspect the country’s apparel factories and implement reforms to protect workers.
  • Companies were asked for transparencies in publicly disclosing their suppliers – including those located in the nation of Bangladesh.
  • Worker grievance mechanisms and effective remedies (including compensation) should be put in place for all workers and their families.
  • The investor coalition argued that supply chain transparency is critical to safeguarding workers and employer responsibility – including information on sub-contractors.
  • Note that the Accord is legally-binding for signatories.

Making the Case

Lauren Compere, Managing Director of Boston Common Asset Management makes the case for companies: “Stakeholders, including investors, rely on transparency as a tool for evaluating corporate performance on a range of social, environmental and corporate governance issues. The Accord has been very transparent in requiring disclosure of each of the 1,600 companies it covers, which helps investors track progress. This is a ‘best practice’ that all companies need to implement, beginning with Tier One suppliers, then throughout their supply chain.”

Progress Report – 5 Years On

To date, 220 brands and retailers have signed on to the original Accord. Remediation plans have made 2.5 million workers in “Accord factories” have been made “meaningfully safer”. A steering committee made up of an equal number of brand and union representatives and a neutral chair from the International Labor Organization govern the Accord.

The Accord provided for in-depth health and safety training to personnel in 846 factories, reaching 1.9 million workers. A grievance process is in place; to date, there have been 183 worker complaints investigated and resolved.

Detailed information is required for each factory.

The Rana Plaza Donors Trust Fund has been established to compensate workers injured in the collapse and families of workers who were killed (note that Bangladesh has no national employment injury system). $30 million has been raised to date; companies sourcing garment/apparel work in the country were asked to contribute; 30 companies did so, along with several union funds and foundations. The ILO is the trustee and oversees distributions.

The investor coalition is pleased with the progress made to date – but stresses that there is much work still be done (therefore the 3-year extension is necessary). “The job of mediating all of the issue is far from done and we will continue to urge those companies that have not signed on to the 2018 Accord and its three-year extension to do so.”

The New Elements to the Accord

The 2018 Transition Accord has gathered140 signatory companies to date, with 1,332 factories covered. The new elements include:

  • Safety Committee & Safety Training at all covered factories;
  • Training and Complaints Protocol on Freedom of Association;
  • Severance payments for affected workers in factory closures and relocations.
  • Voluntary expansion of the scope to include home textiles; fabric and knit accessories;
  • Transition of Accord functions to a national regulatory body.

We’ll bring you updates as the Transition to the new Accord continues.

About the Nation of Bangladesh

Located in Southeast Asia, the People’s Republic of Bangladesh is the world’s 8th most populous country, according to Wikipedia (163 million estimated). It was once part of “British India” until East Bengal became part of the Dominion of Pakistan, was re-named East Pakistan and then became independent in the early -1970s. It is characterized as a “developing country,” one of the poorest, and trades with the USA, EU, China, Japan, India, and other nations. Per capita income was estimated at US$1,190 in 2014.

The largest industries are textiles and ready-made garments; leather-goods (footwear is the second largest in exports. Bangladesh is the second largest exporter of clothes in the world.

# # #

Notes / Information:

There’s more information for you on the ICCR web site: www.iccr.org

Information about the Accord: http://bangladeshaccord.org/

The Accord Update for April is at: http://bangladeshaccord.org/wp-content/uploads/ACCORD_FACTSHEET_Apr2018.pdf

There’s information for you in G&A Institute’s “To the Point!” management briefing platform:

https://ga-institute.com/to-the-point/a-big-year-2018-for-developments-in-corporate-sustainability-sustainable-investing-the-two-halves-of-the-great-whole-of-the-new-norms-of-capitalism/

CNBC in commenting on the five year anniversary (on April 24) noted the factories still pose a life-threatening risk, with 3,000 of 7,000 factories endangering the lives of low-paid garment workers (according to a New York University Centre for Business and Human Rights Study).

