Celebrating Highlights Issue #500 – And Unveiling a New Design

October 16, 2020

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

Celebrating Highlights issue #500 – this is a landmark achievement, we will say, for this is also the tenth anniversary year of publishing the G&A Institute’s weekly newsletter (G&A Institute’s Sustainability Highlights).  As you will see in reading #500, we are also introducing an enhanced format intended to make the newsletter easier to read or scan as well.

Our G&A Institute’s Sustainability Highlights newsletter is designed to share timely, informative content in topic/issue “buckets” that we think will be of value to you, our reader. So much is happening in the sustainable investing and corporate sustainability spaces these days – and we are working hard to help you keep up to date with the important stuff!

Publishing the Sustainability Highlights newsletter is a team effort here at G&A.

Our company was formed in late 2006 and among our first efforts, Ken Cynar, then and now our Editor-in-Chief, began the daily editing of the then-new “Accountability Central” web site with shared news and opinion. The focus was (and is) on corporate governance, environmental matters, a widening range of societal and corporate-society issues, SRI investing, and more.

Two years later we created the “SustainabilityHQ” web platform – Ken manages content for both platforms today.

Back in those early days there was not the volume of ESG news or opinion pieces that we see today. Whenever we “caught” something of note the rest of the G&A team would quickly share the item with Ken.

Our team had worked together (some for a number of years) at the former Rowan & Blewitt consultancy, specialists in issue management, crisis management and strategic communications for the fortunate Fortune 500s.

That firm was acquired by Interpublic Group of Companies and after 7 years the New York City team created G&A Institute to focus on corporate sustainability, responsibility, citizenship and sustainable & responsible investing.  All of us came equipped with a strong foundation of issue management, risk management, critical issues managements, and corporate communications experience and know-how.

“ESG” had just emerged as a key topic area about the time we began our publishing efforts and soon we saw a steady flow of news, features, research reports, opinions & perspectives that we started sharing.

We had worked on many corporate engagements involving corporate governance, environmental management, a range of societal issues, public policy, and investor activism.  Here it was all coming together and so the G&A enterprise launch to serve corporate clients!

By 2010, as we emerged from the 2007-2008 financial markets debacle, then-still-small-but-solid (and rapidly expanding) areas of focus were becoming more structured for our own information needs and for our intelligence sharing, part of the basic mission of G&A from the start. And so, we created the weekly Highlights newsletter for ease of sharing news, research results, opinion & perspectives, and more.

It is interesting to recall that in the early issues there were scant numbers of corporate CSR or sustainability etc. reports that had been recently published (and so we were able to share the corporate names, brief descriptions of report contents, links of those few reports).  That trickle soon became a flood of reports.

But looking back, it was interesting to see that at the start of the newsletter and our web sites, there were so few corporate sustainability / responsibility reports being published we could actually post them as news for readers. Soon that trickle of corporate reports became a flood.

A few years in, The Global Reporting Initiative (GRI) invited G&A to be the data partner for the United States and so our growing team of ESG analysts began to help identify and analyze the rapidly-increasing flow of corporate reports to be processed into the GRI’s global reporting database.

Hank Boerner and Lou Coppola in the early days worked closely with Ken on the capturing and editing of content.  Lou designed the back end infrastructure for formatting and distribution.

Amy Gallagher managed the weekly flow of the newsletter, from drafts, to layout and then final distribution along with the coordination of a growing body of conference promotions with select partner organizations.

And now with a solid stream of content being captured today, all of this is a considerable effort here at G&A Institute.

Ken is at the helm of the editorial ship, managing the “AC” and “SHQ” web platforms where literally thousands of news and opinion are still hosted for easy access. He frames the weekly newsletter.

Today Ken’s effort is supported by our ESG analysts Reilly Sakai and Julia Nehring and senior ESG analyst Elizabeth Peterson — who help to capture original research and other content for the newsletter.

Hank and Lou are overall editors and authors and Amy still manages the weekly flow of activities from draft to distribution.  Our head of design, Lucas Alvarez, working with Amy created this new format. As you see, it is a team effort!

There is a welcome “flood” — no, a tidal wave! — of available news, research and opinion being published around the world that focuses on key topic areas: corporate sustainability, CSR, corporate citizenship, ESG disclosure & reporting, sustainable investing, and more.  We capture the most important to share in the newsletter and on our web sites.

We really are only capturing a very tiny amount of this now-considerable flow of content, of course, and present but a few select items in the categories below for your benefit.  (The target is the three most important stories or items in each category.)

Much more of the ongoing “capture effort” is always available to you immediately on the SustainabilityHQ web platform (see the “more stories” links next to each category of headlines).

We hope that you find Sustainability Highlights newsletter of value. It’s a labor of love for us at G&A, and we would like to get your thoughts and feedback …including how we can continue to improve it. Thanks for tuning in all of these years to our long-term readers!

TOP STORIES

As example of the timely news of interest for this week we offer these (two) commentaries on the Sustainability Development Goals (SDGs).  We are five years in/with 10 years in which to make real progress…where do you think we are headed?

As students and faculty head back to campus – there’s discussion about “sustainability” and “campus”:

 

Moving The World Forward Toward a More Sustainable Future: The Member Nations of the United Nations, Working Collaboratively For Progress in the 21st Century

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

“The United Nations” began as a World War II-era strategy as President Franklin D. Roosevelt talked about the allies of the United States of America partnering in the fight to save democracy and collectively battling the regimes of fascist dictators in Europe and Asia.

On January 1, 1942, 26 nations “united” in Washington DC to coordinate the battle with the “Axis” powers.  (“Axis” – the axis line, said President Roosevelt, ran from Berlin (Germany) through Rome (Italy) and to Tokyo (Japan) – the clear linkage in his mind of the fascist leadership.)

In February 1942 the president addressed the nation in his 20th “fireside chat” (broadcasting nationwide on “the radio”) to talk about the progress of the war.

The U.S. was coming from far behind in terms of preparedness for a global battle, and so an important part of the progress in this, the start of the first year of U.S. involvement in the global conflict, President Roosevelt explained to the nation of 125 million souls:

“The United Nations constitutes an association of independent peoples of equal dignity and equal importance. The United Nations are dedicated to a common cause. We share equally and with equal zeal the anguish and the awful sacrifices of war. In the partnership of our common enterprise, we must share in a unified plan in which all of us must play our several parts, each of us being equally indispensable and dependent one on the other.

“We have unified command and cooperation and comradeship. We of the United Nations are agreed on certain broad principles in the kind of peace we seek. The Atlantic Charter applies not only to the parts of the world that border the Atlantic [Ocean)] but to the whole world; disarmament of aggressors, self-determination of nations and peoples, and the four freedoms – freedom of speech, freedom of religion, freedom from want, and freedom from fear.”

The leader of the free world of that era envisioned an global organization that could bring about a new world ordering, to assure greater peace and prosperity to many peoples of the world.  President Franklin Roosevelt passed away in April 1945; soon the global conflict ended; and then what he long envisioned became the possible:

On October 24, 1945, 50 nations gathered in San Francisco to sign on to the “United Nations Conference on International Organizations” – and the UN as we know it today was launched.  (We celebrate UN Day on 24 October in commemoration of that historic event.)

Today the UN has 193 members – sovereign states that have equal representation in the UN General Assembly. The UN is the world’s largest intergovernmental organization – a forum for governments, not a world government.  And within the organization are important initiatives that have been shaping corporate responsibility, corporate citizenship, sustainability, and for capital markets, as well as for sustainable investing.  These are agencies, programs, institutes, global collaborations, and other entities.

You know some of them as the UN Principles for Responsible Investing (PRI); the UN Global Compact (UNGC); the UN Sustainable Development Goals (SDGs); the work of the UN Environmental Programme (UNEP).

Today we are hearing quite a bit in the corporate sector and in the capital markets about the Universal Declaration of Human Rights (adopted 1948); the UN has been the driving force behind 80-plus “human rights laws”.  Consider:  the declaration has been translated into 380 languages to date, says the UN High Commissioner for Human Rights..

We are sharing with you three recent highlights from the UN universe.   First, an update from the UNGC CEO Lisa Kingo, stressing that now is the time for society to invest in the 1.5C future…”there never has been a time”, she points out, “like today for coming together and jumpstarting a worldwide transformation towards a more inclusive and sustainable net-zero economy.”

