May 03, 2012
EIRIS Reports on Sustainability Practices of Largest Global Companies
by Robert Kropp
Companies in the US and Asia lag behind their peers in Europe, while significant differences
persist among corporate approaches to sustainability.
SocialFunds.com reported yesterday on a new report from Ceres and Sustainalytics, which concluded that while there are
"pockets of leadership and innovation" in the sustainability efforts of 600 of the largest
corporations in the US, there remains a "compelling case for deeper, more comprehensive business
action on sustainability."
EIRIS recently released its own r
eport on corporate sustainability practices as well, in which the more than 2,000 global firms
listed in the FTSE All World Developed (AWD) Index are evaluated. The more global perspective
adopted by EIRIS may have helped the research organization identify more leaders—sustainability
efforts in the UK and across Europe are generally more advanced than those in the US or Asia—but
the report's conclusions are not much different from those arrived at by Ceres.
many companies which are demonstrating positive sustainability impacts, along with some leadership
on ESG (environmental, social, and corporate governance) issues," EIRIS concludes. However, "There
are significant differences in the extent to which companies are on track to tackle the broad
sustainability challenges they face."
In the US in particular, according to the report,
"There are some excellent examples of strong corporate leadership on sustainability… However, there
have been some levels of anxiety about corporate social responsibility (CSR)/sustainability
disclosure amongst US companies." Of the 50 largest companies by market capitalization, only three
US-based companies—Intel, Merck, and Schlumberger—received a grade of B.
Intel, which is
one of the relatively rare US-based companies to link executive compensation to sustainability
goals, was cited for its sustainability efforts in the Ceres report as well. Apple, on the other
hand, received a grade of D from EIRIS, "Amongst the worst performers of the technology hardware
and equipment sector."
Four European companies—all of which are in the pharmaceutical
sector and "provide products and services with a social or environmental benefit," according to
EIRIS—received a grade of A.
EIRIS notes that according to the definition of
sustainability articulated in the Brundtland report—"development that meets the
needs of the present without compromising the ability of future generations to meet their own
needs"—some industry sectors, notably oil and gas, are inherently unsustainable. While some
companies in the extractives sectors have policies addressing climate change, human rights and the
environment, "many more show negative performance on the ground," EIRIS found, including breaches
of international conventions.
Yet that companies in industry sectors traditionally faced
with pervasive ESG challenges can outperform is demonstrated by the top ranking awarded to Puma, a
personal goods company with a far-flung supply chain.
ESG risks in the personal goods
sector include "legal, regulatory and reputational concerns associated with environmental impacts,
brand perception and human rights risks particularly with respect to supply chain practices,"
according to EIRIS. Puma has demonstrated significantly improved environmental performance; has
leading supply chain policies and disclosure; and practices meaningful stakeholder engagement.
Not one of the top ten global sustainability leaders identified by EIRIS is located in the US.
Investors, EIRIS concludes, "need to consider not only traditional financial risk factors,
but also performance against the full range of material ESG issues – not just environmental – in
understanding sustainability performance and how these factors are integrated into a company's
business strategy." Because of their long-term investment horizons, asset owners in particular
should fully understand the sustainability risks and opportunities included in their portfolios.