The story is at: https://www.cnbc.com/2018/04/24/bangladesh-factories-still-pose-life-threatening-risks-five-years-on-from-rana-plaza-disaster.html

The NYU report authored by Paul M. Barrett, Dorothee Baumann-Pauly and April Gu is at: https://static1.squarespace.com/static/547df270e4b0ba184dfc490e/t/5ac9514eaa4a998f3f30ae13/1523143088805/NYU+Bangladesh+Rana+Plaza+Report.pdf

Human Rights Watch also weighed in with “Remember Rana Plaza: https://www.hrw.org/news/2018/04/24/remember-rana-plaza

It’s ESG Survey & Query Time — Public Companies Are In Response Mode

by Hank Boerner & Louis Coppola

Barrage… Avalanche… Tidal wave… Tsunami“Survey Fatigue…
These are terms we hear all year ‘round but especially in the spring of the year as corporate managers describe for us what they often feel as the inevitable flow of third party ESG / Sustainability surveys, forms and various types of questionnaires come pouring their offices. It’s spring – survey time!  Some large-cap companies may receive 200 or more such queries during a year.  What to do!

Effective Response and Engagements Will Be Key to Success
in Communicating Corporate Sustainability Strategies and
Demonstrating Leadership for Investors

The challenges posed to company managers are:

  1. First to decide which queries will matter most to the company and to investors and select those out of the large flow for response;
  2. decide what to do with the rest of the third party queries;
  3. decide what information to be disclosed is material, of relevance and of importance to the third party and beyond to that organization’s user base;
  4. internally source and organize the data and narrative needed in responding to put the best story forward to maximize the positive perceptions of the stakeholders using the data in some way;
  5. and as we hear, [typically] debate internally what can and should be disclosed and why — beyond the mandated financial and related disclosures.

These challenges grow in importance each year as many more asset owners and managers either directly pose the questions to companies — or do so through an army of third-party ESG analytics firms.

The stakes are high and getting higher; the most efficient and effective of the corporate responders could enjoy inclusion in the sustainable investing indexes and benchmarks, and investor products; win high rankings, scores, ratings and other honors bestowed by the third party organizations; and in turn, be recognized by still more third-party organizations for their high scores and rankings.

Questions Often Heard in the Corporate Office: 
How come we are not in the DJSI?
How come “competitor X” is ranked higher than we are?
What should we be doing to improve our scores?
Who are the most important providers to engage with and respond to?

THE MORE TRANSPARENT COMPANY – THE PUBLIC COMPANY ESG PROFILE
Beyond the challenges to responding to the many third party organizations that crank the response and other information into their models and into investor-facing products, there is an ever-widening transparency of the company profile that may be of importance say, to major customers or business partners: for example, the Bloomberg professional services ESG dashboard will put the company’s ESG data and profile in front of more than 300,000 subscribers.   Similarly, the Thomson Reuters’ Eikon dashboards reach 200,000 and more subscribers with the same kinds of information.

We can hear the call from the corporate offices this month — Help!  The spring round of queries is at hand. For example, RobecoSAM’s “Corporate Sustainability Assessment” (the CSA) opened for company response last week; companies have only until the end of May to respond.  (We recently conducted a workshop in NYC for first time reporters in collaboration with RobecoSAM’s Robert Dornau and Gretchen Norwood.)

The information provided by companies in responding to the CSA will be an important determinant in RobecoSAM deciding which companies will be in the Dow Jones Sustainability Indexes and featured in the prized Yearbook roster. The information is used in S&P Dow Jones Company’s various products as well.

HOW TO ADDRESS THE CHALLENGES IN RESPONDING
 The good news is that there are efficient, thorough, comprehensive and organized ways to meet the challenges described above that are faced by many managers at publicly-traded and even privately-owned enterprises.

Here at G&A Institute, we call this our matrix approach that results in a more comprehensive “mosaic” (multi-dimensional) corporate ESG profile with significant benefits for the issuer.

It is important to keep in mind: the public company already has a sustainability profile shaped by its own publicly-disclosed information, by the dissemination of information by third parties distributing ESG analysis and data sets and by such stakeholders as government agencies, media, NGOs, activists, competitors, and others.

