Overview: Select Sessions, “SB21” Trendwatching – Mapping the New Brand Purpose Landscape

April 2021

by Kirstie Dabbs – G&A Institute Sustainability Reports Analyst and G&A Sustainability Analyst Intern Team Leader

BACKGROUND
Sustainable Brands hosted its “SB ’21 Trend Watching“ event (virtually) on February 23, 2021. Covering the intersecting crises from 2020 and opportunities that lie ahead for stakeholders in 2021, the event was full of information about the increased value of purpose for consumers, brands, and leaders.  

I present here brief recaps of select sessions with content that will be of value to many of our blog readers. 

Session Spotlight: “What We Learned About Ourselves in 2020”

Dimitar Vlahov, Senior Sustainability, Regeneration & Brand Transformation Expert at SB kicked off the event with an overview of key trends reflecting the state of our planet, society, and business environment, including:

  • Increasing existential risks related to biodiversity collapse. This, he said, is “very real and very close.” With one million species currently at risk, and global wildlife populations down 68% since 1970, humans and livestock now comprise 96% of all existing mammals. Only 4% of mammals on earth are in the wild. This is a tragic and very dangerous imbalance, he posited.
  • Growing presence of climate grief and climate anxiety in youth and young adults
  • Erosion of social /societal cohesion.
  • Increased focus on racial justice. Because this is such an important trend, Sustainable Brands will host a Just Brands event devoted exclusively to social and racial justice in May 2021.
  • Widening digital inequality.
  • Rise of intentional (and unintentional) spread of false news. False news stories on Twitter travel six (6x) times faster than true / factual stories, according to a recent MIT study.
  • Declining trust in institutions, specifically national governments, global companies, and the media.
  • Signs of collapsing multilateralism.
  • Rising inequality of stock market holdings in the United States of America. U.S. families in the top 1% of net worth hold nearly 40% of overall equities, while families whose net worth falls in the bottom 50% hold only 1% of overall equities, according to Survey of Consumer Finances data presented by The New York Times.
  • Growing commitments to Stakeholder Capitalism have yet to be supported by appropriate levels of action. Despite the promise made by 180 members of the Business Roundtable (BRT) to redefine the purpose of a corporation as benefiting all stakeholders (employees, customers, suppliers and local communities in addition to shareholders) very few have apparently amended their governing purpose guidelines beyond the long-term focus on the Professor Milton Friedman school of shareholder primacy.
  • Increase in Science Based Targets on climate. Over 1,000 companies worldwide are working on science-based emissions reduction targets through the Science Based Targets initiative (SBTi). Exciting news: methodologies are also being developed for setting science-based targets for water, land use, forests, biodiversity, and oceans as well – described below.

Session Spotlight: “Goal Setting & Innovation: Critical Environmental Thresholds”

Kevin Moss, Global Director of the Center for Sustainable Business at the World Resources Institute (WRI) and Chair of the Science Based Targets Network, moderated this discussion with Lina Constantinovici, Founder and Executive Director of Innovation 4.4 and Roberta Barbieri, PepsiCo VP of Global Water and Environmental Solutions.

The session covered new developments around science-based targets (SBTs) for all aspects of nature: biodiversity, climate, freshwater, land, and oceans.

This, of course, in addition to SBTs for climate, which are gaining popularity. This important work is being performed by the Science Based Targets Network, comprised of 20 nonprofits including World Resources Institute. Science-based targets for nature, geared toward cities and companies, will be released by 2022. Initial guidance for business is already available in this 2020 report.

Developing methodologies for these targets poses a challenge, due to contextual variations of resources based on region, accessibility, and use. Freshwater use in a water-scarce region has different limitations than in a non-water-scarce region.

Nevertheless, these targets will be critical in the management of the global commons that power not only our economy, but our very existence.

The SBT Network is currently partnering with private sector companies to pilot targets to determine their feasibility and effectiveness.

Important news:  PepsiCo has signed on to pilot a freshwater target wherein each water-scarce watershed in its supply chain will have a unique target for water management.

PepsiCo knows that freshwater is material to its business and has been focused on water stewardship for years. Adopting a science-based freshwater target will inform the Company about what is required to alleviate water risks, and how far it is from achieving its own water targets.

As Roberta Barbieri pointed out, if PepsiCo is water insecure, other companies are as well. She hopes that this pilot will influence other companies to participate in such work going forward.

Lina Constantinovici shared the mission of Innovation 4.4, which is to accelerate the commercialization and deployment of water, energy, health, materials science and space technology most critical to the achievement of the Paris Agreement and the United Nations Sustainable Development Goals.

Her session highlighted the critical issues facing oceans today, sharing that oceans are Earth’s most valuable asset, contributing US$70 trillion to global GDP annually and over 50% of the oxygen we breathe.

Yet — the quantity of plastic in oceans is expected to outnumber fish by 2050, and UN Sustainable Development Goal 14 – Life Below Water – is second to last in terms of the funding it receives compared to the other SDGs.

For this reason, Innovation 4.4 developed a multi-pronged strategy to innovate for better oceans. Initiatives include Oceans Funders, which enables a more aligned and informed approach to funding ocean solutions, and Oceans Prize, a contest to find plastic alternatives and remove existing plastic from oceans.

Global collaboration and ambitious thinking will be required to tackle our global challenges, of which oceans and freshwater are only two examples. The forthcoming SBTs for nature will allow organizations to measure and take responsibility for their environmental resource use.

Perhaps in a few years’ time we’ll be so lucky as to hear about 1,000 companies working toward such targets. This SB ’21 Trendwatching event provided cause for stakeholder to be optimistic that the rise of brand purpose will help to move us in that direction.

