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Corporate America's sustainability gains 'not enough,' says Ceres

<p>Fresh analysis of 613 of the largest U.S. companies says incremental progress is a good start &mdash; but a new report shows it&#39;s time to pick up the pace.</p>

Corporate America is making some notable incremental progress on sustainable business strategies and practices, according to a new report released today by sustainability leadership advocacy group Ceres.

That's the silver lining in "Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability," produced together with research partner Sustainalytics.

And now for those ominous dark clouds.

This rich analysis of 613 of the largest publicly traded corporations in the United States reveals that while a growing contingent of companies steadily are building sustainability into their business operations and decision-making, the vast majority still are not — at least not at the pace demanded by our present predicament.

"We found that many companies are gaining ground with modest overall improvement. But given the acceleration of environmental and social challenges globally — floods, droughts and workplace tragedies among them — corporate actions and solutions are not keeping pace with the required level of change," write Ceres Chief Executive Mindy Lubber and Sustainalytics CEO Michael Jantzi in the report's opening letter.

In other words, as the report succinctly articulates, "Incremental progress in tackling global climate change and other sustainability threats is simply not enough."

A visible silver lining

But the report — which assesses companies' progress in terms of accountability and performance factors outlined in Ceres' initial sustainability roadmap in 2010 — isn't all doom and gloom.

In fact, its silver lining is quite bright.

"I was surprised and heartened to find more companies engaging investors. I feel that this is a really important and interesting trend," report co-author Andrea Moffat, Ceres' VP of corporate programs, told GreenBiz.

The analysis identifies 319 companies — 52 percent of the total — that are engaging investors on sustainability issues. That's up from just 40 percent when Ceres' published its 2012 roadmap. The top 20 of these companies are using multiple tracts to approach investors on sustainability, for example, by including information in standard investor communications, highlighting sustainability performance and innovations at annual meetings, and directly engaging with shareholders on key issues.

"Companies that are taking sustainability seriously in terms of oversight and disclosure also tend to have stronger commitments," observed Moffat.

Greenhouse gases lurk in the dark clouds

On the other hand, the Ceres VP was surprised that so little progress was made over the past two years in terms of adopting detailed time-bound targets for reducing greenhouse-gas emissions.

As detailed in the report, while more than two-thirds of corporations evaluated (438 companies) are taking steps to reduce GHG emissions, only 35 percent (212 companies) have put a date on it. That is up only slightly from 32 percent in Ceres' 2012 progress report.

Similarly, while 37 percent of companies have implemented some kind of renewable energy program — compared to 35 percent two years ago — only 6 percent actually have quantitative targets to boost their use of renewable energy.

"Are they really committed?" asked Moffat. "It's hard to say."

In exploring this question, the report's narrative relies on a tiering system — from Tier 1 companies "setting the pace" to Tier 4 companies "starting out." But the report does not actually rank companies on their overall sustainability strategies and performance.

"It is meant to demonstrate companies doing creative and innovative things so that other companies can follow them," explained Moffat.

This allows companies to assess their performance against sector peers and to learn from the sustainability initiatives that various other sectors have adopted — many of which are highlighted in the report's case studies.

Corporate leadership stands out

The report recognizes several companies for their corporate leadership on at least one specific aspect of sustainability. Here are a few notable examples.

Flyknit racer image by Achmad Soumerio Hutomo via Flickr.Alcoa ties 20 percent of executive cash compensation to safety, environmental stewardship and diversity goals.

The Coca-Cola Company improved the efficiency of its water use by 20 percent and identified the need for a rigorous third-party evaluation of its water management approach.

Exelon developed an innovative "long-term performance share award" that rewards executives for meeting non-financial performance goals, including safety targets, GHG emissions reduction targets.

Ford established requirements for suppliers that require them to drive Ford's environmental and social expectations down the supply chain.

Intel provides training to help employees consider sustainability in business decision-making and incentivizes its employees by linking compensation directly with sustainability performance targets.

Nike integrates sustainable design across its product portfolio — including new product innovations such as the FlyKnit running shoe, which creates two-thirds less waste in production than its counterparts.

PepsiCo actively engages with investors by presenting its sustainability strategy and goals.

Xcel Energy ties executive compensation to specific performance measures, including environmental leadership and links compensation to goals achieved in demand-side management.

"We do have a lot of good examples," said Moffat. "A lot of companies are doing excellent work. And that's really critical to highlight because other companies are really are looking for examples."

That said, corporate sustainability "is a journey," acknowledged Moffat. However, she said, "I hope that next time we do this, instead of seeing incremental changes, we will see changes in leaps and bounds."

Cloudy sky image by Dean Souglass via Flickr.

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