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Perspectives – Bloomberg, McKinsey, Leading ESG Investors, Mark Cuban – on Corporate Purpose and the Virus Crisis

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Excellence in Corporate Citizenship on Display in the Coronavirus Crisis – Post #8   

“Corporate Purpose – Virus Crisis”   #WeRise2FightCOVID-19

April 1, 2020

By Hank Boerner, Chair & Chief Strategist, and the G&A Institute team members

On Corporate Purpose – Words and Actions – Thoughts From Influentials As The Virus Crisis Deepens Worldwide — the Focus on Purpose Can Help Corporate Generals Lead From the Front

In summer 2019, The Business Roundtable (BRT), the association of the CEOs of 200 firms, revamped the organization’s mission statement to read…

…“as leaders of America’s largest corporations, BRT CEOs believe we have a responsibility to help build a strong and sustainable economic future in the United States.”

This followed the publication of the January 2019 CEO-to-CEO letter of Larry Fink, who heads BlackRock, the world’s largest asset manager (and therefore a major fiduciary investing in the BRT companies). He regularly writes to the CEOs of companies that BlackRock invests in to let them know where of the major investors stands.

He wrote at the start of 2019…

…Purpose is not the sole pursuit of profits but the animating force for achieving them. And, profits are in no way inconsistent with purpose; in fact, profits and purpose are inextricably linked.

And again in his January 2020 letter to CEOs, Chair & CEO Larry Fink said:

…“As I have written in past letters [to CEOs in 2019, 2018] a company cannot achieve long-term profits without embracing purpose and considering the needs of considering the needs of a broad range of stakeholders. Ultimately, purpose is the engine of long-term profitability.”

Fast forward to March 2020 and now into April. What is the walk-of-the-talk of the CEOs (181 of them) who were signatories as the coronavirus crisis grips the U.S. and the world — and the actions of the signatories’ firms as stakeholders look for aid, comfort, security, payroll, taxes paid, and more?

And what other companies not necessarily in the Roundtable? What actions are taken leveraging corporate power to help society?

The stakeholders are watching. And a good number of the Business Roundtable companies are responding to address societal needs.

And what are the perspectives shared about all of this? We bring you some of these today. Here are some of the views and advice of experts and  influentials.

McKinsey Speaks – On How to Demonstrate Corporate Purpose

Says the influential management consulting firm, McKinsey & Company: Companies will define what they do in the crucible of COVID-19 response – or be defined by it.

So what could company managements be doing when the primary purpose of their efforts is to help the enterprise survive? McKinsey acknowledges this — and provides some advice. This is from their bulletin today.

Questions are being asked, of course, related to survival. How long will the crisis last? What are peers doing? How do we pay our people?

“WIN” – what is important now? (The G&A team has asked and helped to answer that question many times in our three decades of crisis management support for client companies over the years.)

First up, advises the McKinsey team members — understand your stakeholder needs and then with the understanding gained, prioritize your response. There will be tradeoffs among stakeholders – prepare for that.

Then, bring the greatest strengths of the organization to bear – consider, how can you make a difference?

McKinsey advises “collaborate with suppliers and customers and they may identify strengths you didn’t know you had”.

Examples offered:  Car makers can make ventilators (GM, Ford etc). Perfume companies can rapidly turn to manufacture hand sanitizer (LVMH and Estee Lauder are doing that today as we’ve reported in these briefs).

As you move forward, test the assumption and decisions you are taking against your stated purpose – communicate – explain (how and why).

Banks have a commitment to lend money in their community. If the bank pulls away – why? The action could help to define that institution in and after the crisis.

Give people something to do! (We also shared this advice a number of times early in the crisis.)

Involve employees in solutions. Give them a sense of purpose. Your team is looking for signals of leadership. And how to help.

And McKinsey says, the positive is that you may in the process be identifying the next generation of your company’s leadership!

Try new ways. Try using “cross-cutting” teams to develop new solutions, new ways to do things.

When in 2005 Hurricane Katrina hit, Wal-Mart Stores asked employees to deliver supplies to areas that were hard to reach. And we remember that the company’s store managers on their own ordered extra supplies and kept the stores open – even as their own homes were being destroyed.

That led to the CEO embarking on a strategic sustainability journey that revolutionized the whole company and in the process formed the Sustainability Consortium!

And like the best of the military leaders, you should yourself lead from the front. Communicate – often, early. Don’t sugarcoat the news. Adapt to changing conditions (and then communicate again). Your enterprise looks to its leaders for guidance.