About Author Kirstie Dabbs
2021 Intern Team Leader
G&A Sustainability Reports Research Intern

Kirstie Dabbs is currently pursuing an MBA in Sustainability, with a focus on Circular Value Chain Management, at Bard College in New York. Her fluency in corporate disclosure stems from the program’s emphasis on the Integrated Bottom Line. As an MBA student she has enjoyed developing sustainability strategies for public, private and nonprofit organizations.

In her role as an Associate Consultant for Red Queen Group in New York City, Kirstie provides organizational analyses and support for nonprofits undergoing strategic or management transitions. Her rich background as a project manager at The Metropolitan Opera has informed this role, and she remains an enthusiastic supporter of the visual and performing arts.

Kirstie is also a member of the Climate Reality Leadership Corps, an organization led by former Vice President Al Gore that promotes awareness of climate change worldwide, and is a contributor to GreenHomeNYC, a resource for green building and career development in the New York metropolitan area.

On Corporate Risk Strategy, Sustainable Actions & Outcomes – What’s the Best Ways to Report on ESG to Stakeholders?

April 2021

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

Buzz… Buzzz… Buzzzzz! The current buzz among key stakeholders – investors, corporate boards & management, NGOs, government regulators, stock exchanges, ESG raters & rankers, ESG corporate disclosure standards and frameworks managers – is centered on “Quo Vadis”…where do we go from here!

The good news is that the lively discussions underway appear to be indicating progress in the global drive to achieve more holistic, meaningful, accurate, comparable, understandable corporate ESG disclosure approaches.

One, to help publicly-traded company managements understand and provide transparency for the data sets, metrics and narratives that asset owners and their managers, and (2) to help creators of sustainable investing products in their expanding analysis of companies of all market cap sizes.

Influential players are part of the discussion.

Example: The World Economic Forum (WEF) published a White Paper in January 2020 to set out a framework to bring sustainable reporting frameworks & standards into a common and consistent system of metrics. This, to help investors and companies attain sustainable value creation and accurately disclose on same. WEF suggests a set of 22 Core metrics and a range of Expanded metrics to start with.

At the same time the “Big Five” of the global corporate sustainability disclosure and reporting frameworks and standards organizations are collaborating and recently published a shared vision of the elements necessary for achieving more comprehensive and holistic corporate sustainability reporting.

The five organizations are: CDP; the Climate Disclosure Standards Board (CDSB); Global Reporting Initiative (GRI); International Integrated Reporting Council (IIRC); Sustainability Accounting Standards Board (SASB). Plus TCFD, the Task Force for Climate Related Financial Disclosure, created by the Financial Stability Board (FSB), a G20 nations organization.

Joining the effort: The European Commission; IOSCO (global government securities regulators organization); WEF’s International Business Council; and IFRS.

Each issue of the G&A Sustainability Highlights newsletter we bring you information about the above and much more related to the increasing tempo of the buzzzzz on corporate sustainability disclosure and reporting.

The discussions are taking place worldwide as leadership in public sector, private (business/corporate) sector and social sector address a widening range of ESG issues that will over time determine what kind of world we’ll live in.

See: meeting the challenges of climate change multiple issues, diversity & inclusion, populations deciding on democracy or authoritarianism, having ample food supplies or facing starvation, providing equality of opportunities & outcomes, pandemics to come, rapidly disappearing natural resources, political financing, a range of labor/workforce challenges…and more.

The content silos in our newsletter are designed to help you scan and select the news and perspectives we gather for you each issue.

The G&A Institute’s “Sustainability Headquarters” (SHQ) web platform has many more items selected by our editorial team led by EVP Ken Cynar for you. He’s assisted in these efforts by G&A’s Amy Gallagher, Reilly Sakai, Julia Nehring, Elizabeth Peterson, Lucas Alvarez, Lou Coppola, and Hank Boerner. All of this is team effort! Check the expanded related contents not in the newsletter on SHQ!

We constantly monitor all of the above issues — the global ESG disclosure buzz! — and participate in certain of the conversations as guiding the ESG disclosure and reporting of our corporate clients is at the core of the G&A Institute mission.

TOP STORIES

CEOs & Business Leaders Speak Out on Voter Rights – Corporate Citizenship, USA-style On Display

April 14 2021

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

Corporate America and “Corporate Citizenship” – Today, that can mean lending the CEO and company voice to address critical societal issues in the United States of America.  Some applaud the move, while others attack the company and its leader for their position on the issues in question.   

In this context, powerful messages were delivered today from the influential leaders of the US corporate community – clearly voicing concern about the American electoral process and the rights of all qualified voters in the midst of mounting challenges to the right-to-vote. 

What the CEOs, joined by other influentials in the American society, had to say to us today:

As Americans we know that in our democracy we should not expect to agree on everything.

However – regardless of our political affiliations, we believe the very foundation of our electoral process rests upon the ability of each of us to cast our ballots for the candidates of our choice.

We should all feel a responsibility to defend the right to vote and oppose any discriminatory legislation or measure that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.

Who is saying this? A list of bold name signatories in an advertisement that appears today in The New York Times and The Washington Post – these messages (these above and more) splashed across two full pages (a “double truck” in newspaper language) with a dramatic roster of prominent names from Corporate America. And prominent accounting and law firms with bold name corporate clients. And not-for-profits. And individuals. Celebrities.  People and organizations that every day in some way touch our lives. 

This advertisement certainly continues to set the foundation in place for pushback by powerful people and organizations as various state legislatures take up electoral voting measures. And pushes back against the “Big Lie” that the November 2020 elections at federal, state and local levels were widely fraudulent.

The names on the two pages jump out to capture our attention: Apple. American Express. Amazon. Dell Technologies. Microsoft. Deloitte and EY and PwC. Estee Lauder. Wells Fargo. BlackRock. American Airlines and JetBlue and United Airlines. Steelcase. Ford Motor and General Motors. Goldman Sachs. MasterCard. Vanguard. Merck. Starbucks. IBM. Johnson & Johnson. PayPal. T. Rowe Price. And many more.

