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

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

Another in the series about The Corporate Citizen and Society

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Highlights:

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

Where Are U.S. Companies on Climate Change Risk Disclosure? New Survey Results from DFIN Are Available…

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

Another in the About the Climate Change Crisis series

Climate Change and Corporate Reporting – the two terms are increasingly coupled now as many more investors and stakeholders are requesting information from publicly-traded companies about their awareness of, and strategies & actions for addressing the many risks posed to the enterprise by climate change.

Important sea change:  many more investors are now asking companies for information about their preparation for climate change and some, demanding a report if none has been issued.

Response:  Many more companies and especially large-cap companies are now disclosing relevant data and information about their climate change / risk management strategies, plans, actions taken, goals set, and results of their efforts to reduce, mitigate and eliminate climate change risks.

The GRI Standards and the SASB Standards are available to provide managers with excellent disclosure guidelines and reporting frameworks for such reporting — and in the dozens of corporate reports that our G&A Institute analyst team examine each week, we are seeing a steady rise in more robust reporting on issues surrounding climate change. 

A new addition to such disclosure and structured reporting are the “TCFD” recommendations for disclosure – these are recommendations of the influential Task Force on Climate-Related Financial Disclosure.

Briefly, why TCFD is important:  The central bankers and top financial regulators of the G-20 nations created the Financial Stability Board (FSB) after the 2008 financial crisis to explore potential regulations for expanded corporate reporting (to prevent unpleasant surprises, which financial market players dread!).

Former Mayor Michael Bloomberg was appointed to head a task force (with 32 members) to develop specific suggestions for public companies’ disclosures on climate change that are financially-related. 

The task force’s report (with recommendations) was made public in 2017.  Companies began responding in their reporting over the following months. At G&A we are seeing the tempo of such reporting increasing as more companies follow the TCFD recommendations.

So where are we?  An important report – “The State of Climate Risk Disclosure: A Survey of US Companies” – was just published by our partners DFIN, in collaboration with the writing team of Richard Mahony and Diane Gargiulo  and research from The Society for Corporate Governance (“The Society”).  The report looks at the evolution of climate-risk disclosure and the state of readiness of corporations to disclose this information.

In partnership with The Society, DFIN conducted a survey of its members on these issues. The results confirmed many of the observations made by the TCFD in its recent update, while also providing new insights into how companies are addressing the challenges associated with climate risk disclosure. (This builds on the earlier report published by DFIN as the TCFD was being released – “Preparing for Climate-Risk Disclosure: Practical Suggestions for Public Companies”.)

The members of The Society for Corporate Governance were surveyed to benchmark what their companies are doing – looking at climate risk, by type; market cap of respondents; frequency of board room discussions on climate risk; use of reporting frameworks; investor queries to the company on climate risk; self assessment of the TCFD (recommendations) implementation; organization structure for climate risk disclosure; and, impediments to TCFD implementation.

The report offers practical steps for companies to take and lessons of the early adopters.  Society members offering value-added perspectives include Val Smith at Citi; Michael Rubio at Chevron; and, Steve Lippman at Microsoft (these sharings are of interest for IROs, corporate secretaries & governance professionals, sustainability leaders at companies, and other professionals involved in the corporate sustainability journey).

Click here to access the survey looking at the evolution of corporate climate-risk disclosure.

The Society for Corporate Governance is comprised of governance professionals and business executives responsible for supporting boards and exec management. 

DFIN is a leading global risk and compliance solutions company providing expertise to public companies.  G&A Institute partners with DFIN to serve corporate client needs with a range of sustainability services including climate change disclosure and reporting.

The G&A Institute team has developed a Resource Paper about the TCFD and what it means for company managements and investment professionals. Click here to download it.

Click here to view G&A’s published a backgrounder on the TCFD as the recommendations were made public in August 2017 (now on G&A’s Sustainability Update blog).

For more information about the TCFD and related disclosure appropriate for your company, contact us at: info@ga-institute.com.

Top Story

The State of Climate Risk Disclosure: A Survey of US Companies
Source: DFIN Solutions
The State of Climate Risk Disclosure: A Survey of US Companies published by DFIN, in collaboration with the writing team from Gargiulo + Partners and research from the Society for Corporate Governance (Society), looks at the evolution of climate-risk disclosure and the state of readiness of corporations to disclose this information.

Also from Governance & Accountability Institute:
G&A’s Climate-Related Corporate Risk Disclosures Resource Guide
Task Force on Climate-related Financial Disclosures | TCFD Organized by the Financial Stability Board of the G-20

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Capitalism – Needing Reinventing? Is Corporate Sustainability / Responsibility / Citizenship’s Focus on ESG Part of the Mix of Reinvention?

