Brands Taking Stands | Climate Change Tops the Issues Agenda Across S&P 500

Jun 20, 2018 4:15 PM ET
Newsletter

THE BIG STORY 

Climate Change Tops the Issues Agenda Across S&P 500

Of the several big issues that have attracted the attention of brands taking stands recently, climate change looks to be topping the agendas of the world’s largest companies.

The concern is literally in the air: 2017 was the third straight year of record warm temperatures in the US, with 15 severe weather events that created $1 billion or more in damages. May 2018 was another record setter, with US temperatures recording 5.2 degrees F above average.
 
S&P Global Ratings backs up these meteorological figures with financial data that shows increasing concern about climate by business. The ratings agency’s analysis of 10 years of earning call transcripts finds that the terms “climate” and “weather” were among the most frequently mentioned terms by S&P 500 executives. The report, a joint effort with Resilience Economics, a climate risk management specialist, noted that 15 percent of S&P 500 companies publicly disclosed an effect on earnings from weather events, recording an average impact of six percent (although only four percent of companies quantified the effect).
 
S&P concludes “The effect of climate risk and severe weather events on corporate earnings is meaningful. If left unmitigated, the financial impact could increase over time as climate change makes disruptive weather events more frequent and severe...As management teams become more accountable for the financial impact of weather events, it is expected that more companies will step up their reporting.”

The implications are clear for publicly traded companies, said the ratings agency: “We may begin to see institutional investors build climate risk factors into their portfolio selection processes, thereby placing greater emphasis on climate when directing investments.”

This rising concern by business has taken a concrete step in the We Are Still In coalition, a group formed to support climate action in meeting the terms of the Paris Agreement despite the administration’s announcement intention to pull the US out of the Accord. Its overall numbers are large, and still growing: to date, 2,809 leaders (mayors, county executives, governors, tribal leaders, college and university leaders, businesses, faith groups, and investors), representing 171.4 million people across all 50 states and $6.45 trillion in assets. The business sector alone is represented by 1,906 companies and investors.

With a growing material impact on bottom lines, and with widespread social support, taking a stand on climate change is a position that makes financial as well as social sense.

NEWS YOU CAN USE

Diversity Report by Google Shows Slow D&I Progress

As the tech industry struggles with diversity and inclusion throughout its workforce, Google has issued its fifth report on the issue that spells out the problems. The numbers tell the story: Last year, Google was 30.8 percent female, 2.4 percent black and 3.5 percent Latinx. As the company notes, representation for women, black and Latinx people has barely increased. At executive levels, Google reports that management is 74.5 percent male and 66.9 percent white. For the first time, data about attrition was provided, and it revealed another angle of the D&I issue: attrition rates for black and Latinx employees were at their highest yet. “I hope what this report underscores is our commitment to this work,” Google vice president, chief diversity and inclusion officer,  told TechCrunch. “We know we have a systemic and persistent challenge to solve at Google and in the tech industry.”

Integrating ESG into Supply Chain Finance Could Create $660 Billion Dollar Revenue Opportunity

Supply chain issues are complex, with many moving parts to be coordinated, and the process is even more complicated when sustainability—with its many new, additional requirements—is the main driver of operations. But the ROI on the effort could be very profitable finds Business for Responsibility, in a new report, Win-Win-Win: The Sustainable Supply Chain Finance Opportunity. It shows how “supply chain and trade finance mechanisms can be leveraged to create tangible cash incentives for suppliers, drive sustainable behaviors, and transform global supply chains. This is a significant opportunity for buyers, suppliers, and financial service providers.” For banks, supply chain finance is a $20 billion revenue opportunity now, according toMcKinsey, “offering an unrealized opportunity to improve supply chains while also achieving sustainability goals.” In time, BSR estimates that the sustainable supply finance market will reach “one third of the market, or $660 billion, representing a US$6 billion revenue opportunity for financial service providers.” Merging sustainability with materiality within supply chain operations could add to bottom lines for all involved.

Calvert Pushes Companies to Take a Stand on Gun Control

The hot-button issue of gun control got some highly visible media coverage last week when John Streuer, chief officer of investment firm Calvert Research and Management, was profiled in a New York Times feature. The article detailed how Streuer pressured Kroger to stop selling firearms after the Parkland, Florida school shooting. Calvert, with $14 billion in assets under management, owns $2.6 million in Kroger shares, and was prepared to introduce a shareholder resolution if the company wasn’t responsive to the issue. Kroger first set an age limit of 21 to purchase firearms, then shortly after cut out gun sales altogether. “To have the capital markets be part of a solution is meaningful. It is responsible investing at its best,” said Streuer. “I don’t want to avoid problems and leave them for someone else to clean up. I want to be part of the solution.” One part of the socially responsible investment equation he emphasizes is competitive profits. “We needed them [companies] to see that these issues would mean something to their stock price,” Streuer said. “That this matters from a business sense, not a social justice sense.” Streuer has been engaged with socially responsible investing since 1991, and has seen ESG-driven investing move from fringe activity to the mainstream. In the US, responsibly invested assets have risen rapidly since the mid-2000s, to $8.7 trillion in 2016 from $6.6 trillion in 2014, according to the latest Global Sustainable Investment Alliance Review.

C-SUITE COMMENTS

"There’s a shift going on. When I went to USC, it was all about maximizing value for shareholders. But we’re moving into a world of stakeholders. It’s not just about shareholders. Your employees are stakeholders, so are your customers, your partners, the communities that you’re in, the homeless that are nearby, your public schools. A company like ours can’t be successful in an unsuccessful economy or in an unsuccessful environment or where the school system doesn’t work. We have to take responsibility for all of those things. 

This idea that somebody put into our heads — that companies are somehow these kind of individuated units that are separate from society and don’t have to be paying attention to the communities they’re in — that is incorrect. We need to have a more enlightened view about the role of companies. This company is not somehow separate from everything else. Are we not all connected? Are we not all one? Isn’t that the point?”  

               — Marc Benioff, Founder, Chairman, and CEO, Salesforce

Excerpted from “Corner Office” by David Gelles, NY Times

PEOPLE ON THE MOVE

Hammad Atassi has been named CEO of the American Sustainable Business Council (ASBC). Atassi is a long-time senior executive with Numi Organic Tea, most recently serving as vice president of strategic development. Prior to Numi, he was an executive in the financial services industry. The American Sustainable Business Council advocates for policy change and informs business owners and the public about the need and opportunity for building a vibrant, sustainable economy. It represents more than 250,000 businesses in a wide range of industries.
 
Becca Martin has assumed the role of head of global HR executive and internal communications at Caterpillar. Martin is responsible for the internal communications strategy for the HR function as well as the chief HR officer and the HR leadership team. Prior to joining Caterpillar, she was the head of corporate communications for Ace Hardware and worked in internal communications at Abbott Nutrition and McDonald’s.
 
Common Impact is expanding its leadership team. The national nonprofit that promotes corporate skills-based volunteering has announced the appointments of Krista Van Tassel as director of partnerships and Season Eckardt and Marjie Bland as senior consultants. Van Tassel has worked with Wells Fargo, Net Impact, and Hewlett Packard. Eckardt previously worked at Reimagining Service, a multi-sector service coalition. Bland most recently worked with HandsOn Central Ohio, where she developed high-impact community and corporate volunteer programs.

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Continue the important conversations on corporate responsibility long after 3BL Forum with the Brands Taking Stands newsletter. Written by veteran journalist, John Howell, this newsletter is published every Wednesday morning.