CEOs including Michael R. Bloomberg (naturally!). Warren Buffett. Bob Diamond, Barclay’s. Jane Fraser, Citi. Brian Doubles, Synchrony. Brian Cornwell, Target. Roger Crandall, Mass Mutual.

Luminaries joined in as individual in support of the effort: David Geffen. George Clooney. Naomi Campbell. Larry David. Shonda Rhimes. Larry Fink. Demi Lovato. Lin-Manuel Miranda. Many more; think about the influence of their influencers in our American society in 2021.

And we see the names of these law firms: Akin Gump. Arnold Porter. Milbank. Morgan Lewis & Bockius. Fried Frank. Cleary Gottlieb. Holland and Knight. Ropes & Gray. (If you are not sure of who these firms and many more law firm signatories are, be assured that in the board room and C-suite and corporate legal offices these are very familiar names).

And the “social sector” institutions/organizations signing on include leaders of the Wharton School, Morehouse College, Spelman College, University of Pennsylvania, Penn State, NYU Stern, United Negro College Fund, Hebrew SeniorLife, and Council for Inclusive Capitalism.

The New York Times covered the story of the advertising message in an article in the Business Section – Companies Join Forces to Oppose Voting Curbs (bylined by Andrew Ross Sorkin and David Gelles). Subhead: A statement that defies the GOPs call to stay out of politics.

The effort was organized by prominent Black business leaders including Ken Chennault, until recently the highly-regarded CEO of American Express, and Ken Frazier, the also-widely-admired CEO of Merck.

Recall that Senate Minority Leader Mitch McConnell corporations said that corporations should “stay out of politics”. The recent State of Georgia legislation addressing voting rights was a trigger for prominent corporate leaders (such as heads of Coca Cola, Delta Airlines, both headquartered in Atlanta) to criticize measures that could deter or inhibit minority voter populations from exercising their rights.  Leader McConnell reacted to this. 

The Times quoted Kenneth Chennault: “It should be clear that there is overwhelming support in Corporate America for the principle of voting rights…these are not political issues…these are the issues that we were taught in civics…”

Also made clear: The CEOs, social influential and thought leaders including celebrities involved in the ad message effort were non partisan and not attacking individual states’ legislative efforts.

Remember The Business Roundtable’s recent re-alignment of the groups mission statement to focus on “purpose”? According to the Times report, the subject of the ad effort was raised on an internal call and CEOs were encouraged to sign on to the statement; many CEOs did.

Where does this go from here? Corporate executives are speaking out separately on the legislative measures being discussed in individual states that appear to or outright are clear about restricting rights of minority populations. That happened in Georgia recently. Coca Cola and Delta Airlines were hit with criticism; those companies were not signatories on the ad today. Home Depot (also HQd in Atlanta) waffled; the company is not represented on the signatory line nor was there public criticism of the legislature’s effort.

Perspective: While corporate citizenship has been an area of focus and public reporting for many years at a number of large cap public companies, the glare of publicity centered on the question of “what are you doing to help advance society on critical issues as a corporate citizen” is more recent.

The spotlight is intensifying on voting rights (as we see today) and also on climate change, diversity & inclusion, human capital management (especially in the Covid crisis), investment in local communities, in supporting public education, in hiring training & promotion of women and minorities, doing business with nations with despot leaders (think of Burma/Myanmar), equality of opportunity for all populations…and many other issues.

And so today’s advertising splash with CEOs especially putting their stake and their company’s stake in the ground on these types of issues is something we can expect to see continue and even expand in the coming weeks.

The division lines in the USA are certainly clear, especially in politics and public sector governance, and we are seeing that corporate leaders are responding to their stakeholders’ expectations…of being “a good corporate citizen”.

And it’s interesting to see the perspectives shared that even the meaning and understanding of the responsibilities of the “corporate citizen”) is defined along some of the lines that divide the nation.

Interesting footnote:  Clearly illustrating the political and philosophical divide, the members of the Republican Party who are organized as the opposition to the GOP today — The Lincoln Project — called on followers to sign on to an email that singles out JetBlue (one of the ad signatories) for contributing to political campaigns of what the Lincoln Project calls “seditionists”.  These are elected officials who “support voter suppression”. Says the project: If enough of us make it clear that we won’t stand inequality, voter supression and sedition, we will make a difference.

The battle lines are clearly drawn in voting rights issues. 

The advertisement today:

April 14 2021 – The New York Times and The Washington Post messages:

 

 

 

 

Expanding Public Debates About the “What” & “How” of Corporate ESG Disclosure

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

March 2, 2021

Corporate sustainability / ESG reporting — What to disclose? How to frame the disclosures (context matters!)? What frameworks or standards to use?  Questions, questions, and more questions for corporate managers to consider as ESG disclosures steadily expand.

We are tuning in now to many more lively discussions going on about corporate ESG / sustainability et al public disclosures and structured reporting practices — and the growing complexity of all this disclosure effort, resulting often in disclosure fatigue for corporate practitioners!

Corporate managers ponder the important question:  which of the growing number of ESG frameworks or standards to use for disclosures? (The World Economic Forum (WEF) describes some 600 ESG guidelines, 600 reporting frameworks and 360 accounting standards that companies could use for reporting.  These do vary in scope, quantity, and quality of metrics.)

In deciding the what and how for their reporting, public companies consider then the specifics of relevant metrics and the all-important accompanying narrative to be shared to meet users’ rising information needs…in this era of emergent “stakeholder capitalism”.

Of course, there is the question for most companies of which or what existing or anticipated public sector reporting mandates will have to be met in various geographies, for various sectors and industries, for which stakeholders.

