Compliance : Dodd Frank : Supply Chain :
Boards Exceeding Environmental Oversight Requirements
Paper, Forestry, Utility and Healthcare Industries at Lead, While Retail Lags
Corporate boards are exceeding legal oversight requirements on environmental and social issues, with more than half of S&P 500 companies providing board level oversight of environmental and/or social issues above and beyond that required by law.
Board Oversight of Sustainability Issues finds that many industries subject to scrutiny – paper, forestry, healthcare, utility companies – are among the most likely to have board oversight of sustainability issues. But, the retail sector lags despite criticism for recycling and labor and human rights practices.
Commissioned by the Investor Responsibility Research Center Institute (IRRCi) and released on Earth Day, the study was conducted by the Sustainable Investments Institute (Si2). A webinar is scheduled for Tuesday, April 29, 2014 at 1 PM ET to review the findings and respond to questions.
“The sizable percentage of S&P 500 companies elevating environmental and social issues to the board level reflects the growing understanding among directors and executives of the financial risks and opportunities of sustainability and to the importance to long-term corporate planning,” said Jon Lukomnik, IRRCi executive director.
While sustainability has been a concern of corporations and investors for years, there has been little research focused on how boards oversee a company’s sustainability efforts. This research sets out to fill that gap. It offers an industry-by-industry analysis, along with other detailed analyses such as correlations between revenue and net income for companies with board oversight of environmental and social issues.
“The report identifies key trends on issues and industries, which seem to be a direct reflection of public scrutiny and industry risk exposure,” said Peter DeSimone, report author and cofounder and deputy director of Si2. “For example, energy companies have long been targets of sustainability proponents. It’s logical that these companies would be among the most likely to have Board oversight of environmental issues.”
“But that simple rationale is confounded by the retail sector – the fourth least likely to have board oversight – despite the fact that the industry has been under fire on issues ranging from sweatshops to recycling practices. The same holds true for technology hardware companies that battle accusations surrounding supply chain labor and human rights abuses, and are enveloped in reporting on conflict minerals as required by Dodd-Frank,” DeSimone added.
Among the findings of Board Oversight of Sustainability Issues are:
The findings are based on a review of committee charters and sustainability reporting conducted in the final quarter of 2013. The study excluded the issue of ethics, as all U.S. publicly-traded companies are required to at minimum have audit committees review fraud and other ethical lapses as a result of the Sarbanes-Oxley Act of 2002.
The Investor Responsibility Research Center Institute is a not-for-profit organization headquartered in New York, NY, that provides thought leadership at the intersection of corporate responsibility and the informational needs of investors.