We’re in one of those rare “hinge” moments in history, when the status quo seems inadequate and failing, and what’s next is emerging out of the meltdown of the current order. The pressure on the top ranks of business management to make more change, faster, is increasing. Companies are being pushed from all quarters—investors, shareholders, employees, and customers—to take stands on the key social issues of the day, on ESG factors, and on employee and community engagement. This surge is being driven by a perfect storm of polarized politics, ominous climate change symptoms, and the collective energy of activists, politicians, innovators, CSR and sustainability practitioners, and a millennial workforce.
The truly exciting development is that chief executives, boards of directors, and shareholders are listening. They are hearing the call for real change more loudly than ever before.
For public companies, there can be no greater voice to heed than that of the investment community. And that sector is asking for more issue-related data to include in its decision making.
Item: Twelve top banks and tech companies have been queried by activist investor group Arjuna Capital for reports on their median gender pay gap. Adobe, Amazon, American Express, Bank of America, Bank of New York Mellon, Citigroup, Facebook, Google, Intel, JPMorgan, Mastercard, and Wells Fargo make up the select list of those petitioned In January. “Citi became the first U.S. company to respond favorably to the gender pay shareholder proposal...which asks for a report to investors on the percentage global median pay gap between male and female employees across race and ethnicity, including base, bonus and equity compensation,” writes Amy Brown in Triple Pundit. Citigroup revealedthat its median or company-wide gender pay gap is 29 percent. As for the rest of those on the list, “the jury is still out on whether the others will follow Citigroup’s lead,” says Brown. Several firms pointed to past pay equity or diversity figures, reports the Washington Post, while some pushed back on the median figure as “a blunt instrument that doesn’t lend itself to comparability and could lead to misleading figures.” Whatever their response, Citi has set a precedent that the others will need to address.
Item: Recent research from Ceres finds that “ESG investment has doubled over the last three years and now represents $1 of every $4 invested in the United States.” The evidence shows that companies have noticed this targeted interest from the financial market, and many have taken stands on ESG issues. “Among 600 of the largest publicly traded companies in the U.S., nearly two-thirds have commitments to reduce greenhouse gas emissions, half are actively managing water resources and nearly half are actively protecting the human rights of their employees.” The reason is simple and goes straight to the bottom line: “When companies move to integrate and disclose ESG issues into their core business strategies, they end up outperforming their competitors. As a result, the investment market continues to see growth in ESG investing.”
Not all is hunky dory in this picture, though. Ceres research also finds that companies often fail to communicate sustainability as an integral component of business strategy—that is, as a material factor that drives business value. Many companies that are taking positions on ESG issues are communicating them as “nice to do” rather than making the business case for ESG. “Investors want to see companies quantify how investments in sustainability translate into cost savings, market expansion and revenue growth,” says Ceres.
How to bridge this messaging gap? Kirsten Lang, a Ceres Company Network director, has come up with some answers in a report she has authored, Change the Conversation: Redefining How Companies Engage Investors on Sustainability. The paper lays out nine recommendations for companies to improve investor engagement on ESG issues, helping them to not only meet investor expectations, but also to capture competitive advantage. Among them:
Lang writes, “We must change the conversation that companies have with their investors on sustainability so that companies can be rewarded for their commitments and incentivized to continue to scale their ambition and urgently respond to issues like climate change, water scarcity, and human rights abuses.”
Those who are wondering “what’s next” in a radically transforming business landscape should look closely into this report. It’s a good guide to the shape of the future of business in a disruptive time which shows no signs of settling down.
Previously posted via our Brands Taking Stands newsletter. Be sure to subscribe!
Image credit: Ted Eytan/Flickr
John Howell, Chief of Thought Leadership and Editorial Director, is a co-founder of 3BL Media, the parent company of Triple Pundit, begun in 2009. Howell oversees original editorial content procurement and creation. He is also the author of the weekly Brands Taking Stands Newsletter. He has written and edited for Elle, Artforum, High Times, the New York Times Magazine, and the LA Times. Howell is based in Wonalancet, NH.