We here questions such as — how to get ahead of anticipated mandates in the United States if the Securities & Exchange Commission (SEC) does move ahead with adoption of new rules or at least strong guidance for corporate (and investor) sustainability reporting.

The European Union is today ahead in this area, but we can reasonably expect the USA to make important moves in the “Biden Climate Administration” era.  (The accounting standards boards are important players here as well as regulatory agencies in the sovereign states.)

Company boards, executive committees, professional staff, sustainability team managers wrestle with this complex environmental (for ESG disclosure) as their enterprises develop strategies, organize data flows, set in place data measurement protocols, and assemble the ESG-related content for public disclosure. (And, for expanded “private sharing” with ESG ratings agencies, credit risk agencies, benchmark/index managers, to meet customer ESG data requests, and more).

The list of issues and topics of “what” to disclose is constantly expanding, especially as institutional investors (asset owners and their managers) develop their “asks” of companies.

Climate change topics disclosure is at the top of most investor lists for 2021. Human Capital Management issues have been steadily rising in importance as the COVID-19 pandemic (and spread of variants) affects many business enterprises around the globe.

In the USA, SEC has new guidance for corporate HCM disclosures.  Political unrest is an issue for companies.  Anti-corruption measures are being closely examined.

Diversity & Inclusion (including in the board room and C-suite) is growing in importance to investors.

Also, physical risk to corporate assets in the era of superstorms and changing weather patterns – what are companies examining and then reporting on?  Exec compensation with metrics tied to performance in ESG issues is an area of growing interest.

We are monitoring and/or involved in multiple discussions and organized initiatives in the quest to develop more global, uniform, comparable, reliable, timely, complete, and assured corporate sustainability metrics, and accompanying narrative.  And, to provide the all-important context (of reported data) – what does the data mean?  It’s a complicated journey for all involved!

This week we devote the content of this week’s Highlights newsletter to various elements of the public discussions about the many aspects of the journey.

Here at G&A Institute, our team’s recommended best practice:  use multiple frameworks & standards that are relevant to the business and meet user needs; these are typically then disclosed in hybridized report where multiple standards are harmonized and customized for the relevant industries and sectors of the specific company’s operations and reflect the progress (or even lack of) of the enterprise toward leadership in sustainability matters.

This approach helps to reduce disclosure fatigue for internal corporate teams challenged to choose “which” framework or standard and the gathering of data and other content for this year’s and next year’s ESG disclosures.

We shared our thoughts in a special issue of NIRI IR Update, published by the National Investor Relations Institute, the important organization for corporate investor relations officers:


Here are our top selections in the content silos for this week that reflect the complexity of even the public debates about corporate ESG disclosure and where we are in early-2021.

TOP STORIES

The ever-evolving world of ESG investing from a few different points of view. What are the providers of capital examining today for their portfolio or investable product decision-making?  Here are some shared perspectives:

Turmoil in the USA / Washington Capitol Terror Attacks – Corporate Sector Responses to Threats to the Nation

Prepared January 20 2021 – Inauguration Day in the USA

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

These are troubled times in the United States of America. After the national elections in November 2020, political and social rhetoric became even more heated and widepread sharing of rumors and lies intensified than even in the weeks leading up to the ballots being cast by well more than 155 million citizens in the 50 states of the Republic.  (There are more than 200 million registered voters in all of the states.)

Moving toward the inauguration of the new president the major social media platforms unfortunately served as rioter assembly stations and important [negative] information sharing tools that helped to spread lies, rumors, and volumes of false and dangerous information.  The large platforms stand accused now of having helped to enable many thousands of protestors to travel to and assemble in Washington, D.C. for a January 6 rally that quickly spun out of control.

There will likely be short- and longer-term fallout here: What was a growing public debate on the role of social media and the focus on tech companies at the center of controversy (think of Facebook, Twitter, Google, others) quickly became a public ranting from all sides of the political spectrum.

The tempo of the public policy debate has sharply increased:  What actions should be taken to address concerns about the tech leaders and their role in spreading false and dangerous-to-democracy content? (Stay tuned to this important public policy debate in 2021.)

To recap what happened:  On January 6th, 2021 a mob of an estimated 8,000-plus men and women attended a rally and then took the point to travel with an even larger group behind them, along the major thoroughfares that lead from the White House and nearby National Mall to the Capitol Hill complex that houses the U.S. Congress (the House of Representatives and US Senate) -– ranting slogans and waving their flags along a brisk and angry 3.6 mile march (4.8 kilometers).

By the time the government complex on the hill was reached the point of the mob was out of control. The “tip of the spear” leadership group quickly pierced the Capitol Hill ramparts and the mob poured in behind to do their damage inside the halls of Congress.

The mob -– characterized by many now as being in fact domestic terrorists -– swarmed the complex, confronted a police force numbering about 1,400, swept past those guardians and into the Capitol Building to wreak havoc, steal items such as the Speaker of the House’s office laptop, and destroy government property.

They were there for hours. And much of this was broadcast live, on various news platforms and including on social media — by participants!

The mob even seemed to be threatening the very lives of the Members of House and Senate — and it seems, the well-being and maybe the life of the Vice President of the United States (Michael Pence) who also served as presiding officer of the US Senate during the crucial vote to accept the 2020 Presidential voting results. (The mob’s intention was to overthrow Congress and change the vote outcome to make Donald Trump the winner.)

The  widespread criticism of these actions was immediate; much of the American public was outraged. Anger was directed at the mob, at the social media platforms helping to spread the messages of the insurrection leaders and participants, at the President of the United States and his political allies for encouraging the unrest.

24/7, major news media published, broadcast and telecast news and the volumes of criticism — and, indeed the collective outrage of most of the nation – out to all of the nation and world.

A Day of Infamy for the USA – and Corporate Response

In Utah, the Deseret News described this in its headline as “Jan. 6, 2021: Another day that will live in infamy for Americans”.