Things that stand out for us that McKinsey explains:

  • Executives are uniquely poised now to bring corporate power, guided by social purpose to aid millions of dislodged and vulnerable lives. Done well, your actions can bridge the divide between shareholders and stakeholders. And leave a lasting, positive legacy.
  • Credibility is both essential and fragile element of executive leadership. Authentic actions demonstrate the company’s genuine commitment to social purpose.

Thanks to McKinsey’s Bill Schaninger, senior partner in Philadelphia, and Bruce Simpson, senior partner in Toronto, and their colleagues Han Zhang and Chris Zhu, for the valuable insights and guidance offered to corporate leaders.

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Mark Cuban on COVID-19 – Words & Action

We are often entertained by the antics of Mark Cuban on the courts (he’s owner of the Dallas Mavericks NBA team) and appearances on the hit TV show, “Shark Tank”. He was serious this week in addressing the virus crisis.

On Twitter he advised the federal policymakers: “Dear government, here is why you require companies that receive bailouts to retain 100% of their employees. The cost of the bailout loan – eventual payments will cost taxpayers less than the cost of government assistance programs for fired employees. Case closed.”

And…

“If you run a business, BEFORE YOUR FIRE ANYONE (or any more), you have an obligation to yourself/employees to find every gov loan option available today and those soon to come. Find the time. When the gov loans start you want to be already an expert and in line.”

Mark Cuban then walked-the-talk, setting up a way to pay his team’s venue employees (American Airlines Arena) even though games are cancelled and no one is coming. Then sent $100,000+ to the area’s not-for-profits aiding the Big D residents.

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Investor Coalition Speaks Its Mind on Corporate Purpose

Nearly 200 long-term institutional investors (with AUM of US$4.7 trillion) called on company managements to protect their workers – difficult to do, the investors acknowledge. Board directors are accountable for long-term Human Capital Management strategies (they remind board members on both domestic U.S. and global companies).

The steps companies could take, says the investor group:

  • Provide paid leave – including emergency leave) for full-time, part-time and subcontracted workers.
  • Prioritize health and safety – meaning, worker and public health safety, and to protect social license to operate. That may include closing facilities as precautionary step.
  • Maintain employment levels – your workers are well-trained (we hope!) and will enable the company to ramp up quickly once the crisis is resolved.
  • And be on the watch for any moves that may be discriminatory.
  • Maintain customer – and supplier — relationships to ensure that you can help stabilize them if necessary (such as financial challenges to suppliers) and to protect your own and other communities and businesses.
  • Practice financial prudence – demonstrate, the advisors strongly urge, the highest levels of ethical financial management and responsibility. And, limit executive and senior management compensation during the crisis (not repeating the practices of companies in the 2008 financial practices with money provided by the taxpayer).

Corporate leadership is critically-needed, the coalition stresses, to help society get through the crisis.

Among the investors in the coalition issuing the advice to public company managements: the Interfaith Center on Corporate Responsibility (ICCR) coalition (with 300 institutional members); the New York City public employees pension fund, led by Comptroller Scott Stringer; AFL-CIO fund; the state treasurers of Connecticut, Maryland, Rhode Island, Oregon, Vermont; American Federation of Teachers (AFT); the British Columbia Government and Services Employees Union; Aviva Investors; APG; Boston Common Asset Management; Coalition on Corporate Responsibility in Indiana & Michigan; Cornerstone Capital Group; Communications Workers of America (CWA); Robeco Asset Management; numerous foundations and religious orders and denominations.

Information: https://www.iccr.org/program-areas/human-rights/investor-action-coronavirus

All of this is spelled out in the “Investor Statement on Coronavirus Response” being circulated among fiduciaries.

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Believe the Investor’s Urging Will Pay Off?

Bloomberg LP provides us with some of the early answers.  Bloomberg Intelligence’s (BI) Shaheen Contractor (ESG Team BI Industry Analyst) in a brief for terminal users noted that an analysis of ESG Exchange Traded Funds (ETFs) during the selloff for the week ending February 28 provided a buffer for their investors and outperformed their benchmarks. The data: only 8% of ESG ETFs had outflows while 22% of all U.S. ETFs saw outflows.

This, she writes, suggests ESG is seen by investors as a long-term investment and not a trading strategy.

And the flow to ESG ETF’s suggests that these instruments are “sticky” and less cyclical. Where where the flows to ESG ETFs? BlackRock, JPMorgan, BNP Paribas, Societe Generale, DWS, State Street, and Vanguard all saw inflows during the drawdown.

Good news for investors looking for “proof of concept” of ESG/sustainable investing from Shaheen Contractor – thanks to her and Bloomberg for sharing this good news.