This mosaic corporate profile may be incomplete, inaccurate, misleading, or otherwise have information that is detrimental to the company and its stakeholders that can be corrected with more timely and/or accurate information. The “wrong information” can lead to negative perceptions that can affect corporate reputation and valuation, and perhaps even societal freedom to operate.

THE G&A INSTITUTE APPROACH TO ESG DATA REVIEW
We usually start with an examination of the existing public ESG profile of the corporation.  This is the information typically provided to investors and key stakeholders by a ever-expanding universe of the ESG rankers and raters.  This phase of the work this helps us and the internal team in developing an understanding of how investors and stakeholders may be viewing the company, what issues are most material in their view — and from this analysis we can provide strategic guidance for how the company can work to better position itself to take advantage of any advances in corporate sustainability over the months and years ahead.

The comprehensive sweep of first-round examinations can be for a key set of the most important data providers (around 4-to-6) or more comprehensive and up to 15 or more of the ESG data providers, index managers, asset managers and public information platforms (such as the data on the Bloomberg and on Eikon).

The specific third party service providers to be examined may depend on peer group, geography of operations, the company’s sector and industry classifications (and keep in mind there are variations of these), the nature of products and services, and other factors.

IMPORTANCE OF THE GAP ANALYSIS
Once the key third party organizations are selected for close examination, an internal gap analysis against the information being made available to investors by the third party provider can be determined – and addressed by the internal team.

Key areas of strength, weakness and the peers’ standings will emerge for internal managers to address. Low hanging fruit such as correcting inaccurate data, or improving reporting by better organizing important ESG disclosure data, may make it easy for short-term improvement.  Longer term the results of this type of analysis and engagement will inform strategy setting, and resource allocations to most efficiently and effectively improve the ROI of the Sustainability program.

G&A’s Co-Founder Louis Coppola was recently interviewed at Skytop Strategies ESG4 Summit on the “Value Companies Can Obtain by Engaging with ESG Investor Data Providers.”  You can watch the interview here and email Lou at lcoppola@ga-institute.com if you have questions or would like to discuss the ESG review process.

KEEP IN MIND:
Improving the ratings, rankings, scores etc is a journey, not a sprint.

It’s important here to stress that whether or not a company chooses to answer queries, respond to data provider inquiries or attempts to correct some public information that service providers are sharing with investors, there is a public sustainability profile out there and it is making an impression on investors.

As the flow of this year’s queries reaches corporate managers, it is important to understand who some of the key third party ESG players are — and what their work is about – and how they can impact the corporation.  We provide some recent news updates about leading players below for your information.

FOR YOUR FURTHER INFORMATION: NEWS ABOUT KEY ESG / SUSTAINABILITY DATA PROVIDERS

The Universe of ESG Rankers Serving Institutional Investor Clients Expands…
Source:G&A Institute’s To the Point! Management Briefs (January 2018)
ISS’ Traditional Corporate Governance Focus Expanding to Encompass Environmental & Social QualityScores for Roughly 1,500 Public Companies Coming in January…And Expanding to 5,000 Issuers in Q2…

ISS Unveils New Corporate “E” and “S” QualityScores for 1,500 Companies
Source:G&A Institute’s To the Point! (February 2018)

Oekom Research to Join Institutional Shareholder Services
Source: oekom research news (March 2018)
oekom research, a leader in the provision of environmental, social, and governance (ESG) ratings and data, as well as sustainable investment research, today announced it will join Institutional Shareholder Services Inc. (“ISS”). Reflecting the strength of both brands, oekom research will be renamed ISS-oekom…

Sustainalytics’ New Research Report Offers Insight into ESG Risks Facing 10 Sectors
Source: Sustainalytics (February 15, 2018)
Sustainalytics, a leading global provider of ESG and corporate governance research, ratings and analytics, today released a new thematic research report – “10 for 2018: ESG Risks on the Horizon”.  The report examines critical ESG risks facing 10 sectors, which are classified under four broad themes, including: Water Management / Stakeholder Governance / Consumer Protection / Climate Change..