An important sea change:  The corporate community, including major players in financial services sector industries, quickly became very visible among the critics. For some companies the silence about the “Steal the Vote” protests was a form of diffidence or even support. That changed!

Prominent corporate leaders and their trade associations blasted the actions, of both rioters and supporters, and took (and continue to take) actions in response to the horror that they witnessed. We bring you highlights of some of this initial response this week.

Following the attack there was dramatically expanding news of what was to come as a new legislative and executive branch was taking shape  -– the days after January 6th were climaxed by the inauguration of the new president and vice president on January 20th (done!) and the convening of a new US Senate leadership team (in process as we write this).

All of this news and opinion was being shared in the context of the continuing threat posed to the American nation by homegrown, domestic terrorists.

This is usually a time of great celebration of the peaceful transfer of power, a 200-plus year tradition in the USA that occurs every four years following the presidential elections.  Instead, these January days became a time of sorrow and sadness and disappointment.  All that was being reported out to the world as well.

The days leading up to the January 20th inaugural event had most Americans very jittery, with media reports of continued threats (such as possible physical harm to the national and state capitals, more heated partisan political talk, even the possibility of threats to human life posed by armed citizens in so-called ragtag “militias”).

There were more U.S. military members present in Washington DC on Inauguration Day  to protect our capital city than were present in the Middle East conflict zones.

The ongoing turmoil poses a serious threat to the American Experiment in Democracy as well as to the long-term symbolism of the Capitol Hill complex that many citizens of America (and even many in the world) consider to be a shining city on a hill, the citadel of democratic rule.

With this commentary we bring you some highlights of the immediate corporate sector response, and what some see as the responsibility of the corporate leadership to help move the nation forward.  The tempo of the corporate response is quickening and we’ll share more with you in our G&A Institute’s Sustainability Highlights newsletter and in this blog. 

TOP STORIES

Here is some of the immediate Corporate Sector responses to the mob’s January 6 attack on the US Capitol – with specific corporate responses that target the financial of candidate campaigns. The corporation’s role in society is in even sharper focus now.

Looking forward:  The news media is now also focused on the future – there is a new administration in place now, led by President Joseph Biden, VP Kamala Harris, and a  House and Senate led by the Democratic Party.  The focus on ESG issues is intensifying:

We will be sharing considerably more news along these lines in the days ahead. Stay Tuned!

Looking Back at 2020 and Into 2021-Disruptions, Changes, But Consistency in Climate Change Challenges

January 11 2021

by Hank BoernerChair & Chief StrategistG&A Institute

Seems like just yesterday we were celebrating the great promise of the 21st Century – the Paris Accord (or “Agreement”) on climate change. Can you believe, it is now five years on (260 weeks or so this past December) since the meeting in the “City of Lights” of the Conference of Parties (“COP 21”, a/k/a the U.N. Paris Climate Conference). This was the 21st meeting of the global assemblage focused on climate change challenges.

For most of us the calendar years are neat delineations of time and space – helps us remember “what” and “when” in near and far-times. But often important trends will not fit neatly in a given year. There is for example so much uncertainty in 2020 that continues in 2021.

As we cheered and toasted each other on 31 December 2019 around the world (with tooting horns, fireworks, lighted spheres dropping on famed Times Square in New York City and fireworks on the Thames in London) we probably were looking eagerly into the new year 2020 and the promise of things to come. Oh well.

Now here we are embarked into new year 2021, starting the third decade of the 21st Century, and groping our way toward the “next normal”.  What ever that may have in store for us.

The next normal for when the Coronavirus, now taking many lives and infecting hundreds of millions of us…at last subsides. For when the economies of the world stabilize and everyone can get back to work, in whatever the workspace configurations may be. For when the long-term issues that are generating civil unrest and widespread – and now very violent! — protests can be addressed and we can begin to resolve inequality et al.

Our world has certainly been dramatically interrupted as the calendar changed in both 2020 and now as we begin year 2021.

One consistency, however, has been in our business and personal lives in all of the recent years and is accelerating in 2021: the effort to address the challenges of climate change, with all sectors of our society engaged in the effort.

There is greater effort now to limit global warming and the impact on society in the business sector (especially for large companies); in the public sector (at local, state, and national levels, among the almost 200 nations that are parties to the Paris Agreement); for NGOs; leaders of philanthropies; and we as individuals doing our part.

We all have a role to play in the collective striving to limit the rising temperatures of seas and atmosphere and forestall worldwide great tragedy and cataclysmic events if we fail.

And so now on to 2021. The Top Stories we’ve selected for you, and additional content in the various silos, focus our attention on what has been accomplished in 2019 and 2020 — and what challenges we need to address the challenges of 2021 and beyond.

As we assembled this week’s G&A Institute’s Highlights newsletter, we learned from the U.S. National Oceanic and Atmospheric Administration (NOAA) that the year 2020 just ended was a period (neatly marked in “2020” for our historical records) of historic weather extremes that saw many billion-dollar weather and climate disasters…smashing prior records.

There were 22 separate billion-dollar events costing the United States of America almost US$100 billion in damages in just the 12 months of 2020.

And this troubling news: in 2020 Arctic air temps continued their long-term warming streak, recording the second warmest year on record. (Since 2000 Arctic temperatures have been more than twice as far as the average for Earth as a whole). When air and sea continue to warm, massive ice fields melt and ocean seas rise, ocean circulation patterns change, and more. Learn more at climate.gov.

Our selection of news and shared perspectives here bridge 2020 and 2021 trends and events. We can expect in the weeks ahead to be sharing content with you focused on climate change, diversity & inclusion, corporate purpose discussions, risk management, corporate governance, ESG matters, corporate reporting & disclosures, sustainable investing…and much more!