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

There are many voices raised now, joining in the public dialogues on corporate sustainability, corporate citizenship, corporate responsibility, ethics, good governance…and more.

The perspectives offered fit into the commentary stream on the future of capitalism — and how to make it work for everyone.

There are rigorous companion dialogues going on – and rapidly growing in number — related to the role of sustainable investing as more asset owners and their internal and external managers adopt new approaches, many focused on the analysis of corporate ESG performance and related outcomes.  We see this as further reinventing of capitalism. Do you?

On Corporate Purpose – How, What, Why and more – another public dialogue dramatically expanding since the release of The Business Roundtable’s revised statement on purpose in summer.

There are more voices being added to the expanding public dialogues on all of the above and more, which is what our newsletter’s Top Story focuses on.

A fascinating range of voices will be raised by Fast Company as the publishers spotlight “15 voices” working at the forefront of trying to reinvent our economic system…and together, the pursuit of important structural reforms and ideas to bring about “fairness” (much needed, we can argue, in 2019!).

The first voice “raised” by Fast Company is that of Darren Walker, Ford Foundation president who says in his essay “capitalism is in crisis” and explains why in his essay — “How to Save Capitalism From Itself”. 

As the editors of Fast Company explain, the voices to be raised in the future (that you will want to follow via Fast Company essays) include:

Zeynep Ton, MIT b-school prof who founded the Good Jobs Institute;

Josh Silverman, CEO of Etsy (the artisanal marketplace) whose company’s social-impact initiatives are held to the same standard as financial reporting;

Fashion icon Eileen Fisher (champion of the B Corp movement);

Barry Lynn, founder of Open Markets Institute (who favors more regulation to address today’s monopolies);

Rachel Lauter, ED of Fair Work Center..and others!

Keep in mind Fast Company is a must-read for many GenXers and Millennialls – and so you will want to keep up with the publication’s voices no matter what generation you belong to.

The Ford Foundation’s CEO essay is at: https://www.fastcompany.com/90411391/ford-foundations-darren-walker-how-to-save-capitalism-from-itself

Top Stories

Capitalism is dead. Long live capitalism
Source: Fast Company – For capitalism to thrive, the system needs to evolve to be fair, inclusive, and sustainable. Fast Company highlights companies and innovators leading the change.

And of importance, the public dialogue – and action! – on the SDGs:

Protecting Our Future: Moving from Talk to Action on The Sustainable Development Goals
Source: Forbes 

How an Italian Energy Company Revolutionized Sustainable and Impact Investing in Structured Credit
Source: Forbes 

First SDG-linked bond in the European market raises 2.5 billion euros
Source: UN Global Compact 

Fashion, Style, Brand and Sustainability Are Today’s Coupling Terms Now for a Growing Number of Consumers…

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

We’re all consumers of one type or another.

We buy a variety of food and beverages, the latest electronic products, and an assortment of apparel and footwear products as needed — or desired!. 

So the questions come to mind…

What are you wearing?  Is it fashionable?  Stylish? And sustainable (as a product you want or need)?  Sustainably and responsibly produced?  In a global (mostly invisible) supply chain that you could say with certainty is “well supervised and responsibly managed”?

Do you identify yourself with the brand’s culture, ethos and sustainability and the praiseworthy efforts of the maker or the retailer in their declarations to the marketplace? 

Do you make sustainability a conscious buying decision?

A growing number of apparel & footwear brand producers/marketers are counting on “yes” answers to these questions.

In our monitoring of news and feature content from around the world and many prominent and not-so-prominent sources, we have been seeing a significant amount of content related to “fashion” and “sustainability” being coupled (as it, taken together as a given, like human nature (human + nature – a natural coupling).

The big bold industry and brand marketing names are part of the conversation: Victoria Beckham, Stella McCartney, Tommy Hilfiger, Gucci, and H&M are focused on sustainability and delivering the fashion + sustainability sales message in the coupling efforts (details in our story selections).

We’re presenting our “capture” of fashion and consumer-buying content this week in our Top Stories in the newsletter. 

In our constant monitoring we are seeing the trend in other consumer-facing areas of industry – in autos, toys, and a variety of food products and ingredients (palm oil, coffee beans, seafood/harvests of the seas).

The good news for society is that many more corporate leaders recognize the timely opportunity for their company to demonstrate that their company’s strategies and processes, and products & services offered in both consumer and B-to-B markets are “sustainable & responsible” … as now more frequently explained in the company’s sustainability report, in the 10-k, proxy statement, on its web pages…and on their products’ labeling. 

In this week’s Highlights newsletter we bring you a selection of the many news and feature stories focused on consumer marketing with a sustainability theme.

