By now it's pretty well understood that strong sustainability performance positively influences financial performance. And investors are taking notice as well.
In a recent report, "Corporate Progress on the Ceres Roadmap for Sustainability," Ceres, a non-profit sustainability advocacy organization, found that while 69% of companies call on their suppliers to effectively manage their environmental and social impacts, only 34% actually provide tools and resources to incentivize action.
Furthermore, compared with the 64% of the companies with commitments to reduce greenhouse gas emissions, only 36% set time-bound, quantitative targets — and only a quarter of those targets work toward reducing emissions by at least 25% by 2020.
“We have reached a turning point," says Mindy Lubber, CEO of Ceres.”It is no longer just about raising the ceiling. It is about lifting the floor.
“The time has come for bold and scalable solutions, not just from a few leading companies, but from companies of all sizes and across all sectors who need to transition from making commitments to taking concrete actions,” Lubber adds. “We must work together to build a more equitable and prosperous world. This will require all investors and companies to take the higher road toward a sustainable future.”
The following are a few of the key findings of the report:
1) Materiality matters, but its role in decision-making remains unclear.
Driven by investor calls to disclose the most material sustainability risks — including climate change, natural resource scarcity, diversity and inclusion, among others — more companies are taking steps to prioritize the environmental and social issues of greatest importance. By defining what is critically important, companies can direct more time and resources to the issues that matter most to their businesses and stakeholders. Companies increasingly understand that materiality assessments matter — but how they use this information to guide strategic planning and decisionmaking remains unclear.
- 32% of companies conduct materiality assessments — a huge leap from just 7 % in 2014.
- 6% of companies publicly 6% disclose how materiality assessments guide strategic planning and decisionmaking.
2) Executive-level sustainability oversight improves, while board oversight plateaus.
Climate change, global water security, human rights abuses and inequality present new and evolving challenges that both executives and corporate boards must consider as part of their fiduciary duty. Although accountability for these material issues has increased among senior executives, oversight among corporate boards has not kept pace.
- 65% of the companies assessed hold senior-level executives accountable for sustainability performance — but only 31% of companies formally integrate sustainability into board committee charters.
- 65% hold senior-level executives accountable for sustainability performance — a meaningful increase from 42% in 2014.
- 8% link executive compensation to sustainability issues beyond compliance (e.g. diversity, GHG emissions, water management) — an increase from the 3% doing so in 2014.
3) Employee engagement can unlock sustainable innovation and drive talent retention, but not enough companies recognize training as the key.
Employees are an under-utilized sustainability resource. Every day, they make decisions that affect corporate sustainability performance, and often have the most successful and innovative ideas for improving sustainability. Employee training builds skills and changes behaviors, and the potential for sustainability innovation and impact can be compounded by job-specific training.
- 38% of companies provide at least some training for employees on sustainability topics.
- 3% provide company-wide 3% and job-specific training on relevant sustainability issues.