Best wishes to you for 2021 from the G&A Institute team. We’re beginning the second decade of publishing this newsletter as well – let us know how we are doing and how we can improve the G&A Institute “sharing”.

If you are not receiving the G&A Institute Sustainability Highlights(TM) newsletter on a regular basis, you can sign up here: https://www.ga-institute.com/newsletter.html

 

TOP STORIES

A year in review and looking ahead to 2021:

About “Stakeholder Capitalism”: The Public Debate

Here is the Transition — From the Long-Dominant Worldview of “Stockholder Capitalism” in a Changed World to…Stakeholder Capitalism!

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

October 2020

As readers of of G&A Institute’s weekly Sustainability Highlights newsletter know, the shift from “stockholder” to “stakeholder” capitalism has been underway in earnest for a good while now — and the public dialogue about this “21st Century Sign of Progress” has been quite lively.

What helped to really frame the issue in 2019 were two developments:

  • First, CEO Larry Fink, who heads the world’s largest asset management firm (BlackRock) sent a letter in January 2019 to the CEOs of companies in portfolio to focus on societal purpose (of course, in addition to or alongside of corporate mission, and the reasons for being in business).
  • Then in August, the CEOs of almost 200 of the largest companies in the U.S.A. responded; these were members of influential Business Roundtable (BRT), issuing an update to the organization’s mission statement to embrace the concepts of “purpose” and further cement the foundations of stakeholder capitalism.

These moves helped to accelerate a robust conversation already well underway, then further advanced by the subset discussion of Corporate America’s “walking-the-talk” of purpose et al during the Coronavirus pandemic.

Now we are seeing powerful interests weighing in to further accelerate the move away from stockholder primacy (Professor Milton Friedman’s dominant view for decades) to now a more inclusive stakeholder capitalism.  We bring you a selection of perspectives on the transition.

The annual gathering of elites in Davos, Switzerland this year — labeled the “Sustainable Development Impact Summit” — featured a gaggle of 120 of the world’s largest companies collaborating to develop a core set of common metrics / disclosures on “non-financials” for both investors and stakeholders. (Of course, investors and other providers of capital ARE stakeholders — sometimes still the inhabiting the primacy space on the stakeholder wheel!)

What are the challenges business organizations face in “making business more sustainable”?

That is being further explored months later by the World Economic Forum (WEF-the Davos organizers) — including the demonstration (or not) of excellence in corporate citizenship during the Covid-19 era. The folks at Davos released a “Davos Manifesto” at the January 2020 meetings (well before the worst impacts of the virus pandemic became highly visible around the world).

Now in early autumn 2020 as the effects of the virus, the resulting economic downturn, the rise of civil protests, and other challenges become very clear to C-suite, there is a “Great Reset” underway (says the WEC).

The pandemic represents a rare but narrow window opportunity to “reflect, reimagine, and reset our world to create a healthier, more equitable, and more prosperous future.”

New ESG reporting metrics released in September by the World Economic Forum are designed to help companies report non-financial disclosures as part of the important shift to Stakeholder Capitalism.

There are four pillars to this approach:  People (Human Assets); Planet (the impact on natural environment); Prosperity (employment, wealth generation, community); and Principles of Governance (strategy, measuring risk, accounting and of course, purpose).

The WEF will work with the five global ESG framework and standard-setting organizations as we reported to you recently — CDSB, IIRC, CDP, GRI, SASB plus the IFAC looking at a new standards board (under IFRS).

Keep in mind The Climate Disclosure Standards Board was birthed at Davos back in 2007 to create a new generally-accepted framework for climate risk reporting by companies. The latest CDSB report has 21 core and 34 expanded metrics for sustainability reporting. With the other four collaborating organizations, these “are natural building blocks of a single, coherent, global ESG reporting system.”

The International Integrated Reporting Council (IIRC, another of the collaborators) weighed in to welcome the WEF initiative (that is in collaboration with Deloitte, EY, KPMG and PWC) to move toward common ESG metrics. And all of this is moving toward “COP 26” (the global climate talks) which has the stated goal of putting in place reporting frameworks so that every finance decision considers climate change.

“This starts”, says Mark Carney, Governor, Bank of England, and Chair of the Financial Stability Board, “with reporting…this should be integrated reporting”.

Remember, the FSB is the sponsor of the TCFD for climate-related financial disclosure.  FSB is a collaboration of the central banks and treasury ministries of the G-20 nations.

“COP 26 was scheduled for November in Glasgow, Scotland, and was postponed due to the pandemic. We are now looking at plans for a combined 26 and 27 meeting in November 2021.”  Click here for more information.

There is a lot of public dialogue centered on these important moves by influential players shaping and advancing ESG reporting — and we bring you a selection of those shared perspectives in our Top Stories in the Sustainability Highlights newsletter this week.

Top Stories On Davos & More

And then there is this, in the public dialogue on Stakeholder Capitalism, adding a dash of “reality” from The New York Times:

Big News: US SIF Report on US Sustainable and Impact Investing Trends 2020 Released

Big News:   As 2020 Began, $1-in-$3 of Professionally Managed AUM in the United States Had ESG Analysis and/or Portfolio Management Strategies Applied…US$17.1 Trillion Total

November 2020 — Every two years, since 1996, the influential trade organization for sustainable, responsible and impact investment (US SIF) conducts a year-long survey of professional asset managers to determine the total of USA-based assets under management (“AUM”) that have ESG analysis and/or portfolio management applied.

The Trends report just released charts the AUM with ESG analysis and strategies in the United States at $16.6 trillion at the start of 2020 – that’s 25X the total since the first Trends report in1996, with compounded growth rate of 14 percent. (The most rapid growth rate has been since 2012, says US SIF.)

Consider: This means that today, $1-in-$3 of professionally managed assets in the United States follows analysis and/or strategies considering ESG criteria. (The total of US assets under professional management at the start of 2020 was $51.4 trillion.)

