What's the buzz about business and bees?
Here's a closer look at what AEP, Bristol Myers-Squibb, GM Hewlett Packard, Walmart and others are disclosing about bees.
This is an excerpt from "The Business of Bees: An Integrated Approach to Bee Decline and Corporate Responsibility" by Greenleaf Publishing.
Pollinator decline is not solely a governmental or individual problem but one which urgently requires a multi-organizational solution. Corporations have both a social and economic responsibility to assist in developing this solution.
First, from a social perspective, corporations not only have a direct impact on pollinator decline through use of insecticides (agricultural companies), but also have an indirect impact by means of climate change. Through the increasing greenhouse gas emissions associated with corporate activity, the greening, flowering and aging cycles of plants are altered, impacting pollinators and multiplying the impacts of habitat loss.
Second, from a purely economic perspective, corporations will directly or indirectly witness pollinator decline impacts on their bottom line. Pollinator decline is projected to increase over time, with a current estimated economic impact of approximately $186 billion.
A direct consequence of this problem includes an increase in raw material prices, significantly affecting cash flows of U.S. corporations.
Other firms will face indirect consequences including, but not limited to: impacts to health services from the decline in available fruits, vegetables and nuts; impacts to the transportation industry dependent on the delivery of agricultural products; and impacts to the recreation industry due to the decline in human food consumption.
Accounting and reporting?
These types of risks from pollinator decline should be included in firm-specific disclosures under current U.S. accounting and reporting standards.
Pollinator, and especially bee, decline is a material financial risk for both companies and their major shareholders. Any financially material and significant issue should be discovered by a firm’s internal control and governance system and should therefore be discussed in public corporate filings.
In the United States, the Securities and Exchange Commission (SEC), along with the accounting oversight bodies, provide firms with guidance on the appropriate items to disclose to the public. Reporting practices within the U.S. are guided by the conceptual framework.
In the face of reporting discretion, where management is not certain what information should be reported, the conceptual framework offers direction. Specifically, when considering disclosure, there is a trade-off between the cost of providing information and the usefulness of such information for decision-making.
Costs of providing information include the actual cost of services to gather and print the information, but may also include proprietary costs. As for the usefulness of information, among other things, the conceptual framework requires that information be relevant. Relevance is defined as information exhibiting predictive value, confirmatory value and materiality.
Pollinator decline is projected to increase over time, with a current estimated economic impact of approximately $186 billion.
In other words, in the face of a decision to include information in public reports, firms must determine whether the information can be predicted and measured, can be verified and whether it is material to the firm. Based on estimates of economic impact and both direct and indirect corporate consequences, pollinator decline is likely to be a relevant issue for all U.S. firms.
After a firm determines that pollinator decline poses a risk and should be disclosed, it must decide in what form to report such information. The SEC specifically requests firms to provide information about the operations of the business as well as addressing firm risks in the annual report (10-K).
In addition to disclosures in a firm’s annual report, disclosures concerning pollinator decline will likely be found in each firm’s standalone sustainability report. These reports, also referred to as corporate responsibility reports, citizenship reports, accountability reports, etc., provide stakeholders with a glimpse into each firm’s environmental and social activities.
Within the U.S., standalone sustainability reports are voluntary, are often not assured, vary in length and informational inclusion, and have been used in many instances as an image-creating marketing tool (in other words, greenwashing).
If a firm is involved in any activities attempting to tackle the pollinator decline problem, it would be considered a positive attribute of a firm’s sustainability behavior and would likely be disclosed. Additionally, given the call by the U.S. Government for businesses to focus on pollinator decline and the involvement by NGOs in cooperating with U.S. firms towards finding solutions to pollinator decline, we anticipate U.S. corporate involvement and disclosure to be strong.
In order to determine whether firms are, in fact, disclosing information required by the SEC, we search U.S. public company 10-Ks and stand-alone sustainability reports for disclosures related to pollinator decline. We specifically search for instances of bee disclosures, any conservation efforts they are involved in, the dollar value associated with any conservation efforts, the net present value of the firm-specific risks and so on.
We also determine what factors lead some firms to provide information and the extent of the information provided, including the industries that may be more prone to informative disclosures. This is certainly a broad overview of the current corporate pollinator decline disclosure landscape in the U.S.
U.S. firm disclosures
Since the size of a firm often predicts increased voluntary disclosures, we chose the S&P 100 firms as our sample of interest.
The S&P 100 is a stock market index of U.S. stocks, representing approximately 45 percent of the market capitalization of the U.S. equity markets. These firms are some of the largest and most established firms in the U.S. We focus on public firms because they have comparable forms of disclosure which makes analysis among firms easier. It is likely that private firms also disclose similar, if not more, information related to bees, but finding that information is more difficult.
