Companies See Value in Broadening Sustainability Efforts
Following is Part 1 from our whitepaper “Companies See Value in Broadening Sustainability Efforts,” that we created in partnership with Bloomberg Environment.
Environmental, social, and governance issues are no longer secondary considerations for companies seeking organizational resilience and global market growth. As consumers and investors call for the private sector to be more globally responsible, organizations across industries increasingly are heeding this expectation, or risk loss of reputation and investor and customer confidence.
Weaving the trio of sustainability concerns, collectively known as ESG, into the fabric of business operations demonstrates that company durability rests on more than economic factors.
While some reports have indicated the high-tech sector is not necessarily in the vanguard of the ESG movement,1 the wider picture in recent years has illustrated that sustainability is nonetheless going mainstream. Nearly all fast-food, gasoline, and retail chains along major highways also have sustainability reports issued by corporate headquarters. This highlights the overall shift across industries. In 2011, 20 percent of S&P 500 companies published sustainability reports. By 2017, 85 percent did.2
The social aspect (or “S” of ESG) is a growing focus in the sustainability conversation, as investors and additional stakeholders call for greater transparency into health and safety practices.
In the early 1900s, writer Upton Sinclair shocked American consumers with depictions of the meatpacking industry, and food safety regulations followed. Today, customers and investors aren’t focused simply on bare-bones regulations, but on more expansive efforts that further strengthen the bottom line, protect assets, and minimize employee turnover. Health and safety concerns are evolving from mere compliance to proactive measures that enhance wellness across the supply chain and benefit recruitment and retention.
“Social sustainability is now recognized as being as important as environmental or economic sustainability,” said Michael Toole, dean of the University of Toledo’s College of Engineering. “We are increasingly recognizing the need for an integrated approach to safety that involves all parties in the supply chain.”
In 2018, the chief executive of BlackRock, the world’s largest asset management firm, amplified this view in an open letter to companies, stating they should “not only deliver financial performance, but also show how [they] … benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”3
This clarion call suggests the need to move ESG strategies away from typically siloed approaches into concrete procedures, embedded across the enterprise. This enlarged focus strengthens an organization’s viability and global competitiveness—an outcome illustrated by the 100 most sustainable companies outperforming the S&P 500 index this past year.⁴
Recognizing these potential gains, public companies now predominantly include non-financial disclosures in filings with the Securities and Exchange Commission. Customers, meanwhile, are asking privately-held companies for the same disclosures.
Similarly, real-time market performance reveals that more investors are viewing social-focused ESG matters, including occupational health and safety concerns, as material in assessing a company’s immediate and long-term viability. These efforts also help attract and retain talent, particularly in a tight labor market.
Assessing this terrain, organizations face the imperative to look beyond decades-old industry standards governing operations, and integrate this broad view of ESG across the entire business ecosystem to manage risk in new ways.
Stay tuned for Pt 2 next week, or Click here to download the full article
1 Sustainability Academy, “Is There Truth in Silicon Valley Companies as Sustainability Leaders?” Feb. 1, 2017, https://sustainability-academy.org/sustainability-leadership-silicon-valley-perception-versus-reality/
2 Governance and Accountability Research Institute, “S&P 500 Companies Sustainability Reporting,” 2017 Research, http://www.ga-institute.com/fileadmin/ga_institute/images/FlashReports/2018/G_A-Flash-S_P500-Chart-2018_600px.jpg
3 Andrew Ross Sorkin, “BlackRock’s Message: Contribute to Society, or Risk Losing Our Support,” The New York Times, Jan. 15, 2018 https://www.nytimes.com/2018/01/15/business/dealbook/blackrock-laurence-fink-letter.html
⁴ Hank Boerner, “Proof of Concept for Sustainable Investing: The Influential Barron’s Names the Inaugural ‘The Top 100 Sustainable Companies—Big Corporations with the Best ESG Policies Have Been Beating the Stock Market,’” Governance and Accountability Institute, Feb. 4, 2018, https://ga-institute.com/Sustainability-Update/2018/02/04/proof-of-concept-for-sustainable-investing-the-influential-barrons-names-the-inaugural-the-top-100-sustainablecompanies-big-corporations-with-the-best-esg-policies-have-been-beating-t/