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Proxy Season 2012: More Requests, More Engagement, More Results

| Friday July 20th, 2012 | 0 Comments

The end of every proxy voting season provides some interesting outlook on the progress of sustainability in the business world. This year was no different. 2012 season was busy as always – investors, as Ceres reports, successfully used shareholder resolutions to spur action on corporate sustainability challenges, such as climate change, hydraulic fracturing and supply chain risks.

In terms of results, this certainly was a productive year – of the nearly 110 resolutions tracked by Ceres in 2012, 44 proposals resulted in new commitments of companies to tackle environmental and social risks in their operations.

Looking at what happened this season, we can already draw three conclusions: First, a growing number of shareholders understand the business case for sustainability. Second, shareholders continue to be an important driver of sustainability in companies. Last, but not least, companies, as Ernst & Young explains, are increasingly willing to enter into substantive dialogue with shareholders and take action.

Among the resolutions on environmental issues (107 in total) the main issues were sustainability reporting (28 resolutions filed), fracking (10), supplier sustainability report (7) and GHG reduction target (9). It’s interesting to see how significant reporting became this year as well as how many companies agreed eventually to start taking action. According to CERES, shareholders convinced Crocs, DSW, Garmin, Celgene and PF Chang’s China Bistro to issue sustainability reports. In addition, companies such as Apple, Dell, HP and Intel agreed to “encourage, and in many cases require, their major suppliers to issue sustainability reports encompassing both environmental and social issues.”

In the case of supplier reporting, the kudos go to John C. Liu, the New York City Comptroller, who filed these resolutions. Liu was very clear about his reasons: “As long-term investors we must be concerned about financial and reputational risk as well as alignment with basic values like workers’ rights and environmental concerns,” he told Ceres.  This is a great example showing companies the direct link between the level of sustainability in their supply chain and their own value. Even more interesting is the fact that Apple, which rejected a resolution in 2010 asking it to issue sustainability report, will now request its suppliers do the same.

Another success related to the supply chain was achieved by Calvert Investments and the New York State Comptroller’s Office, which negotiated commitments with Colgate and Smucker’s respectively, to source 100 percent certified sustainable palm oil for their products. This achievement provides another indication of the progress companies have made, especially with regards to Smucker’s that just last year rejected a resolution calling for the company to show how it manages risks connected to its coffee business and supply chain.

Another issue that was high on the investors’ agenda was fracking, which is quite understandable given the environmental and health risks involved in the process. Investors, according to Ceres, drew attention to community concerns surrounding this water-energy nexus and secured agreements from major drilling firms Anadarko, EOG Resources, Chesapeake Energy, Penn Virginia, Range Resources, Noble Energy and Stone Energy to improve disclosure around the risks associated with their fracking operations, including water risks. In total, out of 10 proposals that were filed only in three cases, companies didn’t reach a compromise with the shareholders (ExxonMobil, Chevron and Ultra Petroleum). In these three cases the vote received 30 percent support on average.

Unlike last year, no vote on environmental issues received a majority this year. The highest support was given to a resolution asking Arch Coal to report on Appalachian mining hazards (44.7 percent) and to another resolution asking Cabot Oil to issue a sustainability report (39.6 percent). Not too far behind was a more well-known company – Yum! Brands – the parent company of Taco Bell, KFC and Pizza Hut, with a resolution filed by Trillium Asset Management requesting the company to source 100 percent certified sustainable palm oil that received 37 percent support. And if we’re talking about big names, let’s not forget Amazon, where a resolution by Calvert calling for the company to disclose information on its climate risks failed for the second year in a row with only 21 percent support.

According to Ernst & Young, environmental and social proposals accounted for approximately 45 percent of the resolutions this year, up from 40 percent last year and 30 percent in 2010. “Not only do resolutions on corporate sustainability issues represent the largest portion of all shareholder proposals we now see, but average support for these topics reached an all time high last year – and we expect this trend to continue to gain traction,” said Steve Starbuck, Americas Leader Climate Change and Sustainability Services, Ernst & Young.

It’s great to see how shareholders create a clear link between sustainability challenges and business performance. Yet, you need two to tango, especially given the non-binding character of these votes, so it’s great to see a growing number of companies engaging with stakeholders and committing to take action. In the current environment, where regulation is far from being satisfactory, right now this seems to be one of the best mechanisms we have to move the sustainability needle in companies.

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business and new product development.


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