FedEx was one U.S. firm with a unique disclosure relating to bees.
We also focus on the most current year’s disclosures as pollinator decline disclosures are likely to improve over time. After searching each firm’s 2014 annual report, we were disappointed and somewhat surprised to find absolutely no disclosure of any type related to firm-specific risks linked to pollinator decline.
Even with the significant economic impact to the U.S. estimated at $186 billion, the direct consequence of increases in raw material prices predicted to significantly affect future cash flows of U.S. corporations and the indirect consequences resulting from impacts to health, transportation and recreation services, there was absolutely no discussion in any annual report of such risks.
Given the non-existent representation in annual reports, we turn to the S&P 100’s stand-alone sustainability reports for the current corporate discussion. While the U.S. does appear to be entering this arena, representation remains weak.
As indicated, an overwhelming majority of the largest public firms in the U.S. do not disclose anything about bees in their sustainability reports (88 of the 100 firms). Overall, there were a total of 12 firms disclosing information about bees or the problems associated with pollinator decline. Of those 12, 10 firms only mentioned bees once, with the average sustainability report in our sample at approximately 111 pages. One firm discusses bees on two separate occasions within their sustainability report and one firm featured extensive discussions in six different areas within their report.
We analyzed all discussions of bee-related activities within stand-alone sustainability reports and determined there were nine distinct activities communicated. In the case of disclosures related to employee activities, how the company assists other companies to impact pollinator decline, research specifically focused on how the firm’s activities are impacting pollinator decline, providing supply chain education, and activities related to researching new product with the potential for reduced impact on bees, we found that only one firm discussed each of these issues.
Hewlett Packard’s 2014 Living Progress Report provides discussions about an employee Global Volunteer Survey it conducted to determine the type of volunteer activities HP employees participate in. Survey results indicated that some employees volunteered by building pollinator habitats in Toronto, Canada. This disclosure was not a company activity per se, but did include the volunteer work of employees within the company.
FedEx was one U.S. firm with a unique disclosure relating to bees. Instead of specifically discussing something they had done related to combating pollinator decline, they provided a discussion, under the heading "Mann Lake Fights Against Colony Collapse Disorder," of a company in Minnesota that is the world’s largest supplier of beekeeping equipment.
FedEx then discussed colony collapse disorder and the potential long-term consequences of the problem and how this company in Minnesota is working to combat the problem by providing beekeeping equipment to both hobbyists and commercial beekeepers.
American Electric Power was the only firm to discuss participating in research on how their own activities may be impacting pollinator decline.
The location of its Minnesota headquarters, far from urban areas of any size, doesn’t impede delivery and distribution — the company relies on a combination of FedEx Express, FedEx Ground and FedEx Freight to get its products to beekeepers and distributors. This is certainly an instance where FedEx is disclosing their indirect involvement in the problem.
American Electric Power (AEP) was the only firm to discuss participating in research on how their own activities may be impacting pollinator decline. Specifically, in their 2014 Corporate Accountability Report, AEP states, "Recently, AEP partnered with the Electric Power Research Institute to evaluate the ecosystem services provided by the site and the possible impacts that shale gas fracking could have on these resources."
AEP specifically includes pollination as one of the resources supplied by the ecosystem, benefiting mankind, that they are interested in studying. They go on to assure the reader, "Results of the study to date have indicated no long lasting impacts."
Within the U.S., Walmart has long been a driving force behind public discussions concerning supply chain sustainability issues. It appears the issues of bees have also caught its attention. In the 2015 Global Responsibility Report, Walmart discusses its bee activities under the heading "Sustainable Food Chain."
Specifically, it states, "Walmart is known for lowering the cost of food for our customers. We have been working hard to do it in a way that also lowers the true cost to society — meaning improving yields while reducing GHG emissions and preserving natural capital (oceans, forests, water, air quality, pollinator health), and enhancing farmer livelihoods."
They go on to discuss the ways in which they are achieving this goal. We deemed this activity, as disclosed, to be a type of supply chain education, both by educating themselves on how to achieve this goal, as well as educating those in their supply chain.
Monsanto was actually one of the most forthcoming firms in the U.S. with regard to pollinator disclosures. They disclosed six separate discussions, one of which centered on research into new products which would likely have less impact on pollinator decline.
Monsanto was actually one of the most forthcoming firms in the U.S. with regard to pollinator disclosures.
In their 2014 Sustainability Report, Monsanto states, "Monsanto’s agricultural biologicals research focuses on creating products derived from nature to support plant health and protection from pests." They further disclose, "Through BioDirect technology, researchers are using their knowledge of plant and pest genetics to develop new topical solutions for controlling weeds, insects and viruses as well as protecting honey bee health."
