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20
May 2002, WEB ARTICLE
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Pressuring for a Change to Business as Usual
Shareholder activists, global reporting, and social
investing combine in pressuring business to do better
by
DEREK REIBER
http://www.tidepool.org/greentide/greent.cfm
John
Osborn, a Spokane physician, is looking to change the old
motto "business as usual."
Working
with a group called Green CAP (Corporate Accountability
Project), Osborn and other stockholders in publicly held
companies are looking to enact social and environmental
change from the inside-out. Muscling their way into
corporate boardrooms through the power of the pocketbook,
Osborn and company have pressured companies through the
issuing of shareholder resolutions, in the process using a
central foundation of American capitalism -- shareholder
ownership in a company -- to get companies to change their
ways.
Thus
far, Osborn has won four resolutions on corporate
governance, including a vote in favor of electing Boise
Cascade's (now known just as Boise) board of directors on an
annual basis, instead of members serving staggered terms.
Even though Boise's management has ignored the resolution
for three straight years, says an article in the Idaho Falls
Post Register, but shareholder and public pressure did play
a large part in the timber firm's decision to no longer log
in old-growth forests.
Osborn's
latest target is Idaho timber company Potlach Corp. Osborn
proposed two shareholder resolutions at the firm's
shareholder meeting last week, with one calling on the
company to reveal how many shares are owned by descendants
of timber baron Frederick Weyerhaeuser, an early Potlatch
investor, said a piece in the Spokane Spokesman-Review. The
other resolution asks Potlatch to explain why it is paying
dividends when the company is losing money.
"Our
effort is to find common ground between people concerned
with the environment and Wall Street investors. Oftentimes,
environmental problems are symptomatic of an underlying
problem with corporate accountability," said Osborn, who is
also a co-founder of the Spokane-based Lands
Council.
Osborn's
activism is just the latest in what's rapidly becoming a new
and effective tactic in making companies more socially and
environmentally responsible. Shareholder activism, socially
responsible investing, and global reporting are all working
in concert to make business -- and thus our world, by
extension -- more sustainable.
While
Osborn's story is heartening, it's certainly not the norm.
According to a new report by the United Nations Environment
Program, there's a growing gap between the efforts of
business and industry to reduce their impact on the
environment. The report, titled "10 Years After Rio: The
UNEP Assessment," found that only a small number of
companies in different industry sectors -- the "early
adopters" -- were actively working to integrate social and
environmental factors into business decisions.
"Significant
efforts have been made by participating industries in
reducing their ecological footprint", said Jacqueline Aloisi
de Larderel, UNEP's assistant executive director, in an
article on GreenBiz.com. "But, it is in industry's own
self-interest to do more to spread best practice and raise
the performance levels of all its members everywhere. Not
enough companies, particularly small and medium-sized ones,
are leading the way and there is insufficient
monitoring."
But
aside from shareholder activism, other campaigns are
underway to help make the next UNEP report a little more
positive.
Socially
responsible investment (SRI) -- where investors bank on
companies or mutual funds that specialize in environmental
or socially just business -- "is sweeping the world's
markets almost as dramatically as the dot-com surge did in
1999," according to a feature in Tomorrow
magazine.
While
recent data is scarce, numbers from the early to late 1990s
show that SRI has been growing by leaps and bounds, with
advocates hoping that growth will help push overall business
trends in a greener direction.
In
the US, SRI funds grew 82 percent between 1997 and 1999,
about twice the overall growth rate, and reached a total of
$2.2 trillion, which makes up about 13 percent of all funds
under management, said the Tomorrow article. There are now
approximately 200 socially responsible mutual funds in the
US.
With
the recent dot-com decimation and sluggish investing on Wall
Street, some observers thought SRI would see a marked
downturn as investors ranked safety higher than social
values to avoid losing their shirts. But the good
performance of many SRI-related funds has allowed investors
to stay in, while helping boost the interest in shifting
investor portfolios toward more socially responsible
businesses.
