Corporations may say they’re concerned about environmental and social issues, but in reality there may be more community service or just lip service done by some, according to a new study by Calvert Asset Management Company, Inc. and The Corporate Library.
The study, Board Oversight of Environmental and Social Issues: An Analysis of Current North American Practice, finds that, while 65 % of S&P 100 index firms and almost a fifth of Russell 1000 index firms have a corporate responsibility-related board committee, compared with only 4% of companies in the Russell 2000 index, “companies often appear to view environmental and social issues in philanthropic or marketing terms, rather than as fundamental business risks or competitive advantages.”
Annalisa Barrett, co-author of the survey and senior research associate for The Corporate Library, an independent corporate governance research firm, said in a statement, “Boards are increasingly taking on responsibility to oversee their companies’ risks and opportunities. However, the current study indicates that much remains to be done to encourage more frequent implementation of board-level responsibility for sustainability and to increase the sophistication of boards’ oversight where it already exists.”
Her co-author, Mike Lombardo, senior sustainability analyst and manager for Calvert Asset Management Company Inc., said, “Environmental and social issues must gain even more consistent and conscientious attention as a set of factors, issues and risks that can make or break shareholder value and the fundamental prospects of the enterprise. We believe that a report examining such oversight is especially timely in a year when major companies have faced performance breakdowns—each with fatal consequences for customers or workers as well as damage to the reputations of these companies—that stronger board oversight as well as more stringent management may have helped to avoid.”
Among the findings in the study:
- Many companies do not cover corporate social responsibility issues at board level
- Many boards do not have specified responsibility for social issues in their charters
- Many of those who have do not seem to have interaction on a broader basis with corporate management to ensure that these issues are dealt with
- Women are disproportionately represented on social issue boards
- Social issues lack director involvement.
Also of concern is the apparent disconnect between mandates (for boards that have them) and actions, or the way actions are carried out. The study cites a number of instances in which there is little accountability or traceability attached to the social/environmental mission: “[T]here are instances where companies identify environment as a material issue to the company, but fail to specifically cite environment as part of the board’s mandate or responsibility. For example, in Target Corp’s 2009 Corporate Responsibility Report, the company states: ‘Our research shows that being a responsible steward of the environment is one of the most important issues that defines Target’s corporate reputation.’ Unfortunately there is no indication that Target’s Corporate Responsibility Committee monitors the company’s environmental impact or work.”
Enumerating a number of aspects of the issue as offering the potential for further research, the study makes a number of recommendations for both boards and investors.