Also from the UNGC, news of the launch of the Ocean Stewardship 2030 Report – to be a roadmap for how ocean-related industries and policymakers can jointly secure a healthy and productive ocean by 2030.

We are now in the Decade of Action on the Global Goals (the SDGs). The UNGC is an initiative of the UN Secretary General, a call to companies everywhere to align their operations and strategies with 10 universal principles focused on human rights, labor, environment and anti-corruption.

The Global Reporting Initiative (GRI) is today an independent global foundation that was birthed by the United Nations, building on the principles advanced for corporate responsibility by the NGO Ceres (based in Boston). An organization known for a philosophy of “constant improvement”, GRI recently organized an Agriculture and Fishing Project Working Group that will lead the work to create a new sustainability standard for ag & fishing.

This is part of the work of GRI’s New Sector Program – a multi-stakeholder group will move forward the initiative to help companies with ag and fishing in their value chains promote transparency and accountability, and better understand their role in sustainable development.

It’s almost 80 years now since President Franklin Delano Roosevelt – one of the most progressive leaders in U.S. history – conceived of the “united nations”, as a necessity to bring together the resources of other nations to fight a war on all of the continents, whose outcome was then uncertain.  And then to assure the peace and work to end wars, or at least settle disputes peacefully.

In November 2010 Secretary General Ban Ki-Moon noted:  “Sadly, FDR never saw the fruits of his efforts.  He died weeks before the founding conference. Yet his vision lives on in the UN Charter’s collective commitment to peace and security, economic and social welfare, tolerance and fundamental human rights.  Franklin Roosevelt’s Four Freedoms. This legacy of multilateral cooperation guides us today…”

Well said!

Top Stories

OOPS
In the June 8th issue of our newsletter (Highlights), with headline “Will We Ever See SEC Rules/Guidance for Corporate ESG Disclosure and Reporting?  The Question Hangs in the Wind..”  We incorrectly identified the corporate reporting regulations being reviewed by the Securities & Exchange Commission – should have said “Reg S-K” (not Reg F-D).  Sorry for the any confusion caused.  A more complete commentary on all of this is here on our blog.

COVID-19 And Real Estate: In Pain, Adapting, and Learning

G&A Institute Team Note
We continue to bring you news of private (corporate and business), public and social sector developments as organizations in the three societal sectors adjust to the emergency.  This is post #14 in the series, “Excellence in Corporate Citizenship on Display in the Coronavirus Crisis” – April 7 2020    #WeRise2FightCOVID-19   “Corporate Purpose – Virus Crisis”

By Binyu Zhao – Sustainability Reporting Analyst-Intern, G&A Institute

The impact of the COVID-19 outbreak is being felt across all aspects of work and life. Understandably, the implications for major property sectors and various stakeholders in the industry are quite specific and different.

Although it is difficult to assess the longer-term repercussions, the real estate industry is already responding and reacting to immediate impacts and short-term risks with their best abilities. Their respective crisis response strategies also unveil loopholes and weaknesses that might be overlooked during peace and tranquility.

Therefore, the outbreak also presents the industry an expensive opportunity to thoroughly review its risk assessment procedures, crisis contingency plans, and to upgrade and update systems if necessary.

Commercial Buildings – Bruised and Fighting the Pandemic Head-on

Commercial building managers & owners are experiencing the most short-term volatility in terms of building management, business operations, and risk mitigation for holding both essential and nonessential business activities.

Following state-wide nonessential business closures, travel restrictions, working from homes orders, and the social distancing mandate, commercial building and business holders have quickly responded with several short-term mitigation measures aiming to enhance safety and well-being for employees and shoppers.

For essential businesses that remain open such as grocery stores and supermarkets, building managers and store owners responded with immediate mitigation strategies such as compulsory disinfection of shopping carts, and providing protective equipment for employees such as gloves and masks to improve hygiene.

Within buildings, yellows distancing lines were drawn in between goods shelves and near the counters to practice social distancing. Some buildings even provide wipes and hand sanitizer in the waiting areas and within the markets.

Meanwhile, although office buildings, hotels, and other non-essential-business-holding buildings are closing, shortening, and changing operation hours in affected areas, some of them are conducting a thorough cleaning and disinfecting of high-touch surfaces and taking ventilation precautions to prepare for reopening.

Just like the majority of society, commercial buildings owners and operators did not seem to have health crisis contingency operations plans beforehand.

Ill-preparedness led many owners and managers to react passively and belatedly, therefore missing their chance to contribute early to support society in fighting this crisis.

Retail markets – “Pushing the pause button, but not the stop button”

Real estate transactions are not completely coming to a halt amid the Coronavirus outbreak because many buyers still regard investment-grade real estates attractive in the long-term.

Usually, March is the starting month for a strong buying season, however as the impact of COVID-19 materialized, the industry changing its normal deal transaction processes in light of the travel restrictions and public health concerns to facilitate deal flow.

According to real estate brokerage specialist Frederick Peters, initially, the industry is normalizing the real estate buying processes to a “by appointment only” format, ensuring that only one viewer group could tour the property at a time to practice social distance and crowd control.

Meanwhile, during the usual tour, numerous precautions are put in place: plastic booties for shoes, alcohol wipes for doorknobs to prevent touching directly with bare skins, gloves (for agents), and hand sanitizer at both the beginning and the end of the display.

NAR Survey Results

A recent survey conducted by the National Association of Realtors (NAR) indicates that out of the 2,500 responses that were received, 1-in-4 home sellers nationwide are implementing practices such as requiring visitors to wash their hands or use hand sanitizers.

However, as situations worsen, some agents and developers are considering adopting visual reality technology so that potential buyers could remotely “visualize” property if the sale is contingent upon the buyer “seeing” the property before signing the dotted line.

More than that, many steps are formerly done in-person (like lawyer consultations and appraisals) are also finding their footing in the electronic space. Undeniably, these kinds of actions, albeit temporarily, could create a real estate transaction slowdown.

However, just as some real estate agents have been saying, the pandemic should not be the catalyst for positive changes that the sector should have already instituted long before — such as technological upgrade and updates that will greatly improve working efficiencies and facilitate business transactions.

Hopefully, the sector could learn a lesson and react quickly to changes in the future.

Real Estate & Building Associations – Learning & Preparing

This unprecedented COVID-19 outbreak has led many to question if the real estate industry and our infrastructures are resilient enough to continue to support society, especially during a public health crisis.

Therefore, to better understand and redefine the critical role buildings, organizations and communities play in crisis prevention and preparedness, resilience and recovery, the International WELL Building Institute (IWBI) is creating a Task Force to focus on reducing the enormous health burden from COVID-19 and other respiratory infections.  (This the Task Force on Role Buildings Play in Reducing Health Burden of COVID-19 and other Respiratory Infections.)

According to Dr. Risa Lavizzo-Mourey, a  co-chair of the task force: “This task force can help us focus quickly on actionable measures we can take to more fully deliver resources needed to advance a global culture of health that includes everyone” — and also will further study scientifically for enhanced opportunities for the built environment to improve population health.

Overall, the health and well being of employees and tenants will be the initial primary corporate concern for the real estate sector, followed closely by business continuity plans.

Given the rapidly-changing situation, operational resilience will be a longer-term focus for real estate decision-makers as businesses develop their ability to be nimble, flexible, and react boldly and quickly should they face another similar event in the future.

Information on the IWBI Task Force: https://resources.wellcertified.com/press-releases/iwbi-assembles-task-force-on-role-buildings-can-play-in-reducing-health-burden-of-covid-19-and-other-respiratory-infections/

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About the Author
Binyu Zhao
is pursuing a Master’s degree in Public Administration at Columbia University. She served in the Climate Change and Sustainability Services Department at E&Y, and the Capital Markets Team in Ceres. Her strong bilingual skills enable her to provide services and conduct research for clients in Southeast Asia and East Asia. (She received her B.Eng. in Environmental Engineering and minor in Political Science from the National University of Singapore.)

G&A Institute Team Note
We continue to bring you news of private (corporate and business), public and social sector developments as organizations in the three societal sectors adjust to the emergency.

The new items will be posted at the top of the blog post and the items today will move down the queue.

We created the tag “Corporate Purpose – Virus Crisis” for this continuing series – and the hashtag #WeRise2FightCOVID19 for our Twitter posts.  Do join the conversation and contribute your views and news.