The range of coupled content (our product + sustainability) is growing by leaps and bounds and we try to select the most topical and informative content for you.

On coupling:  the best-selling author Malcolm Gladwells’s newest book is “Talking to Strangers”, a great read, we recommend. 

He explains why we are so overwhelmingly trusting of others (the strangers) as a basic human default and the concept of “coupling” — certain circumstances that can make certain assumptions, assertions and claims ring true for us.  

This comes to mind the acceptance of apparel, footwear and other brand marketers’ claims about “sustainability” in product and/or production. 

We are eager to invest belief in the claims. But do the facts support the claim?

Gladwell’s insights are terrific to contemplate as we receive the messages about sustainability from some brand marketers.

Top Stories

Fashion Brands Take Sustainability Further for Spring 2020
Source: Forbes 

Exclusive Q&A: Why Retailers Should Embrace Sustainable Supply Chains
Source: Retail Touch Points 

Why Sustainability Should Be Top of Mind for Retailers This Holiday Season
Source: Yahoo

Consumers want to buy sustainably—they just don’t know how
Source: Fast Company 

How Sustainability Became the Future of Retail
Source: Footwear News

Consumers Want to Buy Sustainably, but They Often Don’t
Source: Architectural Digest 

The Best 11 Brands for Sustainable Vegan Sneakers
Source: Love Kindly 

How can shoppers make sense of sustainable fish labels?
Source: The Guardian 

The Young People Move to the Streets to Protest Slow or Lack of Action on Climate Change Challenges…

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

When our young people take to the streets in significant number, there is usually a revolution of some type in store, history tells us.  Revolutions belong to the young, we can say with some certainty if history is our guide. 

Think: Young “Minutemen” in the American Revolution, youngsters on the barricades in the French Revolution, counter-sitters and marchers in the Civil Rights protests in the American South. 

Dramatic change followed these protests. And now, we watch the young men and women in the streets of Hong Kong.

So what to make now of at least four million young men and women flooding into the streets and plazas of large cities and local communities around the world to “protest” their views of “inaction on climate change challenges” by those adults in charge (government and business, especially).

In New York City, Rome, Amsterdam, Tel Aviv, Madrid & Barcelona, Montreal, Berlin, Vienna, and many other of the world’s cities, on September 20th hundreds of thousands of young people rallied in protest and called on leaders to protect our planet. 

There were marches, music, signs of all sorts, speeches, and other public expressions intended to draw attention to the dangers posed by climate change.

A real crisis in our time and a dangerous threat to the young men and women and their younger peers in the decades ahead!

As symbol of the moment, climate activist Greta Thunberg (at age 16) boldly sailed over the seas from her home in Sweden (rather than take a jet airplane) to get to New York City for the celebration of Climate Week and the gathering of leaders at the United Nations General Assembly).

In interviews she commented that she does not understand why world leaders — including the President of the United States — would mock children and teenagers for acting on science that advances evidence that climate change is real – and dangerous for humanity and our planet.

But business is responding – and investors and the public sector, too. 

In one of the focus features we bring you this week, in the Harvard Business Review author Andrew Winston tells us what 1,000 CEOs really think about climate change and inequality. (We know Winston from his best-seller, “Green to Gold”.) 

He reminds us that nearly 200 CEOs working through the Business Roundtable (BRT) declared that business is no longer just about maximizing shareholder profit.

Many more hundreds of CEOs are in agreement and many are focused on climate change.  Are we moving fast enough? 

A report from UN Global Compact and Accenture (“The Decade to Deliver: A Call to Business Action”) presents the views of more than 1,000 global executives on their views of sustainability.

All of the large-cap company CEOs interviewed believe that sustainability issues are important to the future success of their enterprises.  The biggest challenge is climate change. 

This week our Top Stories (plural) are presented as snapshots of where we are as consumers, investors, government leaders and yes, business leaders, focus on sustainability and especially climate change matters.

An appropriate footnote:  in rural Southwest Montana, a participant in the local rally by mostly young people had this to say in a letter to the editor of the Bozeman Daily Chronicle in response to criticism of the young peoples’ rallies:  

“Climate change is not a political issue. It is a life or death issue. Our children are asking in what way school matters when our future is disintegrating before our eyes. 

“Children have as much right and reason to march anyone.  They march because they can still see possibility, opportunity and reasons to fight four just futures. 

“Next time, maybe you should join us to understand what our kids are marching for.”