Morningstar & Sustainalytics Expand Sustainability Collaboration
Source: Sustainalytics (July 2017)
In a continuing and growing commitment to helping investors integrate sustainability considerations into portfolio decisions, Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, and Sustainalytics, a leading global provider of environmental, social, and governance (ESG) research and ratings, today announced that Morningstar has acquired a 40 percent ownership stake in Sustainalytics. The direct investment represents an important milestone in Morningstar’s long-term sustainability strategy and intends to support Sustainalytics’ ability to deliver high-quality, innovative ESG products and services to the global investment community…

Bloomberg ESG Function for Sustainability Investors Adds RobecoSAM Data
Source: Bloomberg (September 2016)
Bloomberg recently expanded its offering of ESG (environmental, social, governance) data by incorporating information from RobecoSAM’s percentile rankings on the Bloomberg Professional service at ESG<GO> —  a Bloomberg Terminal function that provides sustainability investors with data about a company’s environmental, social and governance metrics…

RobecoSAM Publishes “The Sustainability Yearbook 2018”
Source: RobecoSAM (February 2018)
RobecoSAM, the investment specialist that has focused exclusively on Sustainability Investing (SI) for over 22 years, today announced the publication of “The Sustainability Yearbook 2018”.    The Yearbook showcases the sustainability performance of the world’s largest companies and includes the top 15% per industry, which are awarded Gold, Silver or Bronze Class medals. RobecoSAM has analyzed the corporate sustainability performance of the world’s largest listed companies every year since 1999…

Results Announced for 2017 DJSI Review
Source: RobecoSAM (September 7, 2017)
S&P Dow Jones Indices (S&P DJI), one of the world’s leading index providers, and RobecoSAM, an investment specialist focused exclusively on Sustainability Investing (SI), today announced the results of the annual Dow Jones Sustainability Indices (DJSI) review. The three largest additions and deletions…

MSCI:  2018 ESG Trends to Watch
Source: Commentary by Linda Eling-Lee, Global Head of ESG Research, MSCI  (January 2018)
Bigger, faster, more.  Whether due to policy, technological or climatic changes, companies face an onslaught of challenges that are happening sooner and more dramatically than many could have anticipated.  Investors, in turn, are looking for ways to position their portfolios to best navigate the uncertainty. In 2018, these are the major trends that we think will shape how investors approach the risks and opportunities on the horizon. In 2018, investors will…

Has ESG Affected Stock Performance?
Source: Commentary by Guido Giese – ED, Applied Equity Research, MSCI
Are ESG characteristics tied to stock performance? Many researchers have studied the relationship between companies with strong environmental, social and governance (ESG) characteristics and corporate financial performance. A major challenge has been to show that positive correlations — when produced — explain the behavior. As the classic phrase used by statisticians says, “correlation does not imply causation.”Instead of conducting a pure correlation-based analysis, we focused on understanding how ESG characteristics have led to financially significant effects…

CDP:  The Disruptors:  Paul Simpson, the Atypical Activist Who Awoke C-Suites to Climate Risk
Source: Ethical Corporation (November 2017)
The founder of CDP tells Oliver Balch how the organization he started 17 years ago has helped transform corporate and investor attitudes to climate change  The phrase “task force” is hardly one to get the heart racing. Expand it to the Task Force on Climate-related Financial Disclosures, and you’re into catatonic territory. So it’s little wonder that when the TCFD (as insiders call it) issued a suite of recommendations over the summer, it didn’t trouble the headline writers much. Not so Paul Simpson, who met the news with huge excitement…

Our Governments Have Committed to Keeping Global Temperature Rises to Well Below 2-Degrees – What Can Companies and Cities Do…
Source: CDP Campaigns
The Paris Agreement sends a clear signal that the shift to a low-carbon economy is inevitable, and everyone must play their part. To facilitate this transition, CDP and its partners have developed campaigns that seek to highlight and spur meaningful action on tackling climate change from the private sector and sub-national governments…campaign information…. committed to keeping global temperature rises to well…