Do send us news about your organization – info@ga-institute.com so we can share.   Stay safe – be well — keep in touch!

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

February 7 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

The Positives

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Top Stories for This Week

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

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

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

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

1st in Series: The Software / IT Services Industry – GRI & SASB Standards In Focus – Perspectives on Alignments & Differences

SERIES INTRODUCTION 
GRI & SASB In Focus – Perspectives on Alignments & Differences

Notes from the G&A Institute Team on the series of commentaries by members of the G&A Sustainability Report Analyst Interns…

With the recent publication of the much-anticipated “Report on US Sustainable, Responsible and Impact Investing Trends 2018” issued by US SIF showing that ESG has really hit the capital markets’ mainstream — with $1-in-$4 in the US (by professional investment managers now incorporating ESG).  And, with the recent petition urging mandatory ESG reporting — submitted to the Securities & Exchange Commission by institutional investors  — he need to develop a more standardized framework for corporate ESG reporting is more pressing than ever before.

A recent discussion paper — “Investor Agenda For Corporate ESG Reporting” — with inputs from the CFA Institute, ICGN, PRI, CERES, GSIA, GIIN, and the UNEP-FI — further highlights this issue.

Among other things, the discussion paper emphasizes the need for participants of the Corporate Reporting Dialogue (participants include reporting standard setters – GRI, SASB, CDP, IIRC,CDSB, ISO, FASB, and IFRS) to deliver on their promise to work together to develop a more unified agenda on ESG reporting.

As part of our company’s role as the GRI Data Partner in the USA, UK and Republic of Ireland, G&A Institute’s Sustainability Report Analyst-Interns analyze thousands of sustainability reports each year and contribute the information to the GRI’s Sustainability Disclosure Database. This is the largest publicly-accessible sustainability disclosure database in the world (with now over 50,000 sustainability reports included, dating back to the start of the GRI).

Many of the corporate reports the G&A analysts process use the GRI Standards — and a number have now started to implement aspects of the SASB Standards as well in their disclosure and reporting process, depending on their sector and industry categories.

In their ongoing work, G&A’s Sustainability Report Analyst-Interns have been comparing the two standards for disclosure in specific industries as they carefully examine the corporate reports, and consider two standards’ alignment, similarities and differences.

In this series G&A’s Sustainability Report Analyst-Interns share their own perspectives as they have analyzed reports and noticed similarities and differences.

* * *

We begin our series of shared perspectives with the perspectives of Minalee Busi, looking at the Software and IT Services Industry.

Comments by Minalee Busi – G&A Sustainability Report Analyst-Intern

Discussion regarding sustainability reporting is usually more focused in context of resource intensive industries, and the Software and IT Services sector is often left out.

With sustainability being a major factor in competitive advantage and investor decision-making, Software and IT Services companies need to re-think their sustainability reporting strategies, if they are not already at that point.

SASB identifies a limited number of material issues for the industry for corporate reporting, such as:
• environmental footprint of hardware infrastructure,
• data privacy and freedom of expression,
• data security,
• recruiting and managing a diverse skilled workforce, and
• managing systematic risks from technology disruptions.

Environmental Disclosures

The disclosure suggestions set forth by both the SASB and GRI Standards are in fact quite comparable, and in alignment with each other for some topics.

For example, both standards suggest companies to report on the energy consumed (both renewable and non-renewable) — but with different reporting boundaries.

SASB suggests reporting consumption within the organization — and the GRI Standards ask to additionally include consumption outside of the company.

However, GRI Standards also include disclosures in terms of energy reduction due to conservation and efficiency initiatives — which SASB disclosures do not include.

Similarly, though both the disclosure frameworks require information about water withdrawal and consumption, GRI also expects detailed reporting on water discharge into different water bodies, with information such as whether water was treated before discharge and whether they follow international standards on discharge limits.

The GRI Standards also include disclosure on recycling — which although not very comprehensive, is completely non-existent in the SASB sector disclosure.

Given the increasing e-waste generated by the IT industry, both GRI and SASB could consider including more detailed disclosures in this area for addressing material risks companies face.

Addressing Data Security/Privacy

In terms of data security, both standards include suggestions of disclosures related to data breaches and the number of users affected. But since SASB disclosures are designed to be industry-specific standards, more detailed reporting requirements in terms of data privacy and freedom of speech are found in SASB — including information on secondary usage of user data and monetary losses as a result of legal proceedings associated with user privacy.

Other such additional detailed areas of sector-/industry-specific disclosures by SASB which are not specified in the GRI standards are topics under managing systematic risks — such as performance issues, downtime and service disruptions due to technological impediments; and, activity metrics related to data storage, processing capacity and cloud-computing.

Disclosures with respect to monetary losses due to legal proceedings around intellectual property protection and competitive behaviour can also be found in the SASB Standards.  These disclosures can be loosely be aligned with the GRI disclosures under non-compliance with laws in the socio-economic arena.

S/Social Reporting

With respect to the “S” (social domain) of corporate ESG reporting, both of the standards suggest reporting on employee diversity, with GRI focusing on categories such as age, gender and minority representation and SASB additionally suggesting reporting on data related to the percentage of employees who are (1) foreign nationals and (2) located offshore.

Interestingly, although SASB disclosures are industry specific standards and the IT industry is mainly dependent on human and intellectual capital, there is no specific suggestion of reporting on training and education of employees.

GRI Standards appear to be filling this gap with suggestions of detailed disclosures on average training hours, upskilling and transition assistance programs and information related to employee performance reviews.

Sustainability Reporting Criteria

The GRI Standards have extensive sustainability reporting criteria, of which a major portion of the disclosures fall under the “General Disclosures” — which include materiality, measurement approaches, consistency and comparability of reporting, external assurance, supply chain information, sustainability strategies, and ethics and integrity. This to me is seemingly more transparent as compared to the SASB Standards.

Another such area is stakeholder engagement, which exists in the SASB Standards only in the form of percentage of employee engagement.

The category of Discussion and Analysis under SASB Standards does require reporting on strategic planning about each of the material topics identified, which can be mapped to the Management Approach (DMA) disclosures recommended under each material Topic-specific disclosure area of the GRI Standards.

Alignment – and Gaps

With the above overview, the SASB disclosures and GRI Standards can be seen in alignment with respect to some material topics while having some gaps in others.

However, since both the standards are developed to address the needs different stakeholders – with GRI aiming a broader set of stakeholders and the SASB majorly targeting mainstream U.S. investors — they should not be seen by report preparers as being in competition with each other.

I believe that the efforts of the CDP and important sustainability reporting standards-setters such as GRI and SASB will certainly be welcomed by companies and other stakeholders now struggling to keep up, but the question remains if such collaborations can ultimately lead to the desired standardised sustainability reporting framework that many investors actively seek.

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Note:  This commentary is part of a series sharing the perspectives of G&A Institute’s Analyst-Interns as they examine literally thousands of corporate sustainability / responsibility reports.  Click the links below to read the other posts in the series:

California – America’s Sovereign State of Sustainability Superlatives!

While the Federal Government Leaders Poo-Pooh Climate Change, the Sovereign State of California Continues to Set the Pace for America and the World!

Focus on The State of California – the America’s Sovereign State of Superlatives Including in the Realm of Societal Sustainability…

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

We are focusing today on the “Golden State” – California – America’s sovereign state of sustainability superlatives!

The U.S.A.’s most populous state is forceful and rigorous in addressing the numerous challenges of climate change, ESG issues, sustainable investing and other more aspects of life in this 21st Century.

Think about this: California is by itself now the fifth largest economy in the world. The total state GDP (the value of goods & services produced within the borders) is approaching US$ 3 trillion. The total U.S.A. GDP is of course the largest in the world (it includes California GDP) and then comes China, Japan, Germany… and the state of California!

The California population is about 40 million people – that means that roughly one-in-eight people in the U.S.A. live in the Golden State.

Stretching for 800+ miles along the coastline of the Pacific Ocean, California is third largest in size behind Alaska (#1)  and Texas and takes the honor of setting the example for the rest of the U.S.A. in societal focus on sustainability.

Most investors and public company boards and managements know that the large California pension fund fiduciaries (institutional investors) often set the pace for U.S. fiduciary responsibility and stewardship in their policies and activities designed to address the challenges of climate change, of global warming effects.