Her email is: scontractor2@bloomberg.net

The brief: “ESG ETFs See Relative Outperformance, Inflows During Drawdown”

For information, it is on the Bloomberg: https://blinks.bloomberg.com/news/stories/Q6RT29T0G1L2

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Lead from the front.  The general who led the effort to win WW II for the U.S.A. and the democracies, General Dwight D. Eisenhower (President, 1953-1961) observed:   “Leadership is the art of getting someone else to do something you want done because he wants to do it.  You don’t lead by hitting people over the head–that’s assault, not leadership.”

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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 “WeRise2FightCOVID-19“ for our Twitter posts.  Do join the conversation and contribute your views and news.

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

U.S. Industry & Trade Associations Encourage Corporate Sustainability — Today, the American Cleaning Institute is in Focus

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by Hank Boerner – Chairman, G&A Institute

As more and more U.S. companies begin or expand their disclosure and reporting on their sustainability journey, and their widening range of corporate responsibility activities, the choice of reporting frameworks both narrows and expands.

Narrows in the sense that the Global Reporting Initiative (GRI) framework — now in its fourth generation (“G4”) since the introduction of the GRI approach in 1999-2000 — is considered the de facto global standard by thousands of company managements. There are now 30,000 sustainability reports in the GRI database — 21,000-plus of those published GRI Reports.

And the number of reporting frameworks and generally accepted standard steadily expands — there are many more standards, frameworks, codes of conduct, guidelines, third party requests for information, that now take sustainability / responsibility / citizenship / environmental performance reporting far beyond where these activities were a decade or so ago. Many corporate managements recognize the importance of such reporting and devote the necessary [human and financial] resources to the task.

Examples of available standards include corporate responding to the annual CDP CSA request for information (the voluntary Corporate Sustainability Assessment). CDP began operations in 2000 as the Carbon Disclosure Project with focus on collecting, organizing and providing information on corporate Greenhouse Gas Emissions (GhGs) to investors; today the CDP focus include water issues, forestry issues, supply chain issues, and sector-by-sector research and analysis (the first sectors included chemicals and automotive). The client base is almost 500 institutional investors with more than US$55 trillion in AUM — they accept the CDP approach as an important standard in reporting on corporate environmental performance (or lack of).

There are also global and U.S. industry associations and trade groups that help their corporate members to understand key issues, map materiality; understand stakeholder expectations; align corporate strategies, activities and programs, third party engagement, and disclosure and reporting with the ever-expanding stakeholder and shareholder expectations. Among these are such well-known organizations as Automotive Industry Action Group (AIAG) and the Electronics Industry Citizenship Coalition (EICC).

Industry Effort:
The American Cleaning Institute and Sustainability

One large industry-focused effort we focus on today organized resources to develop a charter to provide a common, voluntary approach to promote and demonstrate continual improvement in the industry’s sustainability profile is that of the cleaning (products & services) industry — the American Cleaning Institute (ACI).

The Charter for Sustainable Cleaning is one of ACI’ major initiatives to fulfill the mission, and provide a framework for corporate members to go beyond basic legal and regulatory requirements.

You know many of the member company names and their brands, which are ubiquitous in American and global business-to-business and consumer marketing; a sampling includes Amway, BASF, Church & Dwight, Clorox, Colgate-Palmolive, Dow, DuPont, Huntsman, and International Flavors & Fragrances (IFF).

The American Cleaning Institute’s sustainability mission is to “benefit society and improve the quality of life through hygiene and cleanliness by driving sustainability improvements across the industry and throughout the supply chain.” The ACI Charter for Sustainable Cleaning was launched in January 2014 at the group’s annual meeting & industry convention. The charter was in part based on the A.I.S.E. Charter for Sustainable Cleaning, a voluntary initiative of the sister trade association in Europe (AISE). The bulk of ACI’s U.S. member companies are cleaning product manufacturers and chemical suppliers.

To date, 25 ACI member companies are signing on to the charter; they are required to have systems in place to continual assessment; review; and improvement of sustainability performance. This includes product life cycle; raw materials; resource use; product specs; manufacturing; end use and disposal of products and packaging; and occupational health and safety.


Discussion:
Brian Sansoni, VP, Sustainability Initiatives

We spoke with ACI’s Brian Sansoni, the VP, Sustainability Initiatives, based in Washington, D.C. Brian described the ACI’s sustainability efforts with the Charter as “an ongoing roll-out, beginning with speaker presentations and participant discussion at the 2014 annual conference. We are now two years into the effort.” The effort is to develop and demonstrate the sustainability efforts of a major industry sector in the United States, the cleaning products and services manufacturing and marketing industry and the industry’s supply chain.

