Proxy Season to Step Up Efforts on Corporate Sustainability Issues
<p>A new report from Ernst & Young projects that half of all shareholder resolutions in 2011 will focus on environmental and social sustainability issues.</p>
As the 2011 shareholder resolution season kicks into gear, environmental and social sustainability issues will be front and center.
Last week, shareholder advocacy group As You Sow introduced a shareholder resolution aimed at cutting packaging waste from consumer packaged goods giants Procter & Gamble and General Mills.
And today, Ernst & Young released a new report predicting continued growth of sustainability-focused shareholder resolutions.
Since 2000, the number of CSR-related shareholder proposals has climbed almost 40 percent, up to 191 in 2010. This year, E&Y expects that half of all resolutions will be focused on environmental and social issues.
"Increased awareness among investors and regulators of the reputational and financial risks associated with CSR and environmental sustainability places more pressure on companies to identify and manage these issues," Steve Starbuck, Americas Leader Climate Change and Sustainability Services, said in a statement. "This trend has truly evolved over the last decade and it is gaining more traction as reflected in the growing number of proposals voted on and the level of 'for' votes cast this season."
In addition to a growing number of CSR-related shareholder resolutions, those resolutions are also gaining increasing support: While in 2000, CSR resolutions garnered on average 7.5 percent of support, in 2010 that average climbed to 18.4 percent. The critical threshold for these types of resolutions is generally around 30 percent, which is when corporate boards will take note of shareholder resolutions. In 2008, nearly 27 percent of CSR-focused resolutions earned 30 percent support or higher.
"As shareholder resolutions related to climate change risk and other environmental issues increase, the most progressive, forward-thinking companies will be prepared to address stakeholder concerns," Ann Brockett, Ernst & Young's Americas Assurance Leader, Climate Change and Sustainability Services, said in a statement.
Last week, a shareholder resolution filed by As You Sow earned 26 percent support from shareholders.
The report from Ernst & Young lays out the following steps to help any organization improve its CSR-related governance:
• Board. Make sure that the board has a standing agenda item to review emerging environmental and social issues, opportunities and risks.
• Board committee. Install a dedicated board sub-committee to oversee the company’s management of environmental and social issues, opportunities and risks.
• Committee composition. Ensure that relevant committees are composed of executive and non-executive directors with the expertise to assess the organization’s progress in environmental matters.
• Materiality. Apply a systematic process to determine which environmental and social issues are most relevant to the organization.
• Accountability. Hold individual leaders accountable for environmental performance, and schedule regular presentations to the appropriate committees to document progress.
• Reporting. Establish clear frameworks for reporting on the issues most material to the organization. Regularly publishing a sustainability report is one of the best ways to do this. Relevant board committees should sign off on all sustainability reports.
• Assurance. Obtain both internal and external assurance of all reports to gain independent insights on emerging risks and progress, and to be confident that disclosures are accurate.
The full report, "Shareholders press boards on social and environmental risks," is available for download from GreenBiz.com. For more research on climate and sustainability issues from Ernst & Young, visit EY.com/ClimateChange.