The state’s two large public employee pension funds —  CalPERS (the California Public Employees’ Retirement System) and CalSTRS (the California State Teachers’ Retirement System) have been advocates for corporate governance reforms for public companies whose shares are in their portfolios.

CalPERS manages more than US$350 billion in AUM; CalSTRS, $220 billion.

A new law in California this year requires the two funds to identify climate risk in their portfolios and to disclose the risks to the public and legislature (at least every three years)

CalSTRS and CalPRS will have to report on their “carbon footprints” and progress made toward achieving the 2-Degrees Centigrade goals of the Paris Accord.

Looking ahead to the future investment environment — in the  emerging “low carbon economy” — CalPERS is pointing more of its investments toward renewable energy infrastructure projects (through a direct investment program). The fund has invested in two solar generation facilities and acquired a majority interest in a firm that owns two wind farms.

Walking the Talk with proxy voting: long an advocate for “good governance,” CalPERS voted against 438 board of director nominees at 141 companies this year in proxy voting. CalPERS said this was based on the [companies’] failures to respond to it effort to engage with corporate boards and managements to increase board room diversity.

CalPERS’ votes including “no” cast on the candidacy of numerous board chairs, long-term directors and nominating & governance committee chairs. This campaign was intended to “create heat” in the board room to increase diversity. CalPERS had solicited engagements with 504 companies — and more than 150 responded and added at least one “diverse” director.  CalSTRS joins its sister fund in these campaigns.

During the year 2018 proxy voting season, to date, CalPERS has voted against executive compensation proposals and lack of diversity in board room 43% of the time for the more than 2,000 public companies in the portfolio.

Other fiduciaries in the state follow the lead of the big funds.

The San Francisco City/County Employee Retirement Fund

The San Francisco Employees’ Retirement System (SFERS) with US$24 billion in AUM recently hired a Director of ESG Investment as part of a six-point strategy to address climate risk.  Andrew Collins comes from State Street Global Advisors (SSgA) and the Sustainable Accounting Standards Board (SASB – based in SFO) where he helped to develop the ESG accounting standards for corporations in 80 industries.

The approach Collins has recommended to the SFERS Investment Committee:

  • Engagement through proxy voting and support for the Investor Network on Climate Risk (INCR) proxy resolutions.
  • Partnerships with Climate Action 100+, Principles for Responsible Investment (PRI), Ceres, Council of Institutional Investors, and other institutional investor carbon-reducing initiatives.
  • Active ESG consideration for current and future portfolio holdings.
  • Use of up-to-date ESG analytics to measure the aggregate carbon footprint of SFERS assets; active monitoring of ESG risks and opportunities; continued tracking of prudent divestment of risky fossil fuel assets.

The staff recommendations for the six point approach (which was adopted) included:

  • Adopt a carbon-constrained strategy for $1 billion of passive public market portfolio holdings to reduce carbon emissions by 50% vs. the S&P 500 Index.
  • Hire a director of SRI to coordinate activities – that’s been done now.

As first step in “de-carbonization” the SFERS board approved divestment of ExxonMobil, Royal Dutch Shell and Chevron (September 2018) and will look at other companies in the “Underground 200 Index”.  The pension fund held $523 million in equities in the CU200 companies and a smaller amount of fixed-income securities ($36MM).

Important background is here:  https://mysfers.org/wp-content/uploads/012418-special-board-meeting-Attachment-E-CIO-Report.pdf

There are 70,000 San Francisco City and County beneficiaries covered by SFERS.

At the May 2017 SFERS board meeting, a motion was made to divest all fossil fuel holdings.  An alternative was to adopt a strategy of positive investment actions to reduce climate risk. The board approved divestment of all coal companies back in 2015.

California Ignores the National Leadership on Climate Change

In 2015, the nations of the world gathered in Paris for the 21st meeting of the “Conference of Parties,” to address climate change challenges. The Obama Administration signed on to the Paris Accord (or Agreement); Donald Trump upon taking office in January 2017 made one of his first moves the start of withdrawal from the agreement (about a three year process).

American states and cities decided otherwise, pledging to continue to meet the terms previously agreed to by the national government and almost 200 other nations – this is the “We are still in movement.”

The State of California makes sure that it is in the vanguard of the movement.

This Year in California

The “Global Climate Action Summit” was held in San Francisco in September; outgoing Governor Jerry Brown presided. The meeting attracted leaders from around the world with the theme, “Take Ambition to the Next Level,” designed to encourage collaboration among states, regions, cities, companies, investors, civic leaders, NGOs, and citizens to take action on climate change issues.

Summit accomplishments:  there were commitments and actions by participants to address: (1) Healthy Energy Systems; (2) Inclusive Economic Growth; (3) Sustainable Communities; (4) Land and Ocean Stewardship; and (5) Transformative Climate Investments.  Close to 400 companies, cities, states and others set “100 percent” renewable energy targets as part of the proceedings.

New “Sustainability” Laws

The California State Legislature passed the “100 Percent Clean Energy Act of 2018” to accelerate the state’s “Renewable Portfolio Standard” to 60% by year 2030 — and for California to be fossil free by year 2045 (with “clean, zero carbon sourcing” assured). Supporters included Adobe and Salesforce, both headquartered in the Golden State; this is now state law.

Governor Jerry Brown issued an Executive Order directing California to achieve “carbon neutrality” by the year 2045 — and to be “net zero emissions” after that.

Building “De-Carbonization”

The state legislature this year passed a “Investor Network on Climate Risk (INCR) ” measure that is now law, directing the California Energy Commission to create incentives for the private sector to create new or improved building and water heating technologies that would help reduce Greenhouse Gas emissions.

Water Use Guidelines

Water efficiency laws were adopted requiring the powerful State Water Resources Control Board to develop water use guidelines to discourage waste and require utilities to be more water-efficient.

About Renewables and Sustainable Power Sources

Walking the Talk: Renewables provided 30% of California power in 2017; natural gas provided 34% of the state’s electricity; hydropower was at 15% of supply; 9% of power is from nuclear. The state’s goal is to have power from renewables double by 2030.

California utilities use lithium-ion batteries to supplement the grid system of the state. PG&E is building a 300-megawatt battery facility as its gas-generating plants go off-line.

Insurance, Insurers and Climate Change Challenges

There are now two states — California and Washington — that participate in the global Sustainable Insurance Forum (SIF); the organization released a report that outlines climate change risks faced by the insurance sector and aims to raise awareness for insurers and regulators of the challenges presented by climate change. And how insurers could respond.

The Insurance Commissioner of California oversees the largest insurance market in the U.S.A. and sixth largest in the world — with almost $300 billion in annual premiums.  Commissioner Dave Jones endorsed the 2017 recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (the “TCFD”) and would like to see the now-voluntary disclosures be made mandatory by the G-20 nations. (The G-20 created the Financial Stability Board after the 2018 financial crisis to address risk in the financial sector).

In 2016 the Insurance Commissioner created the requirement that California-licensed insurance companies report publicly on the amount of thermal coal enterprise holdings in portfolio — and asked that the companies voluntarily divest from these enterprises.  Also asked: that insurers of investments in fossil fuel companies (such as thermal coal, oil, gas, utilities) survey or “data call” on these companies for greater public financial disclosure.

What About a Carbon Tax for California?

The carbon tax – already in place. California has a “cap and trade” carbon tax adopted in 2013; revenues raised go into a special fund that finances parks and helps to make homes more energy efficient. The per ton tax rate in 2018 was $15.00.  The program sets maximum statewide GhG emissions for covered entities in power and industrial sectors and enables them to sell allowances (the “trade” part of cap & trade). By 2020, the Cap and Trade Program is expected to drive more than 20% of targeted GhG emissions still needed to be reduced.

As we said up top, the “Golden State” – California – is America’s sovereign state of sustainability superlatives!

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

Brief:  California Leads the Way (Again) – State’s Giant Pension Funds Must Now Consider Portfolio Climate Risks & Report on Results – It’s the Law

 

 

Focus On The Corporate Sustainability Journey This Week – News & Opinion All Around the Topic in Various Communications Channels…

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

Remember the great Beatles’ song…Here, There and Everywhere?  That’s what seems to be happening with “Corporate Sustainability” these days.

The news and commentary seem to be everywhere now, with an examination of how the corporate sector is embracing the concept and developing strategies, action plans, assigning teams and moving forward to address ESG issues.

