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Shareholders want environmental sustainability, but are the Boards listening?


Have you been following the latest shareholder news coming from America?

Increasingly, environmental sustainability is a matter that is gaining traction at Corporate Board meetings, as shareholders in the United States push for the establishment of Board-level committees on sustainability.

This request is increasingly being made by individual shareholders and is on the agenda for voting at the Annual General Meetings for both CISCO and Microsoft.

In fact, over one hundred climate and energy-focused shareholder proposals have been put before shareholders of 88 U.S. and Canadian companies in 2010, according to figures from Market Watch, an Internet web site for investors published by Dow Jones & Co. That’s an increase of almost 50% over last year.

Granted, the environmental and sustainability proposals submitted by shareholders at company AGMs last year garnered support from an average of 20% of the voting shares, an indication that there is still a long way to go. However, at the five energy companies where sustainability proposals were submitted, this issue won an unprecedented 40% or more of the votes cast. Unfortunately, these shareholder proposals are unlikely to receive Board support in the proxy materials sent to shareholders.

In a typical scenario, shareholders at the Apple AGM in February voted down, as per the Apple Board’s recommendations, two shareholder proposals. One requested that the Board prepare a detailed sustainability report describing corporate strategies on climate change and reduction in greenhouse gases. The other asked for a Board level Sustainability Committee to oversee natural resources, limiting energy use, waste disposal, and climate change.

Will Australia take charge?

Interestingly, this phenomenon has yet to rise to the top of shareholder concerns in Australia. In the most recent issue of Company Director, the monthly publication from the Australian Institute of Company Directors, the top five mentioned shareholder issues to be raised at AGMs in Australia were identified as: gender diversity, the effects of government reform, dividends and dilution, the remuneration report, and direct re-election.

One reason for this is that many top Australian companies have already created Board Committees on Sustainability, including Lend Lease, Santos, AGL, BHP Billiton, Westpac, and CUA Health. In most cases, however, these committees have a wide purview of topics and issues to oversee beyond just environmental sustainability.

One model for companies to emulate, both here and in North America, might well be Westpac. The bank’s Board Sustainability Committee charter, adopted in April 2009, requires the Board to review:

  1. the social, environmental and ethical impact of Westpac’s policies and practices
  2. initiatives to enhance the Westpac Group’s sustainable business practices and reputation as a responsible corporate citizen
  3. compliance with government requirements in relation to sustainability issues and sustainability reporting.

How to get more Boards to tune in

While our top companies are showing leadership in this area, not all are following.

Anne-Maree Huxley, CEO of Models of Success and Sustainability (MOSS), suggests there are two opportunities to address this issue.

“The first is the language of sustainability,” she notes, “if we want those who are not so educated on risk to support policies and endeavours. At the end of the day, you may know the many benefits of corporate sustainability, but many shareholders do not.”

The second opportunity, according to Huxley, is “to educate shareholders. Let them know it is about economic sustainability, which can only be achieved through sound social and environmental management.”

These sentiments were echoed in several conversations I had with people at the recent Carbon Expo event in Melbourne. Several middle management staff lamented openly that they cannot get their senior management or their Boards interested in sustainability initiatives.

Apparently there is an enormous “let’s wait and see” attitude percolating in senior executives across Australia awaiting direction from the government on climate change legislation. 2011 would be a good year to change this.

Steven Howard writes the Monday Morning Marketing Memo. He is the author of six books, a blogger, marketing consultant, and Non Executive Director based in Melbourne.

Image by Urban Woodswalker [Mary Anne Enriquez]