This is a dramatic 43% increase over the survey results of the 2018 Trends report – that effort charted a total of $11.6 trillion in ESG-managed AUM in the USA at the start of 2018.

The survey respondents for the current Trends report identified the ESG-focused AUM practices of 530 institutional investors; 384 money managers; 1,204 community investment institutions – all applying environmental, social, and corporate governance criteria in their portfolio management.

What are top ESG issues identified by money management professionals in the survey effort?

  • Climate Change-Carbon: $4.18 trillion – #1 issue
  • Anti-Corruption: $2.44T
  • Board Room Issues: $2.39T
  • Sustainable Natural Resources/Agriculture: $2.38T
  • Executive Compensation: $2.22T
  • Conflict Risk (such as repressive regimes or terrorism, this cited by institutional investors): $1.8T

Note that many strategies and ESG analysis and portfolio management approaches can be overlapping.

Lisa Woll, US SIF Foundation CEO explains: “Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues including climate change, sustainable natural resources and agriculture, labor, diversity, and political spending. Retail and high net worth individuals are increasingly using this investment approach, with $4.6 trillion in sustainable investment assets, a 50% increase since 2018.”

The 2020 Trends report counts two main strategies as “sustainable investing” – (1) the incorporation of ESG factors in analysis and management of assets and (2) filing shareholder resolutions focused on ESG issues.

What are the top issues for the professional asset owners, their managers, and other investment professionals participating in the survey? Gauging the leading ESG issues for 2018-to-2020, examining the number of shareholder proposals filed, the Trends report charts the following in order of importance:

  • Corporate Political Activity
  • Labor & Equal Employment Opportunity
  • Climate Change
  • Executive Pay
  • Independent Board Chair
  • Special Meetings
  • Written Consent
  • Human Rights
  • Board Diversity

Looking at the 2020 Trends report, we have to say — we’ve certainly come a long, long way over the years. When first Trends survey was conducted at the end of 1995, the total AUM was just US$639 billion. The shift to sustainable, responsible, impact investment was underway! (The report released on November 16th is the 13th in the series.)

For information about the US SIF Report on US Sustainable and Impact Investing Trends 2020, and to purchase a copy of the report: https://www.ussif.org/trends

Governance & Accountability Institute is a long-time member of the Forum for Sustainable and Responsible Investment (US SIF) and a sponsor of the 2020 Trends report. US SIF is the leading voice advancing sustainable and impact investing across all asset classes.

Members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investment organizations, and not-for-profits. The work is supported by the US SIF Foundation that undertakes educational and research efforts to advance SIF’s work.

Louis Coppola, G&A EVP and Co-founder, is chair of the SIF Company Calls Committee that arranges meetings of SIF member organizations with publicly-traded companies to discuss their ESG/Sustainability efforts.

US SIF Trends 2020 Report Published November16, 2020:

Corporate Sustainability Reporting: Changes in the Global Landscape – What Might 2021 Bring?

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

Change is a-coming – quite quickly now – for corporate sustainability reporting frameworks and standards organizations.  And the universe of report users.

Before the disastrous October 1929 stock market crash, there was little in the way of disclosure and reporting requirements for companies with public stockholders. The State of New York had The Martin Act, passed in 1921, a “blue sky law” that regulates the sales and trades of public companies to address fraud issues.  That was about it for protecting those buying shares of public companies of the day.

Under the 100 year old Act, the elected New York State Attorney General is the “Sheriff of Wall Street — and this statute is still in effect. (See: AG Eliot Spitzer and his prosecution of the 10 large asset managers for analyst shenanigans.)

President Franklin Delano Roosevelt, elected two-term governor of NY before his election to the highest office in November 1932, brought along a “brains trust” to Washington and these colleagues shaped the historic 1933 Securities Act and 1934 Securities Exchange Act to regulate corporate disclosure and Wall Street activities.

Story goes there was so much to put in these sweeping regulations for stock exchanges, brokerage houses, investor protection measures and corporate reporting requirements that it took two different years of congressional action for passage into law in the days when Congress met only briefly and then hastened home to avoid the Washington DC summer humidity and heat.

The Martin Act was a powerful influence on the development of foundational federal statutes that are regularly updated to keep pace with new developments (Sarbanes-Oxley, 2002, updated many portions of the 1934 Act).

What was to be disclosed and how? Guidance was needed by the corporate boards and executives they hired to run the company in terms of information for the company’s investors. And so, in a relatively short time “Generally Applied Accounting Principles” began to evolve. These became “commonly accepted” rules of the road for corporate accounting and financial reporting.

There were a number of organizations contributing to GAAP including the AICPA. The guiding principles were and are all about materiality, consistency, prudence (or moderation) and objectivity like auditor independence verifying results.

Now – apply all of this (the existing requirements to the Wild West of the 1920s leading up to the 1929 financial crash that harmed many investors — and it reminds one of the situations today with corporate ESG, sustainability, CR, citizenship reporting.  No generally applied principles that all can agree to, a wide range of standards and frameworks and guidance and “demands” to choose from, and for U.S. companies much of what is disclosed is on a voluntary basis anyway.

A growing chorus of institutional investors and company leaders are calling for clear regulatory guidance and understanding of the rules of the road from the appointed Sheriffs for sustainability disclosures – especially in the USA, from the Securities & Exchange Commission…and the Financial Accounting Standards Board (FASB), now the two official keepers of GAAP.

FASB was created in the early 1970s – by action of the Congress — to be the official keeper of GAAP and the developer of accounting and reporting rules.  SOX legislation made it official; there would be two keepers of GAAP — SEC and FASB.  GAAP addressed material financial issues to be disclosed.

But today for sustainability disclosure – what is material?  How to disclose the material items?  What standards to follow?  What do investors want to know?

