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September 29, 2010
Largest US Companies Report Board-Level Responsibility for ESG Issues
    by Robert Kropp

A report by Calvert and The Corporate Library find significantly less board oversight in smaller companies, and few boards that address risk management and stakeholder engagement.

In a recent webcast , Paul Dickinson, the CEO of the Carbon Disclosure Project (CDP), said, "Climate change is moving out of the CSR (corporate social responsibility) department and getting into procurement and finance, and into the boardroom." The clear implication of Dickinson's statement is that until climate change and other environmental, social, and corporate governance (ESG) issues become the responsibility of top-level corporate management, they will not be considered central to business operations and strategy.

The CDP's
2010 S&P 500 Report found that 46% of S&P 500 companies report board-level responsibility for environmental issues, compared to 85% of companies in the FTSE Global 500. A new report from Calvert Asset Management and The Corporate Library roughly corroborate the figures supplied by CDP.

The report, entitled
Board Oversight of Social and Environmental Issues, assesses "the current prevalence and nature of board-level oversight of environmental and social issues at North American companies," and concludes that the larger the company, the more likely it is to have board-level committees with responsibility for environmental and social issues.

Sixty-five percent of S&P 100 companies report having board-level responsibility for ESG issues. However, as the size of the company decreases, the likelihood of such oversight does as well: 18% of Russell 1000 companies have such a board-level committee, and only eight percent of companies in the Russell 3000 do.

"As might be expected," the report states, "These committees are more prevalent in sectors with high environmental or labor-related impacts."

"However," the report continues, "Even when charters explicitly mention corporate responsibility issues, they tend to stress the review and monitoring of policies and management systems," which, according to the report, "Is only a starting point for thorough oversight of social and environmental issues." Only a quarter of the companies that report board-level management say that the committees address risk management, while fewer yet are involved in stakeholder engagement and reporting.

Again, the findings of the report reflect those of the CDP, which found that only 18% of S&P 100 companies have both board-level oversight of environmental issues, and integrate risks and opportunities into overall business strategy.

In their foreword to the report, Bennett Freeman of Calvert and Richard Bennett of The Corporate Library stated, " All too often, boards still appear to view these issues in soft philanthropic or marketing terms, rather than as hard, fundamental business risks or competitive advantages."

Studying the demographics of the board committees with oversight responsibilities, the report finds that 25% of the committee members are women, compared to 18% of all S&P 100 directors.


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