July 14, 2012
ICCR and the Business Case for Sustainability
by Robert Kropp
For the first time, members of the Interfaith Center on Corporate Responsibility engage in
corporate dialogues more often than submit shareowner resolutions, reflecting the growing awareness
of the business case for corporate sustainability measures. Second of a two-part series.
Launched more than 40 years ago, the Interfaith
Center on Corporate Responsibility (ICCR) was a pioneer of modern shareowner activism. Its
members were instrumental in the divestment campaign that helped end apartheid in South Africa, and
the shareowner resolutions they have filed over the years, calling for corporate attention to
environmental, social, and corporate governance (ESG) issues, number in the thousands.
So what is one to make of the fact that for the first time, the corporate dialogues
engaged in by ICCR members outnumber the shareowner resolutions filed? Thus far during this proxy
season, ICCR members have engaged in 170 dialogues and filed 160 resolutions.
Executive Director Laura Berry, the trend can be attributed primarily to two factors: increasing
support from mainstream investors for resolutions addressing ESG issues, and more widespread
corporate recognition of the business case for sustainability.
"The number of mainstream
investors that are voting with activist shareholders like ICCR has been going up in orders of
magnitude," Berry told SocialFunds.com. "It used to be we'd get excited if we got three or five
percent of the vote. Now we really expect to get 30 or 40 or 50 percent."
"When you start
to see such big numbers around issues such as political accountability and executive compensation,
it means that this is making sense to a much larger audience," she continued.
A look at
this year's shareowner resolution
tracker from Ceres makes an emphatic case
that increasing numbers of mainstream investors are supporting resolutions addressing
sustainability. According to Ceres, resolutions addressing environmental and social issues are
consistently gaining more than 30%, and often more than 40%, of shareowner support.
almost half of the resolutions coordinated by Ceres—many of which were co-filed by ICCR
members—were withdrawn following successful engagement. Clearly, more companies are seeking to
avoid the negative publicity that can accompany high shareowner votes. Companies also recognize
that most if not all resolutions addressing ESG issues are attracting far more than enough support
to exceed the minimum vote required by the Securities and Exchange Commission (ESG) for re-filing
"How do you take 650 resolutions without much dialogue, and distill them down
to 150 with much richer dialogue and get ten times as may mainstream investors voting with you?"
Berry asked. Even if companies want to avoid the negative publicity associated with high shareowner
votes, the number of withdrawn resolutions documented by Ceres, as well as the dialogues engaged in
by ICCR members, suggest that many are now recognizing a business case for sustainability.
"The business case for sustainability has become more specific," Berry said. "It's become more
useful for companies, and they're starting to get the point. It no longer requires a belief system,
because it's become meaningful for companies' business practices. And ultimately, all of our work
is about changing how companies do business."
As an example, Berry cited recent
findings by the Hudson Institute, a conservative think tank. Surveying the food and beverage
sector, the Institute's Hank Cardello concluded that consumer packaged goods (CPG) corporations
with above-average sales of better-for-you (BFY) products had larger sales increases over a
five-year period, and offer superior investment opportunities.
"Companies can make money
while selling healthier products," Cardello wrote. "Shareholders have reason to nudge companies
they invest in to pay more attention to selling more BFY items as this may lead to higher returns
on their investment."
ICCR members have been engaging with food and beverage companies on
issues of health and childhood obesity for years. Berry said of the Institute's recommendations,
"Not only is it the right thing to do, there is a profound business case for doing it as well. If
you look through this lens you start to discover business practices that actually give you an
advantage in the marketplace."
Given ICCR's long experience in shareowner action, then, it
is not surprising that the organization's members are taking a leading role in corporate dialogues
that have become increasingly effective.
"In the corporate engagement and advocacy arena,
longstanding engaged shareholders like ICCR members, who know how to run a corporate dialogue and
have a profound sense of what the issues are and what the steps to get there are, are now acting as
curators," Berry said. "We're translating resolutions into business cases, justice cases, and
sustainability cases, and developing the language for those conversations in important ways."
She continued, "We're playing a bridge-building role, because we're coming to this from the
perspective of moving companies toward a better way of doing business. We're in boardrooms because
we believe companies have the power to make the changes to build a more just and sustainable
That the business case has gained widespread acceptance from mainstream investors
and corporations is all the more remarkable when one realizes that the transition has occurred in
the absence of legislative or much regulatory action. Using the guidance on climate risk disclosure
issued in 2010 by the SEC as an example, Rob Berridge of Ceres suggested to SocialFunds.com, "The
work investors did prior to that got companies to recognize climate change as a risk, which made it
easier for the SEC to issue its regulatory statement."
Nevertheless, much remains to be
done on the regulatory front in order to embed climate change mitigation and other sustainability
concerns into the nation's economy. As Berry observed, "Corporations cannot do this by themselves,
and corporations are still very much biased toward profits. You contain that bias in a civil
society by creating and enforcing rules."
'"What suffers in the ideological divide in
politics right now is the ability to regulate and enforce," she said. "If you have regulations like
Dodd-Frank that are trying to become real functioning parts of the system, but you have no money to
enforce them—like the ridiculous underfunding of the SEC, for example—that's a huge problem."