by Hank Boerner – Chair & Chief Strategist – G&A Institute
Pressure points: The corporate executive suite in recent months has experienced pressure from both inside and outside the organization in terms of rising expectations related to corporate sustainability, responsibility, citizenship, ESG, and so on.
For example, asset owners and external asset managers are asking many more questions now about the sustainability journey of the companies they are invested in, including the company’s ESG strategies, actions, performance, metrics, outcomes, external recognitions, and more.
The customer base for a growing number of companies is now an important consideration related to the supplier/provider’s positioning in its sustainability journey.
The working principle here: the large customer especially considers the supply chain “partners” to be part of their own ESG footprint. Third-party organizations pose questions to supply chain partners on behalf of their client base (Ecovadis being an excellent example of this practice).
Consider, too, that the Federal government is the largest buyer of goods and services in the U.S. and the Biden Administration has instituted sweeping sustainability policies on sourcing of many kinds.
Regulators of different sorts are moving towards strongly urging companies to disclose more about their sustainability journeys and considering mandates to help ensure more comparable, accurate, complete, decision-worthy data and narrative disclosures to help providers of capital (investors, lenders, insurers) in their own portfolio management. We see that now in the U.S. and in the European Union.
There is peer pressure – corporate issuers moving ahead to leadership positions in sustainability put pressure on industry peers to perform better, disclose more, and attain at least middle-of-the-pack positions. And laggards (those not yet on their journeys) are under even greater pressure today.
One place where the leader board really counts is in the now-numerous ESG ratings and rankings provided to institutional investors by the likes of MSCI, Sustainalytics, Institutional Shareholder Services, and other ESG rankers and raters.
And then there is the internal pressure point – employees want to work for a company demonstrating leadership in sustainability and responsibility. They want to be an integral part of the journey and be a part of the team making great things happen. All this counts in recruitment, retention, and motivating the workforce.
This week we pulled together some of the contours of these pressures on boards and executive and management teams. As you read this, thousands of people are gathering virtually for the UN Global Compact Leaders’ Summit to discuss the growing pressure on governments, companies, investors, and other stakeholders to take action on climate change and sustainability issues. The UNGC released the 2021 Survey of Companies & CEOs ahead of the gathering.
Top line results: Business interests need to transition to more sustainable business models. Over the past three years corporate leaders have been experiencing the pressures to do this; and 75 percent of survey respondents expect the next three years to be times of increased pressure on boardrooms and executive suites.
Where is pressure coming from? Certainly, from the investor side. For example, 450+ investors managing US$45 trillion in assets released a joint statement calling on world governments to create a race-to-the-top on climate policies…
This is the “2021 Global Investor Statement to Governments on the Climate Crisis” that asks for climate-related financial reporting to be mandatory, recognizing the climate crisis.
Seven investment management partners created “The Investor Agenda” to be shared at the recent G7 meeting to encourage advocacy for “ambitious climate policy action” leading up to the Glasgow, Scotland meeting of “The Conference of the Parties” (COP 26) in November.
The Investor Agenda is in the Top Stories below for your reading, along with comments from heads of NYS Common Fund, State Street/SSgA, Alliance Bernstein, Legal and General Investment Management, Fidelity International, and others.
In the U.S., 160 investors with U$2.7 trillion in AUM joined by 155 corporate leaders and 58 not-for-profit organizations are advocating for the Securities & Exchange Commission to protect investors from risks including systemic and financial risks related to climate change by mandating climate disclosure.
By doing this, corporate issuers can clarify the risks they should measure and disclose so that investors can make sound investment decisions. SEC rules are needed, say the advocates, to provide comparable and consistent information.
Who are these advocates? A group of state financial officers — Illinois State Treasurer Michael Frerichs, California State Controller Betty Yee, New York State Comptroller Tom DiNapoli – as well as Steven Rothstein, Managing Director for the Ceres Accelerator for Sustainable Capital Markets and others. Their suggestions for moving to an SEC mandate is another Top Story selection for you.
G&A is closely monitoring the various pressure points being placed on organizations to start or advance your sustainability journey, and you can detect other pressure points in the story selections in the topic silos.