Here's the main problem with companies talking about how sustainable they are.
If environmental and social issues were as central to their operations as we're led to believe, then they would be discussed meaningfully in securities disclosures, lobbyists would bring them before Congress and retirement plans would invest by them.
Here’s how President Obama described the problem in an interview with the Economist:
"There’s a huge gap between the professed values and visions of corporate CEOs and how their lobbyists operate in Washington," Obama said. He said that when executives visit him in the White House, "my challenge to them consistently is, is your lobbyist working as hard on those issues as he or she is on preserving that tax break that you’ve got? And if the answer is no, then you don’t care about it as much as you say."
The same issue holds for official disclosures, such as the 10-K report that the U.S. Securities and Exchange Commission requires annually of public companies. They tend not to include methodical discussions of energy use, potential child labor in supply chains, product safety or myriad other issues.
A consultancy based in Stamford, Connecticut, called Framework LLC, in 2011 compared sustainability reports and corporate 10-K disclosures for the 100 top companies chosen annually by Corporate Responsibility Magazine. The study found that just eight companies had "a large degree" of overlap between 10-K and sustainability reports: Merck & Co., Campbell Soup Co., Intel Corp., Freeport-McMoran, Weyerhaeuser Co., Newmont Mining Corp, Xcel Energy and Coca-Cola Co. Twenty-eight companies had disclosures that raised "somewhat" similar topics and 60 had minimal overlap. Four didn't intersect at all.
How many companies direct their pensions or retirement plans to invest only in companies with like-minded approaches to environmental and social risks and opportunities? State pensions tend to be ahead of private-sector peers considering environmental, social and governance ("ESG") issues, the recent fossil-fuel investment controversies being only the most prominent example.
Getting politicians and markets to acknowledge this stuff is a relatively new enterprise. "It's not a small ask to get sustainability into the 10-K," says Jean Rogers, CEO of the Sustainability Accounting Standards Board. SASB is a three-year-old group that is working with more than 80 industries to develop disclosure standards for non-financial issues that are nonetheless important for investors to know. The initiative is the subject of a new Harvard Business School case study (and is chaired and partially funded by former New York City Mayor Michael Bloomberg, the majority owner of Bloomberg LP).
Obama's beef is that companies are talking up civic issues more and more -- in media, their own reports and elsewhere -- but not pursuing policy changes to match them in Washington. Does that mean they should lobby for changes in federal law that reflect their "professed values and visions”? At some point, corporate advocacy on issues too far from core business issues might prove, to boards and shareholders, unsustainable.
Correction: The original post incorrectly stated the location of Framework LLC.
More by Eric Roston (@eroston on Twitter):
- Warmer ground blows 'rather spooky' crater in gas-rich Russian north
- This happened while everybody was putting on war paint for the Obama climate hearings
- Ten U.S. cities where flooding is more annoying than ever
- Pumping groundwater during a drought is great as long as you have groundwater
- Hot ideas and a climate-friendly Republican remake Indiana town
Visit The Grid for the latest about energy, natural resources and global business.