When we began our sustainability news, commentary and research sharing at Governance & Accountability Institute more than a decade ago, the items were few and far between, skimpy and more periodic than regularly appearing.

Today, a widening range of media and communications channels bring us the news of what the players in the corporate sector are doing — and how institutional investors and other key stakeholders are responding to same.

We see numerous news stories and commentary about what companies are doing in their sustainability journey…and how this matters in so many ways for the issuer (such as improved risk management, more effective investor relations, greater access to capital, enhanced reputation for recruiting and retaining human capital, preferred supplier status, and more).

G&A Institute is the data partner for the USA, UK and Republic of Ireland for the Global Reporting Initiative (GRI) and in this role, we gather and analyze (and then database) the corporate sustainability and CR reports of literally hundreds upon hundreds of companies.

The progress we’ve seen companies making in their journeys is encouraging and pretty astounding if you think back just 10 years or so (to the dark days of 2008).

And so as companies move ahead in the journey and greatly expand their disclosure and reporting, the communication channels light up with the “sustainability” news, commentary and research focused on a company, a group of peers, investors, an industry or a sector.

We selected a few examples for you this week.  First, from the food processing industry, an examination by Kevin Piccione (he describes his company’s effort – Sealed Air, an early sustainability adopter).

He cites the World Economic Forum finding that most “sustainable companies” outperform their peers by a third – but only 2% actually achieve or exceed their sustainability goals. So why do they succeed?  A brief review for you.

The second article for you is Harry Menear’s more in-depth piece from Energy Digital, examining which companies stand out for “green credentials”.

His focus is on the Corporate Knight’s “Top 10 Sustainable Companies” roster, which is drawn from comprehensive research on 6,000 companies worldwide across all industries (for companies with US$1 billion revenues).

The companies were scored on energy use, carbon, waste and clean air production, innovation expenditures, taxes paid, diversity of leadership, supply chain management, and other elements of the sustainability journey.  Which companies made the Top 10?  The link is below for your reading.

The third item is a note of caution from Bloomberg by Emily Chasan and Chris Martin — who point out that in the midst of the growing enthusiasm about corporate sustainability, there are some companies that investors call out for their “corporate greenwashing” (and they name names).  The authors cite the recent Ceres report on this (500 companies were analyzed).

They write:  Companies are still making questionable claims but accountability is rising.

Emily and Chris tell us companies (and their executives) are being forced now to admit to greenwashing (that is, “gushing” sustainability claims with a tenuous grip on reality).

Examined:  Mid-American; VW; Wal-Mart; Amazon; AB InBev SA.  There are perspectives shared on this by Calvert,  CalSTRS, BlackRock, Neuberger Berman, DWS Group, UBS.

And there are as always many items that our editors share this week in the Highlights, as we say, drawn for you from the many communications channels that our team monitors every day.  Let us know your thoughts as to how we are doing and what you would like to see!

This Week’s Top Stories

Achieving your sustainability goals does not mean sacrificing profits
(Thursday – August 16, 2018) Source: Food Processing – Nearly 90% of business leaders believe that sustainability is essential to remaining competitive and despite the clear link between sustainability and profit, only 2% of companies either achieve or exceed their sustainability…

Top 10 Sustainable Companies
(Monday – August 13, 2018) Source: Energy Digital – Which companies stand out for their green credentials? Energy Digital finds out.

Investors Are Increasingly Calling Out Corporate Greenwashing
(August 20, 2018) Source: Bloomberg – Corporate sustainability reporting has risen dramatically over the last few years, with 85 percent of the S&P 500 index producing annual corporate responsibility documents in 2018, up from just 20 percent in 2011, according to the Governance & Accountability Institute. That’s partially due to investor demand. Assets in sustainable investment funds grew 37 percent last year, according to data tracked by Bloomberg.

A Big Year, 2018 – Tipping Points For Developments in Corporate Sustainability & Sustainable Investing…

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

Volume & Velocity!
Those may be well the key characteristics of developments in corporate sustainability and in sustainable in the year 2018.

Linda-Eling Lee, Global Head of Research for MSCI’s ESG Research Group and her colleague Matt Moscardi (Head of Research Financial Sector, ESG) this week described what they are projecting in the traditional early-in-the-year setting out of key ESG trends to watch by the influential MSCI ESG team:

Bigger, faster, more – that’s how Linda describes the “onslaught of challenges happening soon and more dramatically that many could have imagined” in the corporate sector” (including public policy, technology, and climate change as key factors).

Investors (in turn) are looking for ways to better position their portfolios to navigate the uncertainty of the 2018 operating environment in the corporate sector.

As the “heads up” for investors and companies– the five key 2018 trends projected by MSCI’s ESG researchers/analysts:

  • Investors will be using ESG “signals” to navigate the size/shape of the Emerging Markets investment universe to pick the winners for portfolios.
  • The first steps are coming in “scenario testing” for climate change (this is systematically looking at risks emanating from company carbon footprints across asset classes, with short- and long-term transition scenarios).
  • The fixed-income universe will see acceleration (velocity) with the alignment of ESG frameworks by investors across all asset classes.
  • And this is very important for the corporate sector:

Investors are looking beyond the growing volume of corporate disclosure and reporting for data.
Keep In Mind: 65% of a company’s rating by MSCI is based on data sources beyond the corporate reporting!

 

  • MSCI sees 2018 as the Year of the Human – it’s about human talent, talent, talent!  That is, what companies do to help in the transitioning to new working environments (with the changes brought about by automation, artificial intelligence, robotics) that will be factored into the analysis of public companies by the MSCI ESG team, and measured over time (for outcomes over a 3-year horizon).

Linda Eling-Lee observed:  These are the major trends that we think will shape how investors approach the risks and opportunities in 2018.

Already, at the Davos meetings this week, major global firms in IT are creating an initiative to “tech-reskill” one million people to meet the global skills gap challenge inherent in the “Fourth Industrial Revolution” (firms are Cisco, Accenture, CA Technologies, HP, Infosys, Salesforce, SAP, Tata Consultancy, others).

What we think company managements / boards should expect in the “volume and velocity” context:  many more investors (the volume / especially large fiduciaries) are embracing comprehensive ESG factors in their analysis and portfolio management approaches with a faster uptake of this trend among the mainstream elements of the capital markets players (the velocity).

Voluntary reporting by companies has its limits in providing a full picture of the companies’ ESG risks,” the MSCI ESG researchers note. “In 2018 we anticipate that the disclosure movement reaches a tipping point, as investors seek broader data sources that balance the corporate narrative and yield better signals for understanding the ESG risk landscape actually faced by portfolio companies”

# # #

Buzzing:  The Larry Fink CEO-to-CEO Message for 2018

Speaking of significant influence, the head of the world’s largest asset management firm sent an important CEO-to-CEO letter to stress the importance of companies having “a social purpose”

Background:  BlackRock engages with about 1,500 companies a year on a range of ESG issues, meeting with boards of directors and CEOs, and other shareholders when that is needed.

Each year, CEO Fink reaches out to the CEOs of companies in portfolio to alert them to the key issues in focus for BlackRock (as fiduciary).

For 2017-2018, the key Investment Stewardship priorities are:

  • Corporate Governance / Accountability
  • Corporate Strategy
  • Executive Compensation Policies
  • Human Capital (again — there’s the focus on talent management)
  • Climate Risk Disclosure

Larry Fink is the Founder, Chair, and CEO of BlackRock and heads the firm’s “Global Executive Committee.” BlackRock is about to celebrate its 30th anniversary in 2018.  It now manages more than US$6 trillion (Assets Under Management-AUM).

Of this, $1.7 trillion is in active funds managed by the company.  As one of the world’s most important and influential (and trend-setting) fiduciaries BlackRock engages with company management to drive the sustainable, long-term growth clients need to meet their goals.

“Indeed,” CEO Fink said in his letter to CEOs, ”the public expectations of your company has never been higher.”

“Society is demanding that companies, both public and private, serve a social purpose…to prosper over time, every company must show it makes a positive contribution to society.”

“Without a sense of purpose, no company…can achieve its full potential…it will ultimately lose the license to operate from key stakeholders…”

# # #

The Key Word on Responsible Investing Growth is Global, RBC Reported

In October 2017, RBC Global Asset Management (RBC GAM) conducted its second annual global survey of asset managers.  Two-out-of-three respondents said they used ESG considerations, and 25% will increase their allocations to managers with ESG investment strategies to offer in 2018.

