over 10 years ago, at the time of the Rio Summit, business resistance
to the concepts of environmental responsibility, transparency
and sustainability was deep and strong. In contrast, many of
the worlds largest corporations today have explicit policies
in favor of sustainable development. Businesses around the world
are now exploring, at great depth and expense, their effects
on biodiversity, water and energy use, and climate.
In the face of this progress is a new predicament: By seeming to
embrace the idea of sustainability, there is a danger that business
may co-opt it and strip it of any real challenge. If business appropriates
the term, then business can redefine the goals and actions that
constitute a successful fulfillment of them. A year or so ago, even
the Business Roundtable circulated a memo in which it professed
to support sustainabilityand then defined it as a form of
While some corporations pursue genuine and substantive actions,
others simply re-label their existing practices as sustainable.
The challenge for the environmental and investor communities is
to retain the right and responsibility to define the standards of
Three categories of actions must occur to meet the challenge:
* First, companies must engage
in a serious and thorough manner with significant stakeholders.
* Second, businesses must disclose
their policies and performance on labor, human rights and the environment.
* Third, companies must actto
take positive steps.
Individual firms have gone a long way toward engaging with stakeholders,
disclosing their performance through environmental and other reports,
and taking specific actions on everything from greenhouse gas emissions
to labor practices to supply chain management.
At the same time, this increased activity has resulted in a serious
problem. As companies are asked to engage, disclose and act, they
too often pick among those options as though they were selections
on a menu. Some engage, but dont disclose. Some disclose,
but dont act. Some act, but never engage.
It is time for the investment and environmental communities to state
clearly that, in the 21st century, it is not enough to do only one
of those things.
In many communities, consumers can now purchase telephone service,
cable television and high speed Internet access all bundled as one
package. Investors and activists must convey to the corporate community
that engagement, disclosure and action are a single, bundled package.
In an interconnected globalized world, a well-run company, a company
that will be a good investment for the short- and the long-run,
does all three. Taking the issue one step further, investors and
activists need to distinguish between high quality and low equality
in each of three categories.
Some forms of engagement are superior to others. Too many companies
are now in the habit of inviting a few people to meetings that are
not real dialogues, but rather covert sales presentations or dressed-up
focus groups. Too many companies pursue the ancient strategy of
divide and conquer, trying to build relationships and win favor
with one set of activists and investors while leaving others out
in the cold.
The only remedy is solidarity. Working together has been the key
to success in the labor movement, the civil rights movement and
the anti-apartheid movement, and in all previous efforts in social
investing. Investors and activists can further the goal of effective
engagement by supporting shareholder resolutions that ask companies
to endorse the CERES Principles, a 10-point code of environmental
conduct, and by supporting the goals of organizations such as the
Social Investment Forum and the members of the CERES coalition of
environmental, investor and advocacy groups.
Disclosure: Global Reporting Initiative
There are wide discrepancies in the quality and usefulness of reporting.
The Social Investment Forum (SIF) has been a powerful national and
international leader in asking companies to disclose their impacts
in a candid, comparable manner that would be useful to investors.
In 2002, a long-shared dream among activists was fulfilled, in part,
with the launch of a common international disclosure standard, the
official inauguration of the Global Reporting Initiative (GRI) at
the United Nations and the release of the GRIs new guidelines.
The GRI provides globally applicable guidelines for reporting on
the economic, environmental and social performance of corporations,
governments and non-governmental organizations (NGOs).
As significant as the recent developments with the GRI might be,
the organization will not by itself bring about a new era of corporate
accountability and transparency. Companies must be asked to follow
it. Investors must show that they are using the information that
comes from it. Activists must continue to press for its improvement.
In places such as France, England, South Africa and Australia, governments,
stock exchanges and large-pension funds are pressing for increased
disclosure through the GRI. In the United States, many activists,
including CERES, support the Corporate Sunshine Working Groups
campaign for new forms of disclosure; the goal is to secure a rapid
and positive response from the Securities and Exchange Commission
In anticipation of what investors and activists hope will be a mandatory
requirement, it is essential to insist that every publicly-traded
American company adopt the GRI. American firms are a slow and cautious
bunch. Leaders in the environmental movement cannot allow their
inertia to cause them to lag behind their European, Japanese and
international counterparts in their rate of adoption of the GRI.
Social investment firms such as the Calvert Group and other SIF
members have asked their companies to use the GRI. Investors can
make similar requests to their portfolio companies.
Investor members of the CERES coalition are working with a group
of strategic companies on filing shareholder resolutions on GRI.
Additional co-filers are needed to express vigorous and public support
as well as proxy votes.
Unless the U.S. corporate community receives a clear signal from
shareholders, then the international effort to secure this new form
of corporate transparency may falter. Our foreign partners and allies
know that the U.S. government will not provide any leadership on
this matterit is up to the U.S. investor community.
The third area in which progress is needed is action. Action is
necessary in every area that has broad impact on humanity and on
the biosphere. There is a need to insure proper labor practices,
human rights and living wages. It is essential to secure real investment
in our communities. It is imperative that financial prosperity not
be built on the suffering of others or degradation of the world.
Indeed, environmentalists are standing at a historic moment. At
long last, the two great movements in shareholder activismsustainability
and governance, which have traveled on parallel tracks for several
decadesare finally converging. A company that does not know
how to integrate issues of sustainability into its long-term strategy
is a poorly-run company. It is incurring large and potentially unacceptable
risks for its shareholders.
Sustainable Governance and Climate Change
Thats why CERES, in partnership with many of its coalition
members, launched the Sustainable Governance Project,
which is working to promote and clarify the links between sustainability
and good governance. CERES has identified key interlocks among corporate
boards and is working to educate and engage key board members.
There is no better example of the link between sustainability and
governance than in the issue of climate change. For more detail,
please see the recent report entitled Value at Risk: Climate
Change and the Future of Governance, which assembles some
of the financial and economic impacts that can be expected (www.ceres.org/reports/main.htm).
The argument on climate change for companies and for investors is
* First, humankind is facing
the largest and potentially most damaging changes to the physical
world in all of human history.
* Second, these changes will
have an intensifying impact on all economic sectors, which means,
in turn, that climate risk is now embedded, to some degree, in every
business and investment portfolio in the United States.
* Third, prudence dictates that
those who are responsible for preserving the value of these businesses
and investments analyze this risk and take steps to mitigate it.
* Fourth, a willingness to address the seriousness
of embedded climate risk raises profound questions about both good
governance and fiduciary duty.
Yet as straightforward as these propositions may be, many pieces
still are not understood. A methodology must be developed on how
to subject a portfolio to a complete and thorough climate analysis
and how to integrate what is known from science into an evaluation
of financial risk. The answers are yet to be determined, but the
questions still must be asked, not only of investors and activists,
but also of portfolio companies.
This is not easy work. It takes unflinching commitment and persistence.
Yet history has shown that efforts can accumulate, that tributaries
will converge and that, when they do so, they take on unstoppable
power. Thats why Martin Luther King always used to quote the
words of the prophet Amos, who said, Let justice roll down
like waters, and righteousness like an ever-flowing stream.
Justice is rolling down, the stream is ever gathering and through
collective hard work its force will carry the world into a safe
and prosperous future.
Mindy Lubber is executive director
of the Coalition for Environmentally Responsible Economies (CERES),
the coalition of environmental organizations, investors and social