Our offerings for you this week:

After strikes, youth climate activists keep pressure on leaders
Source: Reuters 

What 1,000 CEOs Really Think About Climate Change and Inequality
Source: Harvard Business Review

Business leaders join the UN Global Compact Leaders Week to address climate crisis and advance the SDGs
Source: UN Global Contract

Banks worth $47 trillion adopt new UN-backed climate, sustainability principles
Source: UN News 

Markets face major risks over lax climate forecasts, top investors warn
Source: Reuters 

The second-largest gift to a US university was pledged to Caltech. It’s being used for climate research
Source: CNN 

Climate Activism Requires More Than Just Sustainability Statements From Brands
Source: Ad Week 

Most of world’s biggest firms ‘unlikely’ to meet Paris climate targets
Source: The Guardian 

Lead on global climate change and sustainability
Source: St. Peter Herald 

Editorial: Climate Week 2019
Source: Advanced Science News 

Climate crisis seen as ‘most important issue’ by public, poll shows
Source: The Guardian 

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

The Business Roundtable 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 top business leaders work to influence major societal issues (tax policy, infrastructure needs, trade and other issues).

This 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.  And, 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 guiding philosophy traces back to the period four decades ago when influential economists such as Milton Friedman of the University of Chicago advised the CEOs that their duty was to look out for the shareholders…and all else would fall in place.

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” — 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 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 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, the organization 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.”

ESG and Sustainability basic principles are now “officially recognized” by the members of the CEO association and 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.

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…

What Does “Sustainability” Mean to Manufacturers? Ingersoll Rand Helps to Explain Through Operations & Products

One of the long-term success stories in U.S. manufacturing is that of Ingersoll Rand, with history dating back to the 1870s as the Industrial Revolution gained great momentum in North America.

The company’s products were needed by other industrial revolution companies (such as compressors), by mining companies (rock drills), and in various elements (locks and more) of the b-to-b market.  When the Panama Canal was being built by the U.S., Ingersoll Rand drills were on the job. 

Over the decades numerous industrial companies were acquired, with technologies and products added – including such well-known names as Clark Equipment Company, Trane, Thermo King, Dresser-Rand, Harrow Industries, and others. In 2006 the company celebrated its 100th anniversary of listing on the New York Stock Exchange.

Today the company’s products are used in business and residential heating and air conditioning systems (HVAC), in the food industry, on golf courses (the familiar Club Cars), in temperature control (for transport), as well as the company’s plants turning out power tools, control systems and other equipment (there are 51 plants worldwide).

In 2014 at the UN Climate Summit the company announced its Global Climate Commitment to reduce GhGs from products and operations by 2030.  So – how is Ingersoll Rand doing today? 

Today’s Top Story is a Forbes interview with Rasha Hasaneen, VP-Product Management Excellence and Innovation (before joining the company she was at General Electric. The interview is authored by Joan Michelson, a ForbesWomen contributor) who talks with Rasha about “process” as well as products. 

Ingersoll Rand has “a holistic view of sustainable innovation”, helping the company to find common ground with customers, partners and potential recruits.  Keys to innovating with a “core value of sustainability” including (1) anticipating customers’ unstated needs; (2) performance comes first with sustainability a close second; (3) the focus is primarily on product portfolios; (4) the company is constantly innovating; (5) data helps make the business case for understanding the customers’ industries; (6) use the organization’s unique “language” to get support for innovation.

These “6 tips” explain, says Rasha Hasaneen, comprise the Ingersoll Rand approach to innovation.  The challenges to address in the era of global warming with record heat across the U.S. include design and production of HVAC systems (heating, ventilation, A/C) which account for half of the energy consumption in U.S. homes and 39% of commercial buildings.

The company explains “sustainability”:  At Ingersoll Rand, we integrate sustainability into the anatomy of how we help our customers success and how we run our operations.  There’s good information on the firm’s 2030 Sustainability Commitment and the challenges the company, customers and society faces here.

We note here that the two aspects of “sustainable” definitions used today in industry are involved: developing sustainable, long-term products for customers (such as innovative HVAC systems) and making those products sustainability — and to be sustainable and responsible as well in the language of ESG.

Note:  The company’s headquarters was for a long time in New York City, moving to neighboring New Jersey in the 1970s and then on to Davidson, North Carolina.  The company is now incorporated in Dublin, Ireland (that’s a clear sign for us of the impact of globalization of what we formerly considered to be our “national” businesses!).

Top Story

6 Tips For Driving Sustainable Manufacturing From Ingersoll Rand
(Tuesday – July 16, 2019) Source: Forbes – As record heats spread across the U.S. (and the globe), air conditioning systems and the power systems they depend upon are getting a workout. These HVAC systems – heating, cooling and ventilation – are used 24/7 “account for…

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

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

One annual list that we do follow is the one produced by Corporate Knights – 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 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?