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Sustainability and 21st Century Corporations: Are We Gaining Enough Ground?

3p Contributor | Monday May 12th, 2014 | 0 Comments

Gaining Ground Report CoverBy Julie Gorte

Four years ago, Ceres and Sustainalytics produced a report that it called a roadmap for sustainability for the 21st century corporation, and noted that while there were pockets of leadership in sustainability, these pockets were surrounded by oceans of incrementalism that were insufficient to address the sustainability challenges confronting us.  This year, celebrating its 25th anniversary, Ceres released an assessment of the roadmap report with the uplifting title Gaining Ground The bumper sticker: Corporations are doing better at integrating sustainability into their souls.

That is worth celebrating, to be sure.  Some of the specific candles on this celebratory cake include:

  • More companies are incorporating sustainability performance into executive compensation packages.
  • More than half of the 613 companies evaluated in Gaining Ground are engaging investors on sustainability issues.
  • Forty percent of the companies evaluated are engaging employees on sustainability issues.
  • Over two-thirds of the companies have taken some steps to reduce greenhouse gas (GHG) emissions.
  • Nearly 58 percent of companies have established codes of conduct for suppliers that address human rights and other sustainability issues.

These are important milestones, ones that the companies should be proud of, and the investors and other stakeholders who encouraged them should chalk them up as accomplishments.  If we are going to pass on to our children a world that provides at least as many opportunities for enrichment and fulfillment as our forebears did, these companies are the enablers.

But let us also remember that better is not the same as good enough.  Reducing GHG emissions is great, but compared to the amount that we must reduce those emissions by in order to avoid crossing the 2 degrees Celsius Rubicon, accomplishments to date are not adequate.  Ceres and Sustainalytics also point out that there has been no significant uptick in the percentage of water-intensive companies that assess water-related risks.  And while it is good that almost one-fourth of the companies tie executive compensation to measures of sustainability, it is useful to understand the history of executive compensation, and attempts to tie it to performance, which have not been terribly successful.   Many companies tie performance-based shares to financial performance, but they use a measure of financial performance — called Total Shareholder Return — that does not appear to create much of an incentive for improved performance, according to a recent study.  Performance measures that actually drive performance are not as common as they ought to be.

Progress is great, and Ceres and Sustainalytics deserve a great deal of credit for finding a medium and a message that helped to motivate the progress that has been made.  Now it’s time to amp it up.

Image courtesy of Ceres

Julie Gorte is Senior Vice President, Sustainable Investing for Pax World.


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