All U.S. S&P 500 companies except one report some form of sustainability disclosure. This widespread reporting indeed is good news. But, isolated sustainability disclosures have proven to be of limited value to corporate management trying to improve the bottom line, and for investors seeking to gauge risk and opportunity.

New research from the Investor Responsibility Research Center Institute (IRRCi) and the Sustainable Investments Institute (Si2) – the first to benchmark the status of integrated reporting in the U.S. – finds that nearly all S&P 500 companies are failing to connect the disclosure dots. A mere seven companies are integrating financial and sustainability reporting. These trendsetters include American Electric Power, Clorox, Dow Chemical, Eaton, Ingersoll Rand, Pfizer and Southwest Airlines.

The study also finds companies typically are beginning to place a dollar figure on sustainability – about 74 percent of corporations. But, these disclosures frequently mention other initiatives without quantification of the benefits and costs. Also interesting is that some 44 percent of companies link executive compensation to sustainability criteria.

What’s driving increased disclosure is a combination of factors – rules, regulations, fines, and even the increased volume on the climate change debate. What’s problematic, however, is that the rules are disjointed. As a result, companies and investors don’t have a clear vision so they can factor sustainability into corporate planning and financials.

But this disorderly backdrop doesn’t mean companies lack the capability to quantify the impact of sustainability.

…continue reading: Are Companies Connecting the Sustainability and Financial Disclosure Dots?

In a Director Note recently published, The Conference Board assesses how and to what extent social and environmental issues are integrated into the strategic agenda of the board of directors of U.S. public companies. The report is based on findings from a survey of 359 SEC-registered business corporations conducted by The Conference Board in collaboration with NASDAQ OMX and NYSE Euronext. Data are categorized and analyzed according to 22 industry groups (using their Standard Industrial Classification [SIC] codes), seven annual revenue groups (based on data received from manufacturing and nonfinancial services companies) and five asset value groups (based on data reported by financial companies, which tend to use this type of benchmarking).

The study updates a previous edition of “Sustainability in the Boardroom,” released by The Conference Board in June 2010.

The following are the main findings discussed in the study.

…continue reading: Sustainability in the Boardroom: A 2013 Update

Major companies across industrial sectors are putting more effort and investment into demonstrating good corporate citizenship on environmental, social, and related governance factors. However, research shows that it may be getting harder for companies to gain recognition for doing so.

Last year, Brandlogic and CRD Analytics prepared the 2012 Sustainability Leadership Report: Measuring Perception vs. Reality, marking the second year for the annual report and continuing our pioneering work in measuring and comparing real sustainability performance to the perceptions of key stakeholders. This follow-on study used the same methodology established for the inaugural report, as described in a November 2012 issue of Director Notes (see “About the Sustainability Leadership Report,” p. 2, for a summary). [1] Moreover, the follow-on study validated the methodology’s usefulness as a management framework for making decisions about if and where to invest in sustainability, both on the operational and communications fronts.

With a second set of data in hand, we are able to observe year-over-year movement. Overall, real performance on sustainability is rising, reflecting ongoing and intensifying corporate efforts to define and achieve sustainability goals.

However, perceived performance, on average, is declining. The findings suggest that it is becoming more difficult to achieve differentiation among those audiences who are most attentive to sustainability, despite a better track record. This finding is both striking and surprising. Why is perception slipping despite an increasing volume of communications around sustainability? In what follows, we explore possible answers.

…continue reading: The Bar Is Rising on Sustainability Leadership

Operational sustainability performance is becoming increasingly important to corporations and their stakeholders, but operational performance is not the only measure that matters. There is also considerable value in communicating the corporate sustainability story. This report looks at the potential benefits to corporations of demonstrating good environmental, social, and governance (ESG) performance and discusses five common characteristics of sustainability “leaders”—companies that excel in both the operational and communication dimensions of sustainability.

As economic and societal priorities change over time, so do the criteria that define corporate leadership. The world’s “best” organizations have, at various times, been identified as those that excel in research and development and new product development, those that display excellence in operational and process reengineering, or those best able to focus on core competencies. More recently, the yardstick has been the ill-defined term “innovation”—the ability to be a game changer via breakthrough products or business models.

…continue reading: Charting a Path to Sustainability Leadership

A growing number of corporations are releasing stand-alone sustainability reports. To provide insight into corporate sustainability performance, many reports contain sets of performance indicators. However, questions remain about what should be reported and the indicators disclosed vary widely. This report presents an analysis of the indicators disclosed in 94 Canadian corporate sustainability reports.

Sustainability policies, plans, programs, and projects have been initiated in corporations around the world. Given the broad nature of sustainability, the breadth and depth of these initiatives varies widely. For example, initiatives as diverse as measuring a corporation’s carbon footprint, fostering diversity in the workplace, and supporting community development could all be classified under the umbrella of sustainability. These initiatives are of interest to a variety of internal and external stakeholders. Depending on the issue, these stakeholders may include employees, investors, customers, suppliers, regulators, nongovernmental organizations, and local communities, to name a few.

One important way corporations share information about their sustainability initiatives is through the release of publicly available reports. Although the titles of these reports differ, they typically include words such as “sustainability,” “responsibility,” “accountability,” or “citizenship,” and they focus on addressing the economic, environmental, and social dimensions of corporate performance through a review of both qualitative and quantitative information. (For the remainder of this issue, the term “sustainability report” is used.)