Does ESG mitigate risk…or drive alpha?  Answers were mixed.  Some asset managers are increasing their allocation and others are skeptical, especially about the accuracy and value of the available data on corporate ESG performance.

For 2018:  RBC sees responsible investing as a global trend, with many managers incorporating ESG in analysis and portfolio management due to client (asset owner) demand.

# # #

Tracking Company Behaviors – The RepRisk ESG Risk Platform

One of the leading producers of research and business intelligence for the banking and investment communities is RepRisk, based in Zurich, Switzerland. The firm started in 2006 to serve bank clients wanting to be alerted to real or possible risk issues in the corporate sector.

RepRisk developed artificial intelligence and data mining tools, that along with human analysis, “reduces blind spots and sheds light on risks that can have reputational, compliance and financial impacts on a company…”

Today, there are 100,000-plus companies in the RepRisk database (both listed and non-listed, from all countries and sectors). The firm started out monitoring 100 companies for clients.  The daily screening is delivered in 16 languages and about 50 companies a day are added for screening.  Is your company one of those tracked?  What are the risks tracked?

# # #

Does Adoption of ESG Approaches Sacrifice Corporate Performance?

Robeco, one of the world’s leading financial services firms (based on The Netherlands), and a sister company of RobecoSAM, managers of the Dow Jones Sustainability Indexes, looked at the question of whether or not the adoption of ESG / sustainability approaches “cost” the company performance.

Adopting sustainability approaches does require investment, but companies with poor ESG performance also have greater risks and “seriously under-perform” their peers.  And investors “win” by investing in the better performers (that reduce risk, strategize around climate change, reduce bad behaviors).

Says Robeco:  “…a growing body of evidence concludes that companies which are progressively more sustainable today will reap the rewards of the future…and it may save their businesses…”

The Company’s positioning:  “Robeco is an international asset manager offering an extensive range of active investments, from equities to bonds. Research lies at the heart of everything we do, with a ‘pioneering but cautious’ approach that has been in our DNA since our foundation in Rotterdam in 1929. We believe strongly in sustainability investing, quantitative techniques and constant innovation.”

# # #

CalPERS, America’s Leading Public Employee System – Corporate Engagement on Diversity Issues

“CalPERS: is the California Public Employee’s Retirement System, the largest state investment fund in the United States with about $350 billion in total fund market AUM.

CalPERS sent letters to 504 companies in the Russell 3000 Index to engage on the issue of diversity on the companies’ boards of directors.

CalPERS request:  the company should develop and then disclose their corporate board diversity policy, and the details of the plan’s implementation (to address what CalPERS sees as lack of diversity in the companies).

“Simply put, board diversity is good for business,” said Anne Simpson, CalPERS’ investment director for sustainability.

Starting in Fall 2017 and into 2018, CalPERS is monitoring companies’ progress on the matter and making it a topic for engagement discussions.  If a company lags in progress, CalPERS will consider withholding votes from director-candidates at annual voting time (at annual meetings).

# # #

The Climate Action 100+ Investor Initiative

 Sign of the times: More than 200 investors supporting action on climate change by the corporate sector are focusing on the board room of such companies as ExxonMobil, Boeing, GE, P&G, Ford, Volvo, PepsiCo, BP, Shell, Nestle, Airbus, and  other  enterprises (the “100” plus companies in focus) to dialogue on their GhG emissions as contributions to global warming.

The 100 corporates are said to account for 85% of the total GhG emissions worldwide – they need to step up, says the Coalition, and develop strategies and take action (and disclose!) to address the issue.  The investors manage more than $26 trillion in AUM, and are coordinating their efforts through five partnerships…

# # #

McKinsey Weighs In – ESG No Longer “Niche” – Assets Are Soaring

The McKinsey & Co. experts studied ESG investing and reported to corporate clients that of the $88 trillion in AUM in the world’s capital markets (in late-October), more than $1-in-$4 (25%-plus) are invested according to ESG principles.  That’s a growth of 17% a year, and ESG has become “a large and fast-growing market segment.”

# # #

Investors Are Not Forgetting – Rana Plaza Still in Focus

One of the characteristics of the sustainable investing market players is having-the-memory-of-the-elephant.  Do you remember the Rana Plaza apparel factory tragedy of five years ago?  Most media reporters and commentators have moved on to other crisis events.

Investors are signing on to a statement – “Investors Call on Global Brands to Re-commit to the Bangladesh Accord for Fire and Building Safety” – with focus on the upcoming fifth anniversary of the statement signed (in May 2013) after the accident that killed more than 1,000 workers in Bangladesh.

Reforms were promised in the Accord by industry participants and trade unions.

# # #

Another Example of Investor Action – McDonald’s

“In a win for the health of the world’s oceans,” began the As You Sow shareholder advocacy group announcement, “McDonald’s Corp. agreed to end the use of polystyrene foam packaging – worldwide! – – by the end of 2018.

The advocacy group had campaigned to have the fast food retailer stop using foam cups and takeout containers.

A shareholder proposal filed by As You Sow in May 2017 requested the company stop using polystyrene and 32% of shares voted (worth $26 billion at the time) voted to support.

# # #

Finally – What a Low-Carbon Economy Looks Like – California Dreamin’

The State of California is the world’s sixth largest economy all by itself!

While President Donald Trump upon taking office fulfilled one of his signature campaign promises – beginning the process of withdrawal from the historic COP 21 Paris Accord on climate change – California Governor Edmund (Jerry) G. Brown, Jr is moving ahead with his state’s plans to move to a low-carbon economy.

The Global Climate Change Action Summit is scheduled for September 2018 in San Francisco, California.

The theme, as described by the governor:  “Sub-national governments” (cities & states), business sector leaders, investors and civil society leaders will gather to “demonstrate the groundswell of innovative, ambitious climate action from leaders around the world, highlight economic and environmental transition already underway and spur deeper commitment from all parties, including national governments.”

Says the governor: “California remains committed to a clean energy future and we welcome the responsibility to lead on America’s behalf…”

# # #

Coming:  ISS QualityScores for “E” and “S” for 1,500 Companies

As we communicated in early January, Institutional Shareholder Services (ISS) has expanded its long-term focus on corporate governance to encompass “E” and “S” issues for its QualityScore product for fiduciaries (its client base).  In late-January it is expected that ISS will issue the first wave of scores for 1,500 companies in six industries, expanding to 5,000 companies in additional industries by mid-year 2018.

The first 1,500 companies to be scored are in Autos & Components; Capital Goods; Consumer Durables & Apparel; Energy; Materials; and, Transportation.

The QualityScore is a Disclosure and Transparency Signal that investor-clients are seeking, says ISS, and an important resource for investors to conduct comparisons with corporate peers.

Keep in mind:  ISS serves its 1,700 clients with coverage in 117 global markets.

# # #

There’s much more information on this and other critical 2018 tipping points for corporate managers and investment professionals in the comprehensive management brief from the G&A Institute team posted on our G&A Institute’s “To the Point!” platform for you.

We’re presenting here more details on the MSCI trends forecast, the BlackRock CEO-to-CEO letter about Social Purpose for the Corporation, California’s move toward a low-carbon economy,  RepRisk’s focus areas for corporate behavior…and a host of additional important developments at the start of the year 2018 that will shape the operating environment throughout the year – and beyond! Read the brief here!

Changes Ahead for Corporate Sustainability Reporting

This is a guest post by our colleague-in-sustainability, Jane DeLorenzo.  She recently completed the on-line Certificate in Corporate Responsibility & Sustainability Strategies.  The platform is hosted by G&A Institute and developed in partnership with IntegTree LLC. This is a dual credentials course!  A certificate is issued by Swain Center for Executive & Professional Education at the University of North Carolina-Wilmington and a separate certification is issued by G&A Institute.  This commentary is prepared as part of the completion of the coursework.  We are sharing it today to broaden understanding of the state-of-sustainability reporting – present and future.  Find out more about the dual certificate program here.

By Jane DeLorenzo  October 27, 2017

Now is the time for businesses and other organizations to take a closer look at their sustainability reporting; key considerations are what they report, why, how and which standards to use.

New standards released by the Global Reporting Initiative (GRI) will take effect July 1, 2018 — so the clock is ticking.

