A Growing Trend Companies Can't Ignore
For many years, the shareholder resolutions published in the back pages of companies' proxy statements rarely reached most people's radars. These proposals weren't expected to hold much sway much less pass muster with shareholder votes.
Times have changed. These days, shareholder resolutions are sparking some important changes and commitments from public companies, even in the realm of environmental and sustainability issues.
Change agents and agitators
Ceres, a consortium of investors, companies, and public interest groups advocating for sustainable business practices, has released the report Investor Power. The report includes corporate case studies and shows just how progressive the 2012 proxy season has been when it comes to corporations responding to investor action on sustainability topics.
Ceres tracked 110 shareholder resolutions in 2012, and reported that 44 of those resulted in American corporations vowing to work on the environmental and social risks in their supply chains.
For example, both Colgate (NYS: CL) and J.M. Smucker have said they'll switch to certified sustainable palm oil to mitigate greenhouse gas and habitat risks. Traditional sources of palm oil, which is used in tons of consumer products like cookies and other foods and soap, have resulted in major greenhouse gas emissions and massive deforestation in places like Indonesia.
Hydraulic fracturing, more popularly known as fracking, has reached the public spotlight as a potentially dangerous method to extract natural gas. In fact, many states and towns have begun blocking the practice. Energy companies Anadarko Petroleum (NYS: APC) and Chesapeake Energy (NYS: CHK) have agreed to provide better disclosure and transparency related to risks involved in the practice, as have several of their peers.
Apple (NAS: AAPL) and Intel (NAS: INTC) are two of several tech giants that have moved to encourage or even require suppliers to report on sustainability. Interestingly enough, though, just this week Apple moved away from the EPEAT green electronics certification on its products.
Risks versus rewards
Shareholder proposals related to environmental and social challenges are growing, and many companies are rising to the occasion by engaging with shareholder proponents and addressing the issues. That's a good thing, because the alternative is a far riskier climate for corporations and their investors over the long term.
Last month, Ceres, Calvert Investments, and Oxfam International released a report outlining "Physical Risks from Climate Change." This report discussed last year's records for weather-related disasters, adding up to $148 billion in losses, and $55 billion in insured losses.
Anyone who thinks that businesses that don't pay any attention to sustainability don't cost anyone anything is ignoring reality, and for investors, ignoring reality could mean missing potential risks of all kinds.
Meanwhile, analysts at the Wharton School of the University of Pennsylvania recently pointed out the importance of corporate social responsibility, which has everything to do with how consumers and other companies view enterprises. It cited a recent survey showing that 77% of consumers say companies should be socially responsible. Social media can scorch a corporation's reputation like wildfire.
And of course, unethical, irresponsible companies are more likely to treat their investors to nothing more than expensive legal problems or corruption or fraud scandals that destroy value over the long term.
Sustainably run businesses are long-run businesses, and that's better for investors, companies, economies, and communities. Fortunately, more corporations recognize the importance of sustainability initiatives. More progress will yield more rewards than risks.
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Check back atFool.comevery Wednesday and Friday for Alyce Lomax's column on environmental, social, and governance issues.
At the time this article was published Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Intel, Apple, and Chesapeake Energy. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy, Apple, and Intel, as well as creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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