"Despite
the market turbulence in 2000, 88 percent of screened funds
earned four- or five-star equivalent ratings from either or
both Morningstar and Lipper Analytical Services," Larry Chen
of UBS Warburg said in Tomorrow. "Statistics like this are
attracting a new class of investor, one that is starting
starting to realize that by investing responsibly, money and
doing good can go hand in hand."
Even
though SRI-related funds and companies show good
performance, there are still plenty of skeptics in the
investment community. Even though studies have shown SRI
funds outperforming traditional mutual funds, it's still not
quite enough to get some people on board.
"While
anecdotal evidence exists to suggest that socially
responsible investing generates superior returns, most
attempts to directly prove the 'social effect' have so far
been inconclusive," Chen said.
To
dig deeper into the 'social effect,' Tomorrow magazine
talked to those who manage the books for corporations --
accounting firms.
In
surveying five top global accounting firms, the magazine's
staffers discovered that while corporate social
responsibility (CSR) issues remain a fringe element for many
of their clients, some of the accounting firms' clients were
beginning to show interest in how to integrate those issues
into the core services that the accounting firms provide for
them, such as risk management and the accountancies'
assurance services, including internal and external
audits.
"From
their privileged access to the leaders of the world's top
corporations, the accountancies have formed a view that the
CSR and sustainable development agendas are clearly making
waves at board level -- partly because of the interest shown
by the financial and investor communities but also because
they fit with other aspects of business risk and
values-based programs," reads the magazine's
report.
The
accounting firms viewed the CSR trend as being on the cusp
of a slow but consistent growth during the next 5 to 10
years, adding that the accounting field -- which has
received an unprecedented amount of publicity in the wake of
the Enron scandal -- is well-positioned to help companies
transition into integrating CSR and sustainable development
into their agendas.
One
of the main complaints in the new push for corporate
responsibility has been a lack of standards and screening
criteria. During the past decade, environmental and social
reporting by companies has been creative, but without a
standard format or use of common indicators.
At
its most innocent, the lack of standardization leaves
investors without a clear idea on a company's environmental
record or a basis by which to compare different companies.
At worst, it leads to 'greenwashing,' where firms release a
report that may appear substantial on the surface, but
really doesn't reflect on a corporation's culture or
practices accurately.
The
Global Reporting Initiative (GRI), launched in April, aims
to solve this problem. The independent global institution is
sited at the United Nations in New York City, with a mandate
"to make sustainability reporting as routine as financial
reporting while achieving the highest standards of
consistency and rigour," said Leah Haygood of BuzzWord
Sustainable Reporting in a column on
GreenBiz.com.
GRI
originally started back in 1997 to develop globally
applicable guidelines for reporting on the economic,
environmental, and social performance of companies. Since
then, GRI's reporting guidelines have gone through two
editions, with a third currently in draft and open for
public comment until May 26, 2002.
Under
the new revisions, GRI is striving to both develop standards
for reporting while providing guidance on what companies
should include in sustainability reports, including dozens
of specific indicators. Economic and social reporting
standards are also being expanded, to better assist
companies that want to expand from just environmental
reporting to broader sustainability reporting.
The
GRI process, at present, simply gives companies one set of
guidelines for reporting. Other guidelines, such as the ISO
standards, cover similar aspects, but observers point out
that GRI is fast becoming the agreed-upon global
standard.
That's
a good thing, because in many places across the globe,
environmental reporting is becoming mandatory for business.
In Denmark, the Netherlands, Norway, and Sweden, reporting
is required by law. The idea is being considered in Japan,
while the European Parliament recently debated the idea. The
US hasn't approached the idea yet.
But
business isn't waiting for reporting to become mandatory.
It's already receiving enough pressure from the private
sector, from folks such as John Osborn, to increase
corporate transparency as well as environmental and social
responsibility. In the process, they're finding out it's
possible to turn a profit while being a good corporate
citizen. They just needed a little prodding in that
direction.
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