As more global companies produce sustainability reports, the process has become more complex. Competing standards and frameworks, increasing pressures from investors and other stakeholders, and the costs and resources involved to develop such reports can be challenging – and baffling to leaders.

While GRI is positioning and advocating to be the de facto global reporting standard, companies can select other frameworks, such as those of the Sustainability Accounting Standards Board (SASB) or the International Integrated Reporting Council (IIRC).

There are important factors to consider. Organizations can opt for an integrated report that includes both financial and sustainability information, or they can issue a sustainability report that is separate from the annual financial report.

Producing no sustainability report is also an option, since all three of these standards are voluntary in the United States and most other countries. Companies should be aware, though, that stakeholders may cry foul if no report is produced.

What’s a company to do?

The Continued Evolution of Reporting

Sustainability reports tell the story of an organization’s impacts on economic, environmental and social issues. Many corporations began to examine their non-financial impacts following the environmental and social movements of the 1970s in Europe and the United States.[i]

Public outcry due to rising awareness of pollution and social inequities pushed companies to try to be more transparent. Shareowners were making the case that non-financial issues can and do impact a firm’s financial performance.

In the U.S., for example, emissions data reporting was spurred by Right-to-Know legislation and rules in 1986 that required accountability from companies that were releasing toxic chemicals into the environment.[ii]

Demand for environmental and social disclosures led to the formation of GRI in 1997 by the Coalition for Environmentally Responsible Economies (now known as CERES) and the nonprofit Tellus Institute, both based in Boston. GRI later partnered with the United Nations Environment Programme (UNEP), which had been promoting voluntary environmental reporting by companies and industry groups.

At a ceremony in 2002 announcing the move of the GRI headquarters from Boston to Amsterdam in the Netherlands, UNEP Executive Director Dr. Klaus Töpfer acknowledged GRI’s mission to develop a framework for voluntary sustainability reporting.

He commented: “An increasing number of stakeholders, including the investment community, share the goal of the GRI to raise the practice of corporate sustainability reporting to the level of rigour, credibility, comparability and verifiability of financial reporting.”[iii]

GRI launched its first sustainability reporting framework in the year 2000 and subsequently developed four versions of its guidelines (G1 through G4). Keeping current was a long-term challenge for companies reporting their corporate social responsibility (CSR) efforts. Over time it became clear that a simplified, easier-to-update standard was needed. The new GRI Standards are meant to streamline and simplify the process.

As GRI marks its 20th year, the organization is attempting to “tackle the confusion among companies about the proliferation of different reporting frameworks,” according to GRI Chief Executive Tim Mohin.[iv]

While some media reports claim GRI and SASB are competing frameworks, a 2017 article in GreenBiz, co-authored by Mohin and SASB Founder/CEO Jean Rogers, intended to dispel this perception.[v] The article states: “Rather than being in competition, GRI and SASB are designed to fulfill different purposes for different audiences. For companies, it’s about choosing the right tool for the job.”

Best Practices

Using the right tool, or standard, is the key to companies producing a successful report for their target audience.

While GRI is the widely-accepted framework for reporting sustainability initiatives to a broad audience, SASB focuses on reporting to the investor audience. This audience is interested in the link between sustainability and financial performance. Both GRI and SASB agree on a common goal: to improve corporate performance on sustainability issues.

Other organizations with similar goals include a list of initials and acronyms:  IIRC, CDP, ISO, OEDC, SDG and more. These are:

  1. IIRC (International Integrated Reporting Council) promotes integrated reporting to provide “investors with the information they need to make more effective capital allocation decisions,” according to its website.[vi]
  2. CDP (formerly known as Carbon Disclosure Project) partners with organizations to measure their carbon footprint. Many companies use CDP alongside other reporting frameworks.
  3. ISO, the International Organization for Standardization developed ISO 26000 to help organizations improve their social responsibility efforts.
  4. OECD is the Organization for Economic Cooperation and Development. Its industrial economy member countries negotiate guidelines surrounding social responsibility.
  5. SDG stands for the United Nations “Sustainable Development Goals.” UN member states adopted the 17 SDGs with 169 targets that seek to protect the planet, end poverty, fight inequality and address other social injustices.

While CSR reporting has been widely voluntary, mandatory reporting is taking effect in some countries. In the European Union, large companies (more than 500 employees and certain assets and revenues) now face mandatory disclosure of environmental and social impacts beginning with their 2018 annual reports.[vii]

The EU published its own guidelines in 2017, but it allows companies to choose among the various standards. Laws requiring CSR reporting are also in effect in South Africa, China and Malaysia. Meanwhile, a growing number of stock exchanges around the world are issuing sustainability reporting guidance and requirements.

Companies that are just beginning the process to report on their sustainability impacts should find the new GRI Standards relatively simple to use. The Standards are free to download from the GRI website (www.globalreporting.org) by registering a company name and email address. Organizations can use all or some of the Standards, but they must notify GRI of their intended use.

The new Standards are made up of three modules (or manuals): (1) the Foundation, which describes the basic reporting principles; (2) General Disclosures, which outline required contextual information about an organization and how it operates; and (3) Management Approach, which requires organizations to state how they approach their selected sustainability topics or issues.

While the content and requirements are basically unchanged from the currently-used GRI G4, the Management Approach now takes center stage. A reporting company must provide information on how it “identifies, analyzes and responds to its actual and potential impacts.”[viii]

Once a company determines its approach to a key topic, this management approach might stay the same from year to year. Also, one management approach may apply to several key topics, which should make reporting more concise. The Standards include three additional modules that are organized according to topic categories: economic, social and environment.

Focusing on material (or key) topics, rather than a long list of topics, should also make the reporting process more concise as well as more meaningful to stakeholders. In other words, less is more. The new Standards direct companies to identify their key topics and then report on at least one of the topic-specific GRI disclosures.

For example, Company XYZ determines from stakeholder feedback that the topic of waste will be included in its sustainability report. Both the new GRI standards and G4 guidelines include five disclosures on waste. The new Standards require reporting on one disclosure so Company XYZ can report more in depth on this key topic.

Previously, some companies felt compelled to report on a greater number of topics and disclosures in order to be ranked favorably by rating agencies like Bloomberg or Thomson Reuters. These ratings not only can affect a company’s stock price, but they also can influence a company’s CSR strategy.

According to a 2016 study on rating agencies, about 33 percent of companies said inquiries from sustainability analysts shaped their overall business strategy.[ix]

Implications and Conclusion

Regardless of which sustainability reporting guidelines an organization chooses, the number of companies producing voluntary or mandatory reports is growing.

The process itself can give companies a clearer picture of their impacts and progress meeting their CSR targets. These insights help companies develop strategies to identify risks and opportunities within their realm of sustainability.

Because the GRI framework has been widely accepted globally, its new Standards will likely have a strong impact on the future of reporting. But it’s also likely that the leadership of corporations will continue to take a closer look at the link between sustainability and financial performance. Consequently, other frameworks that focus on both financial and non-financial impacts could gain acceptance.

GRI, SASB, IIRC and other frameworks are all driving improvements in sustainability reporting. As GRI’s Mohin explained: “In order to be more impactful, reporting needs to be concise, consistent, comparable and current. Brevity and consistency are key to successfully managing and understanding the insights delivered by the reported data.”[x]

Reporting must consider the financial bottom line if a company is to be both profitable and sustainable. What matters is that organizations need to be mindful of their reasons for reporting and how sustainability reporting can make an impact internally and externally. Honest, balanced and transparent reporting will ultimately benefit companies, their stakeholders and society-at-large.

Author:  Jane DeLorenzo is Principal of Sustainable Options, specializing in sustainability report writing and editing, and compliance with GRI reporting.

 

 

 

 

 

 

 

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The on-line Certificate in Corporate Responsibility & Sustainability Strategies provides a broad overview of key corporate responsibility challenges and strategies that will enable organizations to succeed in the 21st Century Green Economy.  The Program Developer is Nitish Singh, Ph.D., Associate Professor of International Business at the Boeing Institute of International Business at Saint Louis University with Instructor Brendan M. Keating.

