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CFO Engagement on Shareholder Social and Environmental Expectations

Bill Roth | Tuesday July 26th, 2011 | 0 Comments

This post is part of a series on Stakeholder Engagement sponsored by Jurat Software.

Deloitte’s CFO Signals report summarizes the issues that CFOs are increasingly confronting with 4 words: Major Change Initiatives Stress. 56% of CFOs cite this stress with more than half placing it as a top three stress.

One of the “Change Initiatives” confronting CFOs is the increased interest among shareholders in social and environmental actions. Ernst & Young recently reported that proposals on social and environmental issues were the largest proportion of all 2010 shareholder resolutions. They estimate that half of all shareholder resolutions in 2011 will center on social and environmental issues.

Bloomberg reports that analysis of a company’s social and environmental issues is way up, with 29% annual growth in investor use of Bloomberg environmental, social, governance indicators. That increase represents 5,000 users in 29 countries who accessed more than 50 million sustainability data sets. 

CFOs face a new reality wherein they must balance fiduciary responsibility with the expanding needs of stakeholders on Human Health, Environmental Protection, and Social Equality.

Today’s CFO must be engaged on these three questions:

How does their company’s product offerings align with creating human health benefits, the sustainable use/conservation of earth’s resources and trustworthy treatment of associates, customers and contractors?

What are the measurement criteria for non-finance performance on human, social and environmental impacts?

What new role should a CFO contribute in shaping management practices that respond to their company’s shareholders expanding focus upon social and environmental issues?

But above all, the fundamental question of concern for most CFOs is:

How can my company a achieve of stock valuation goals and simultaneously manage growing consumer and shareholder expectations on social and environmental issues?

To that question, R. Paul Herman, founder of HIP Investor, has compiled growing documentation that companies that respond to the environmental and societal issues perform better in the stock market. This chart from the HIP Investor newsletter profiles the potential for a company to achieve superior stock valuation from designing management processes, products and supply systems that are responsive to social and environmental issues:

PERFORMANCE of the HIP100* Portfolio
(Net of Fees) Figures are cumulative, not-annualized and unaudited

TimeframeHIP 100*     S&P 100 HIP Over by:
Since Inception**+ 36.27%+29.71%+6.55%
First Year***+ 13.41%+9.37%+4.04%
2010 Year****+ 12.69%+10.88%+1.81%
2011 YTD****+ 5.86%+4.24%+1.62%
Q2 2011*****+ 0.89%- 0.68%+1.57%

* See HIP Disclosures and Disclaimers at www.HIPinvestor.com and at bottom of this newsletter. ** Cumulative performance since HIP 100′s inception date of 7/30/2009 until 6/30/2011. *** First year performance is 7/30/2009 to 7/31/2010. **** Year end 2010, as of Dec. 31, 2010; YTD ending 6/30/2011. *****Fees allocated to month but collected quarterly in advance.

In the following video R. Paul Herman profiles his best practices for a company to become HIP, which he defines as Human Impacts + Profits:

http://www.youtube.com/watch?v=TCDFMXUjlmI

Bill Roth is the founder of Earth 2017, a company that connects businesses with customers who are seeking smart, healthy and green solutions. His book, The Secret Green Sauce, profiles best practices of businesses making money going green. During 2010 he is implementing Green Builds Business, an 11-city program created by the U.S. Hispanic Chamber of Commerce Foundation with funding from Walmart.

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