Brian, who joined ACI in 2000, was named VP, Sustainability Initiatives in 2012 (he also has the title of VP, Communication & Membership). Brian works closely with the association’s communications team, the government affairs team, research & science team, and with a sustainability committee whose members come from member companies. He’s a radio news reporter and Congressional press secretary by background and past experience, and applies those skills to the communication about the industry association and member companies’ commitments to greater sustainability.

Brian’s teammate is Melissa Grande, Senior Manager, Sustainability Initiatives, who joined us in the conversation. Brian and Melissa oversee the production of the ACI Sustainability Report, which Brian describes as being thorough, distinct and relevant with metrics that clearly provide a hallmark of what the association and its member companies are doing in their collective sustainability journeys. The report summarizes data from 33 member companies participating in the 2014 Sustainability Metrics Program (the metrics relate to energy use, GhG emissions, water use and solid waste generation). The report features an updated summary of ACI’s social and environmental sustainability programs, and details for ACI’s scientific and research programs. They also conduct the “Sustainability Academy” for the education of ACI’s member companies.

The report is available at: www.cleaninginstitute.org/sustainability2015

Melissa Grande explained that as part of the association’s ongoing collaboration with other standard setters, ACI is a member organization of the Sustainability Consortium (Melissa was previously a member of the consortium staff).  ACI participated in the Sustainable Accounting Standards Board (SASB) development of suggested (voluntary) materiality disclosures for the Consumption Products Sector (including household and personal products).

Brian Sansoni stressed that the ACI effort is intended to create an industry-wide, discrete approach that member companies can benefit from, and contribute to as the initiatives move forward.

Important:  ACI’s Critical Issue Assessment

For the first time, the Institute staff and participating companies conducted a comprehensive materiality assessment to map risks and opportunities facing the U.S. cleaning product value chain, including key energy and environmental metrics. The mapping identified and characterized the key issues that affect ACI’s membership and the industry-at-large.

The top issues identified in the materiality process by internal and external stakeholders:

1 – Materials (safety of chemical ingredients; raw material sourcing, scarcity).
2 – Disclosure & Transparency (public disclosure related to sustainability, governance, products).
3 – Climate Change / GhGs (climate risk & opportunities; GhG emissions).
4 – Ecological Impacts (biodiversity, deforestation, environmental management, responsible agricultural practices).
5 – Water (use, waste water treatment, recycling).
6 – Workplace Health and Safety (health & safety management; health & wellness training programs).
7 – Waste (hazardous, non-hazardous waste; management of product end-of-life).
8 – Energy (energy use, renewable energy).
9 – Supply Chain Management (screening business partners on ethics & sustainability issues).
10 – Compliance (with EHS regulations).

The American Cleaning Institute’s Materiality Assessment, Brian notes, is an important way of guiding the association’s and member companies’ reporting on industry priorities. It’s also useful for the dialogue between companies and their stakeholders. ACI CEO Ernie Rosenberg notes that the association will be more strategic about tracking industry performance [on the issues] and the ACI sustainability reporting will evolve as a result.

In our view, the American Cleaning Institute’s sustainability program is an excellent example of the preferred method of the American business community in addressing ESG performance issues: adopting of voluntary, industry-wide standards, approaches, guidelines, codes of conduct, and other non-regulated approaches.

As we said up top, this approach is represented by what we see in the automotive, electronics, chemicals, apparel and other industries and sectors. This is important to keep in mind as the public dialogue on sustainability reporting includes expectations that the Federal government will at some point issue mandates for greater sustainability disclosure and structured reporting (similar, some advocates say, to mandated financial reporting).

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For Reference

 

Company participants in the 2014 American Cleaning Institute Metrics Program:

AkzoNobel Chemicals LLC; Amway; Arylessence, Inc; BASF Corporation; Brenntag North America; Celeste Industries Corporation; Chemia Corporations; Church & Dwight Company, Inc; The Clorox Company; Colgate-Palmolive Company; Corbion; Croda, Inc; The Dow Chemical Company; DuPont Industrial Biosciences; Ecolab, Inc; Evonik Corporation; Farabi Petrochemicals; Firmenich Incorporated; Givaudan Fragrances Corporation; GOJO Industries, Inc; Henkel Consumer Goods, Inc; Huntsman Corporation; International Flavors & Fragrances, Inc; Novozymes PQ Corporation; Procter & Gamble; SC Johnson; Sasol; Seventh Generation; Shell Chemical LP; Stepan Company; The Sun Products Corporation; Vantage Oleochemicals.

These companies are key members of the US$30 billion U.S. cleaning products marketplace. ACI members formulate soaps, detergents and general cleaning products used in household, commercial, industrial and institutional settings. They also supply ingredients and finished packaging for these products; and, ACI members include oleochemical producers.