Calvert Files 65th Corporate Sustainability Reporting Proposal
Firm continues to urge companies to improve their ESG risk-management reporting and transparency
Sustainability disclosure has been a core focus of Calvert's shareholder advocacy for nearly a decade. At the close of the 2012 proxy season, Calvert filed its 65th shareholder proposal requesting companies—across multiple sectors—to issue sustainability reports.
Why Investors Should Care
Calvert believes that sustainability reporting is a critical business tool. Corporate sustainability reports measure, evaluate, and disclose a company's environmental, social, and governance (ESG) risks and opportunities that are material to long-term corporate success.
In our view, more transparent and comprehensive sustainability reporting may lead to a number of benefits, including:
- Corporate leaderships' increased understanding and management of key sustainability business risks and opportunities. This can contribute to stronger ESG performance, creating greater value for companies and shareholders.
- More effective internal controls for anticipating, managing, and reporting on operational, regulatory, and reputational risks and opportunities.
- Stronger potential employee retention and brand reputation, and a venue for publicizing the company's best practices.
- Greater openness and trust between companies and key stakeholders, such as employees, customers, communities, investors, suppliers, and governments. As sustainability reports often serve as platforms for engagement between companies and key stakeholders, they can help build strong relationships based on transparency and trust.
Companies are also facing mounting pressure from their competitors to disclosure sustainability information. According to a recent study by KPMG, 95% of global fortune 250 companies now report on their corporate responsibility activities. This represents an increase of more than 14% since the previous survey in 2008.1
Some Notable Wins in Recent Years
Williams-Sonoma Inc.: Earlier this year, Williams-Sonoma launched its first ever Corporate Responsibility Report in response to Calvert's 2011 shareholder proposal.Â As a retailer of kitchenware and furniture through its Pottery Barn and West Elm brands, the company faces a number of ESG risks. The company's new report provides investors with a clear sense of Williams-Sonoma's primary sustainability challenges—namely sourcing and product design and safety—and the company's approach to managing these risks.
Ann Inc.: In the 2010 proxy season, Calvert filed a sustainability proposal with Ann Inc., owner of Ann Taylor and LOFT brands.Â Given the company's exposure to social risks within its supply chain and its minimal ESG disclosure at the time, Calvert requested that the company take steps to enhance its transparency. Ann Inc. responded with Ann Responsibly, which outlines the company's strategy, systems, and approach to labor and human rights risks, as well as the company's environmental initiatives.
Southwest Airlines: After filing two consecutive shareholder proposals with Southwest Airlines in 2008 and 2009, the company agreed to issue a sustainability report. As a company with significant environmental risks, investors are now better positioned to evaluate Southwest's fuel efficiency efforts and the company's potential exposure to carbon regulation. Southwest interestingly now produces a "One Report," which combines its financial and corporate responsibility reporting using the Global Reporting Initiative guidelines—an internationally accepted benchmark for corporate sustainability reporting. This step demonstrates that the company thinks of and manages these issues in the context of its overall business, which is critical to long-term success.
The 2012 Proxy Season
In 2012, Calvert identified a number of companies across different industries that we believed were failing to disclose sufficient sustainability information. After we received insufficient responses to our letters requesting more ESG information from these companies, Calvert filed sustainability reporting proposals with PF Chang's China Bistro, Gentex Corporation, Cleco Corporation, Garmin Ltd., Crocs Inc., and John Wiley and Sons Inc.
A combination of good timing, a compelling business case, and constructive engagement with corporate leadership led to successful withdrawals of our proposals from all of the companies but two—Gentex and Cleco. As part of our withdrawal agreements, Calvert expects to see enhanced information in future reports that will help investors make more informed investment decisions. This includes greater corporate transparency regarding the identification of material ESG risks, in combination with appropriate policy frameworks and management systems to address these risks. Calvert's proposals with Gentex and Cleco, like similar resolutions that have gone to a vote before all shareholders in previous years, received strong support at these companies' general annual meetings. 34% of Cleco's shareholders supported the request for a sustainability report, while 32% of Gentex's shareholders voted in favor of the proposal.
As of 9/30/12, accounts managed by Calvert Investment Management, Inc. held securities issued by Williams-Sonoma Inc., Ann Inc., Southwest Airlines, Gentex Corporation, Cleco Corporation, Garmin Ltd., Crocs Inc., and John Wiley and Sons Inc. Calvert may or may not still invest in, and is not recommending any action on, any companies listed.
Calvert Investment Management, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814
1. KPMG International Survey of Corporate Social Responsibility Reporting 2011