25 Jan. 2017 | Comments (0)
- Standard-setting organizations. The Global Reporting Initiative (GRI), SASB, etc. provide frameworks/standards for companies to use for disclosing and/or measuring their sustainability efforts. As an example, the SASB has developed non-financial standards that target material sustainability information for 79 industries. It would seem important for management and the board to be knowledgeable about these industry standards, how they connect to the company’s operations, risks and opportunities, and how the company and its peers are performing against these standards. Investors are already looking at these standards to gain insight on company sustainability efforts and to benchmark companies against their peers. In addition, a number of investors have signed on to the Principles for Responsible Investment (PRI), which provides principles for how investors will incorporate Environment, Social, Governance (ESG) in their investment decisions and how they will engage with their portfolio companies on ESG issues. Are your investors PRI “signatories?” (See Governance Center Senior Fellow Rhonda Brauer's October 25, 2016 blog post UN PRI: What Will its Second Decade Bring to Global Investors? )
- Big data. Most boards are familiar with looking at “buy,” “sell” or “hold” analyst reports from investment banks as a means of measuring investor sentiment. But there is another type of analyst: one that collects big data around environmental and social responsibility activities. Investors are well acquainted with and actively use analyst reports and data screening tools from MSCI, Bloomberg, Sustainalytics, etc. Boards should ask to see this data for themselves and their peers or get access to a Bloomberg terminal directly to see their ratings. With the 2017 proxy season coming up, staying on top of ESG-related shareholder proposals and other activity is another way to gauge potential issues and/or trends.
- Social media. Companies are looking at social media from the customer’s view and even to gauge employee satisfaction, but they should also be looking at social media through the investor’s eye. These sites can give investors important clues about the softer details about a company like its culture, ethics, diversity initiatives, etc. As one example, some investors have said they may look to Glassdoor for insight into the C-suite and board, the company’s culture, how open management is to new ideas, processes, compliance concerns, etc. Social media comments should be reviewed carefully and management and the board may want to take a look as well.
- Materiality assessment. Sustainability issues are complex and cross over many different departments including HR, Finance, Operations, Sales, IR, Procurement, etc. By conducting a periodic materiality assessment, companies can ensure they have all the information necessary to determine what is material and must be disclosed. As in the Wells Fargo fraudulent bank accounts case, small things like incentives for your sales team, can lead to big things like regulatory actions, litigation, reputation damage and investor dissatisfaction. The assessment should be reviewed with the board so directors can see the data and be aware of the results. This review can be completed internally or through a third party.