Information is here:  http://learning.ga-institute.com/courses/course-v1:GovernanceandAccountabilityInstitute+CCRSS+2016/about

# # #

References:

[i] Brockett, A. and Rezaee, Z. (2015). Corporate Sustainability: Integrating Performance and Reporting. Retrieved from https://www.safaribooksonline.com/library/view/corporate-sustainability-integrating/9781118238066/chapter02.html

[ii] Environmental Protection Agency, United States. (n.d.) Timeline of Toxics Release Inventory Milestones. Retrieved from  https://www.epa.gov/toxics-release-inventory-tri-program/timeline-toxics-release-inventory-milestones

[iii] CSRwire (2002, April 22). Global Reporting Initiative Announces Move to Amsterdam. Retrieved from http://www.csrwire.com/press_releases/15359-Global-Reporting-Initiative-Announces-Move-to-Amsterdam

[iv] GRI (2017, October 4). Q&A with GRI Chief Executive Tim Mohin. Retrieved from https://www.globalreporting.org/information/news-and-press-center/Pages/QA-with-GRI-Chief-Executive-Tim-Mohin.aspx

[v] Mohin, T. and Rogers, J. (2017, March 16). How to approach corporate sustainability reporting in 2017. Retrieved from https://www.greenbiz.com/article/how-approach-corporate-sustainability-reporting-2017

[vi] International Integrated Reporting Council. (n.d.) Why? The need for change. Retrieved from https://integratedreporting.org/why-the-need-for-change/

[vii] European Commission, Belgium. (n.d.) Non-financial reporting. Retrieved from    https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/non-financial-reporting_en

[viii] GRI (n.d.) GRI 103: Management Approach. Retrieved from https://www.globalreporting.org/standards/gri-standards-download-center/gri-103-management-approach/

[ix] Sustainable Insight Capital Management (2016 February) Who are the ESG rating agencies? Retrieved from https://www.sicm.com/docs/who-rates.pdf

[x] GRI (2017, October 4). Q&A with GRI Chief Executive Tim Mohin. Retrieved from https://www.globalreporting.org/information/news-and-press-center/Pages/QA-with-GRI-Chief-Executive-Tim-Mohin.aspx

 

Are You Still In? Are You Signed on Yet? C’Mon – the Country Needs You!

by Hank Boerner, Chairman & Chief StrategistG&A Institute

Question of the Day:  Are YOU Still In?  Have you signed on?  “In” — that is, for the long haul on addressing the many challenges of climate change and related global warming issues.  And “signed on” — to the We Are Still In Movement (please see wearestillin.com for information).

Right now, there are more than 2,000 signatories to the statement that was released on June 5 (2017), right after President Donald Trump figuratively “tore up” the important, historic commitment of the United States of America to the COP 21 Paris Accord.

The new movement is a voluntary grassroots approach that includes a wide array of bold names in different sectors of the American economy (bold name highlights further down in this commentary for you).

The signatories include investors (asset owners and asset managers); mayors of cities and leaders of local municipalities; universities and colleges; state governors and state governments; and (very encouraging!) lots of American corporations.

Folks at Ceres and World Wildlife Fund (WWF) and various sustainable, responsible and impact investment thought leaders are helping to get the word around. (Thank you to Anne Kelly and Jessie Arnell at Ceres and Marty Spitzer at WWF.)

The message points for signatories of all stripes are:

Despite the Trump Administration reneging on an important commitment (governmental and moral!), major players in the U.S. economy are still in — and stepping up, moving ahead on climate action.

Signatories are committing to drive down carbon pollution and address head on the challenges related to climate change (and especially the part that human activity plays in the changes taking place).  The goals put in place and the ambitious goals to come will help to ensure that the United States remains in the game and a global leader in reducing carbon emissions.

The broad-based coalition driving the We Are Still In movement
Just in the month of June, those signing on included:

  • 199 cities and counties;
  • 9 U.S. states;
  • 1,531 business leaders and investors;
  • 308 universities and colleges.

These players agree that:

  1. government alone is not driving the process;
  2. the Paris Accord represents an important blueprint for creating new jobs (think solar, wind, geothermal, energy conservation, etc);
  3. create prosperity on a broad, domestic and global basis;
  4. create stability in the world community, with developed economies assisting less-developed nations as ALL embrace the promises made in Paris (almost 200 nations are signed; notably absent now sad to say are just the USA, Nicaragua and Syria).

The We Are Still In Movement is sending clear signals to the global community in Plain English — not always present in White House’s erratic and often contradictory communications — that leaders throughout the American economic scene, in all geographies, in all sectors, are moving forward to help this nation meet the goals promised in Paris.

We will keep America Great in the global efforts to address climate change issues and provide innovative, job-creating, environmentally-friendly solutions!

ECONOMIC POWER
The signatories to date represent 124 million people in this nation (1/3 of the population!) and contributing US$6.2 trillion to the national economy.  This includes 38 Fortune 500 companies(bravo!) representing US$2.1 trillion in annual revenues and employing 4.7 million team members.

Here is the “Open Letter to the International Community” from the Movement for important background: http://wearestillin.com/

So — back to the question…are you signed on yet?  You can find more information at: www.wearestillin.com  — where you can sign up!

A Brief Selection of Bold Names for Your Reference

CORPORATE SECTOR
Bloomberg, LP; Mars Incorporated; Amazon; eBay; Google; Levi Strauss; Seagate Technology; Sealed Air Corporation; Loring, Wolcott & Coolidge; The Estee Lauder Companies; Microsoft; Apple; Nike; Campbell Soup Company; IBM: The Hartford; Starbucks; Intel; International Flavors & Fragrances; Wal-Mart Stores; Toshiba American Business Solutions; Johnson Controls.

THE INVESTMENT COMMUNITY
CalPERS; CalSTRS; New York City Office of the Comptroller; Office of the New York State Comptroller; Oregon State Treasury; Green Century Capital Management; Washington State Investment Board; Northwest Coalition for Responsible Investment; Cornerstone Capital Group; Nathan Cummings Foundation; Ambata Capital; Boston Trust/Walden Asset Management; Amalgamated Bank; Moore Capital Management; Azzad Capital Management; Sustainability and Impact Investing Group of Rockefeller & Company; California Clean Energy Fund; California State Controller; Calvert Research and Management; Trillium Asset Management; Interfaith Center on Corporate Responsibility; Clean Yield Asset Management; Rhode Island State Treasurer; Zevin Asset Management; Connecticut Retirement Plans and Trust Funds.

STATES / GOVERNORS
California; Connecticut; Hawaii; New York; North Carolina; Oregon; Rhode Island; Virginia; Washington.

MAYORS  OF CITIES
The Honorables: Bill DeBlasio (New York City), Eric Garcetti (Los Angeles); Kasim Reed (Atlanta), Rahm Emanuel (Chicago),  Hillary Schieve (Reno, NV); Bridget Donnell Newton (Rockville MD).

ACADEMIC CENTERS
University of Iowa; University of Maryland, University College; University of Massachusetts; Arizona State University; Bates College; Oregon State University; Occidental College; Northwestern University; Rutgers, the State University of New Jersey; State University of New York (the colleges at Albany, New Paltz, Stony Brook, College of Environmental Science and Forestry, Cortland, Oswego, Orange).

FAMILY FOUNDATIONS
Linton Family Foundation; Lora & Martin Kelley Foundation; Merck Family Fund.

ENTREPRENEURS/SMALL BUSINESS
Keller Estate Winery; The Junkluggers; Crystal Mountain Resort; Rune’s Furniture; Sara Danielle Designs; Eco Promotional Products; Say It Forward Productions; Mom’s Organic Market; Sons and Daughters Farm; Fetzer Vineyards; RC Flying Cameras LLC; Dallas Maids LLC; Rocca Family Vineyards; York Machine Works; Joe’s Tree Service.

PROFESSIONAL PRACTICES
Steve Harvey Law LLC; BCK Law PC; Christopher Intellectual Property Law PLLC; the Hvizda Team LLC/Keller Williams Realty Metro; Jim Henry, Architect; CTA Architects and Engineers; Cycle Architecture + Planning.

ASSOCIATIONS
National Ski Areas Foundation; National Latino Farmers & Ranchers Trade Association; Outdoor Industry Association; U.S. Green Building Council.

And Of Course the Usual Suspects – Pioneering Leaders in Sustainability:
Bloomberg LP; Ben & Jerry’s; Patagonia; Unilever…and more.

We have provided a brief overview here – please do check out the full roster at the WeAreStillIin.com.

And of course, Governance & Accountability Institute, Inc. was an early signatory!

And the latch handle is out:  we invite you to sign on for your organization!