In addition to each of the aforementioned activities, community education and conservation efforts in general were also disclosed, both on two separate occasions. An example of community education can be found in Monsanto’s discussion of their involvement in a coalition of researchers, advisers and other stakeholders in an effort towards "working with beekeepers to better understand how to keep healthier bees."
General conservation effort disclosures were also found in Monsanto’s Sustainability Report. This disclosure was the only one providing a dollar amount of investment. Specifically, Monsanto states, almond crops are a crucial part of the California agriculture industry that requires 800 commercial beekeepers and more than 1.8 million honey bee colonies — transported from around the country — for pollination each year.
By placing a variety of early-blooming flowers in areas adjacent to almond groves and other farmland, bees have access to a nutritious food source during peak pollination times. Our three-year partnership with PAm, a leading organization dedicated to improving the vitality of honey bee colonies, includes a $250,000 investment in educating California almond growers and landowners on the value of honey bee forage, as well as planting forage itself. With 2014 marking the second year of the partnership, together we have planted more than 3,000 acres of forage.
FedEx then discussed colony collapse disorder and the potential long-term consequences of the problem and how this company in Minnesota is working to combat the problem
Employee training was also a popular disclosure among our 12 firms. Within our sample, three firms discussed providing employees with training on the pollinator decline problem or how they could assist in combating the problem. BristolMyers Squibb discussed employee training twice within their 2014 Foundation and Corporate Social Responsibility Report.
First, each year during Earth Week in April, Bristol-Myers Squibb employees around the world demonstrate their commitment to environmental stewardship and a sustainable future by participating in activities ranging from planting trees to attending workshops about the benefits of keeping honeybees and the conservation of energy and water.
To raise awareness about biodiversity and the essential role that bees play in the ecosystem, the company introduced employees and their children to its apiary. Workshops and discussions were led by professional beekeepers who introduced the hive and the role of the bees and their queen.
Thirty-five children participated in the program, which also included a presentation of the movie "More than Honey," an award-winning documentary that takes an in-depth look at honeybee colonies around the world.
Among all of the pollinator disclosures, the most frequently disclosed activity involved developing pollinator gardens. One example of this type of disclosure is General Motors (GM). In their 2014 Sustainability Report, GM discusses an activity under the heading "Leadership in natural habitat," "A 27,000-square-foot garden was designed to benefit pollinators, such as bees and butterflies, that are critical to the reproduction of 90 percent of flowering plants and one-third of human food crops worldwide."
One of the firm-specific characteristics, beyond that of size, likely to impact the decision to participate in and disclose bee-related activities is the industry in which the firm operates. This is due to the fact that different industries are likely to be affected more by pollinator decline than others. Similarly, the activities of firms in different industries are likely to impact pollinator decline in different ways.
A majority of industries in our sample are only represented once (automotive, metal mining, agricultural production, variety stores, semiconductors, electric services, computer hardware/software, diversified machinery, and air courier services). The pharmaceutical industry was the most represented industry within our sample of large U.S. public firms, with a total of three firms disclosing bee-related information.
Even the Big Four accounting firms have begun to take notice.
While the U.S. bee disclosures appear to be minimal, some disclosure is a good sign. U.S. public firms often lag other countries in reporting environmental and social activities and wait for other countries to provide direction.
Another possible catalyst for U.S. corporate involvement is the actual cooperation or partnering of the federal government with NGOs to encourage firm participation in bee conservation activities. Often referred to as cross-sector social partnerships (CSSP), this informal tri-sector partnership will likely educate firms on the risks to their operations from pollinator decline, encouraging firm-specific initiatives related to bees.
In pollinator disclosures (including bees and butterflies) in U.S. S&P 500 firms from 2013 to 2015, the formation of a CSSP between the U.S. Government, NGOs and public firms to combat pollinator decline significantly increased pollinator disclosures, with a disclosure rate increasing from 6 to 14 percent during that timeframe.
Finally, as the current trend in responsible investment continues to rise, the impacts of biodiversity, in this case pollinator decline, are increasingly being incorporated into investment and financing decisions. As the expected costs of issues such as pollinator decline continue to rise, corporate cash flows are likely to be affected.
Even the Big Four accounting firms have begun to take notice. Each firm has published documents informing corporations of the potential impact of biodiversity on business, and that firm-specific information related to these issues is increasingly being requested by stakeholders.
The combination of international activity, CSSP involvement, responsible investment and financing decisions, and the isomorphic pressure of disclosures among peer firms, will likely continue to increase U.S. firm-specific bee disclosures in the future. As more stakeholders become aware of the pollinator decline issue and its potential impact on firms, they too will demand greater action and accountability and transparency.
"The Business of Bees" is published by Greenleaf Publishing. Readers can use the code BEES10 to obtain a 10% discount on the book on Greenleaf Publishing’s website.