…continue reading: Reporting on Corporate Sustainability Performance

According to a new study recently released by The Conference Board, U.S. corporations continue to lag far behind their counterparts in other developed economies—notably , the European Union and Japan—in transparency of environmental and social practices. In particular, the overall disclosure rate of this type of information by U.S. companies in the Russell 1000 is 10 percent, compared to 19 percent for a global sample of 3000 business organizations tracked by Bloomberg’s Environmental, Social, and Governance (ESG) database.

The new report, Sustainability Practices: 2012 Edition—a collaboration between The Conference Board, Bloomberg, and Global Reporting Initiative (GRI) Focal Point USA—covers a total of 72 environmental and social practices including: atmospheric emissions, water consumption, biodiversity policies, labor standards, human rights practices, and charitable and political contributions. For benchmarking purposes, Bloomberg ESG data is compared with the S&P 500 and the Russell 1000, and further analyzed across 11 business sectors and four revenue groups.

The following are some of the other major findings discussed in the paper.

…continue reading: Sustainability Practices in 2012

It’s illogical – and quite myopic – that many of the nation’s largest institutional investors refer to shareholder-sponsored resolutions addressing material topics such as climate change, resource constraints and environmental stewardship as “special interest,” “non-routine” or involving “special circumstances.”

The opposite is in fact the case. We strongly agree with David Lubin and Daniel Esty’s contention in a recent Harvard Business Review article that sustainability is a core driver of competitive business strategies. Sustainability issues present both opportunities for competitive advantage and risks that, left unmanaged, will cause a company to lag its sector. If companies aren’t addressing sustainability they won’t be producing long-term value for their shareholders.

The financial numbers back this up: A review of 36 studies by Mercer Investment Consulting shows strong linkages between ESG (environmental, social and governance) integration and positive investment performance. “Eighty-six percent of the studies are neutral or positive,” Mercer’s Jane Ambachtsheer told the CalPERS Board of Directors in August.

With this in mind, Ceres recently unveiled the new and detailed Ceres Guidance: Proxy Voting for Sustainability to a Council of Institutional Investors breakfast in Boston. Our guidelines are a tool. But more importantly, they launch a serious effort to get mainstream investors moving now – immediately – to assert their prerogative, as part of their fiduciary duty, on these issues. Ceres, which coordinates the $10 trillion Investor Network on Climate Risk, has the partners in its network to leverage this initiative.

…continue reading: Proxy Voting for Sustainability

It doesn’t take a majority to make a revolution, particularly when old paradigms have developed deep fault lines. A significant and growing portion of investors think the companies they own need to take more proactive, transparent action on a broad range of social, environmental and governance issues, to protect long-term shareholder value. One measure of support for this view is the global group of 870 investors who manage more than $25 trillion and have signed on to the UN Principles for Responsible Investment. Another is the Carbon Disclosure Project, which now boasts support from investors with $71 trillion of AUM and presses companies to disclose how they are reducing their carbon footprints. Clearly there is an explosion of involvement by investors—“shareowners,” not just passive shareholders—who work to integrate ESG issues into their investment decisions and engagements with companies.

Additional hard evidence of sentiment favoring reform comes from the recently concluded 2011 proxy season, which arguably marks a new tipping point for social and environmental issues. Active shareowners now are voting their convictions more than ever, sending a strong message to company managements and boards. This analysis focuses on the spring “proxy season“ results as one strong indicator of the expansion of investor interest and support for company evolution to higher levels of corporate responsibility.

…continue reading: Proxy Season 2011: A Tipping Point for Social and Environmental Issues?

Global Proxy Voting

In 2010, the SBA worked with The Corporate Library to analyze its proxy voting among nine externally managed foreign equity portfolios totaling approximately $9 billion. The vote audit examined a total of 33,729 individual ballot items (proxy voting decisions) across 257 distinct voting categories. The purpose of the foreign equity proxy vote audit was to evaluate the external managers’ voting activities as well as to benchmark those voting decisions against similar SBA votes and those of a major corporate governance research provider. The vote audit examined aggregate voting results, voting by each individual manager, and benchmarked external manager voting against SBA internal voting decisions.

…continue reading: Florida SBA Confronts Recent Corporate Governance Issues at Home and Abroad

In a recent paper, Sustainability in the Boardroom, published as part of the Conference Board’s Director Notes series, I discuss the findings from a survey of board practices in the area of sustainability by 50 public companies of different industries and revenue groups.

The survey revealed flaws in how corporate boards oversee their companies’ social and environmental initiatives. In particular, what appears to be largely missing is access to independent sources of information on the impact of business operations on the environment as well as detailed procedures and metrics for integrating social objectives into daily corporate activities. Directors mostly rely on reports by senior executives (89.2 percent of respondents) and almost never use additional sources (including peer-company benchmarks, environmental reports, director education programs, and consultants) that would help them critically verify and analyze any internally produced information on these matters. For most companies, sustainability discussions with the board only take place in reaction to emergency situations like the oil spill in the Gulf.

…continue reading: Sustainability in the Boardroom