Today corporates and investors debate the questions:  What should be disclosed in a consistent and comparable way? The answers are important to information users. At the center of discussion: materiality everyone using corporate reports in their analysis clamors for this in corporate sustainability disclosure.

Materiality is at the heart of the SASB Standards now developed for 77 industry categories in 11 sectors. Disclosure of the material is an important part of the purpose that GAAP has served for 8-plus decades.

Yes, there is some really excellence guidance out there, the trend beginning two decades ago with the GRI Framework in 1999-2000. Publicly-traded companies have the GRI Standards available to guide their reporting on ESG/sustainability issues to investors and stakeholders.

There is the SAM Corporate Sustainability Assessment (CSA), now managed entirely by S&P Global, and available to invited companies since 1999-2000. (SAM was RobecoSAM and with Dow Jones Indexes managed the DJ Sustainability Indexes – now S&P Global does that with SAM as a unit of the firm based in Switzerland.)

Since 2000, companies have had the UN Global Compact principles to include in their reporting. Since 2015 corporate managers have had the UN Sustainable Development Goals (SDGs) to report on (and before that, the predecessor UN Millennium Development Goals, 2000-2015). And the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations were put in place in 2017.

The Securities & Exchange Commission (SEC) in February 2010 issied “guidance” to publicly-traded companies reminded corporate boards of their responsibility to oversee risk and identified climate change matters as an important risk in that context.

But all of these standards and frameworks and suggested things to voluntarily report on — this is today’s thicket to navigate, picking frameworks to be used for telling the story of the company’s sustainability journey.

Using the various frameworks to explain strategy, programs, actions taken, achievements, engagements, and more – the material items. Profiling the corporate carbon footprint in the process. But there is no GAAP to guide the company for this ESG reporting, as in the example of financial accounting and reporting.

Institutional investors have been requesting more guidance from the SEC on sustainability et al reporting.  But the commission has been reluctant to move much beyond the 2010 risk reminder guidance even as literally hundreds of publicly-traded companies expand their voluntary disclosure.  And so we rely on this voluntary disclosure on climate change, diversity & inclusion efforts, political spending, supply chain management, community support, and a host of other ESG issues. (Human Capital Management was addressed in the recent Reg S-K updating.)

We think 2021 will be an interesting year in this ongoing discussion – “what” and “how” should companies be disclosing on sustainability topics & issues.

The various providers of existing reporting frameworks and standards and those influencing the disclosures in other ways are moving ahead, with workarounds where in the USA government mandates for sustainability reporting do not yet exist.

We’ve selected a few items for you to keep up with the rapidly-changing world of corporate ESG disclosures in our Top Stories and other topic silos.

There are really important discussions!  We watch these developments intently as helping corporate clients manage their ESG / sustainability disclosures is at the heart of our team’s work and we will continue to keep sharing information with you in the Highlights newsletter.

More about this in The Wall Street Journal with comments from G&A’s Lou Coppola: Companies Could Face Pressure to Disclose More ESG Data (Source: The Wall Street Journal)
TOP STORIES

Food! Will We Have Enough to Feed an Ever-Hungrier Planet? – Are Food & Ag Industries “Sustainable” – Let’s Explore…

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

October 30 2020

The United Nations projection is for today’s global population of an estimated 7.6 billion people to expand to a global population of 8.6B by 2030 and 9.8B by 2050…and then to 11.2 billion in 2100 (so says the UN Department of Economic and Social Affairs report, June 2017).

Each year, says the UN, 83 million more people are added to the world’s population.

If we go back 1,000 years, the world population was an estimated 300 million people.

And then, only 4% (about 4 million square kilometers) was used for farming, according to the University of Oxford (source: ourworldindata).

Today, half of the world’s habitable land is used for agriculture (excluding deserts, beaches, rocks, etc.) – that is 51 million KMs. T

There is also land (an additional 40 million KMs) used for livestock, meat, and dairy. Protein supply is largely from plant-based food for much of the world population. (Data – UN Food and Agricultural Organization).

So as the population grows and grows, will we be able to feed millions and then billions of additional people? Where will the capital be needed for food & ag expansion?

Will investors and other stakeholders have enough information – especially reliable, comparable data sets – to understand where the food & ag industry players are…to meet the daily food needs of many more people…to use available arable land wisely and sustainably…to understand what food manufacturers and marketers are doing to be more sustainable and responsible?

We’ve selected a few items in our Top Stories to explore these questions, especially as investors look for agriculture and food trends that fit into the ESG bucket.

TOP STORIES

  1. Forbes contributor Hank Cardello looks at the food industry and the magazine’s list of “100 most sustainably managed public companies” – finding food processing companies “a no show among the top companies”:Food Industry is a No-Show in New Sustainability Study (Source: Forbes)
  2. This ESG / Financial Times article explores why the food sector is difficult to assess from an ESG perspective – to quote, “ESG investors are finding it hard to incorporate food in their portfolios…food businesses’ far-reaching impacts are difficult to measure, making it unclear whether they meet ESG criteria”:Food Proves Hard for ESG Investors to Digest (Source: Financial Times)
  3. This article talks about ESG not being covered in farm media and opines that primary producers don’t have to rely on ESG reporting to get access to capital. So – it seems like these factors could cause difficulty for downstream customers to report on the ESG metrics of their supply chains. Contributing analyst Elaine Kub advises the ag industry that convincing investors a company is operating sustainably and making long-term decisions…and deserves to be in the “ESG category”, but is nary a mention of this in farm media…yet: ESG: Another Acronym for Ag to Know (Source: Progressive Farmer)
  4. 4-A new study from the U.S. Department of Agriculture (USDA) charts organic ag sales have increased 31% from 2016 to 2019:2019 Organic Survey Results Show Sales Up 31% from 2016 (Source: USDA)

Sources: