Investors: Here’s What a Sustainability Leader Looks Like
I spend my days thinking about how companies can use their market power to improve our environment and health. Companies are motivated to lead on sustainability for a number of reasons including cost savings, risk management and improved reputation. Additionally, the stakeholders companies most want to impress are their customers and shareholders, which studies show care deeply when it comes to sustainability.
In fact, in a 2017 Morgan Stanley survey, 75 percent of investors said they are interested in sustainable investing and 71 percent believe companies with leading sustainability practices may be better long-term investments. Given this, companies are increasingly talking about their sustainability efforts.
An example of such a company is Walmart, who recently hosted its annual shareholder meetings in the form of a formal business meeting and an event for associates and shareholders. As a sustainability professional, I was pleased to see both meetings highlight sustainability as a key strategy for Walmart moving forward.
In the formal business meeting, Walmart’s CEO Doug McMillon talked about Walmart’s goal to be the most trusted retailer by saying “earning trust also means creating shared value for business and society.” He mentioned one way Walmart is accomplishing this is with Project Gigaton, an initiative with suppliers to reduce emissions in the supply chain by 1 billion metric tons by 2030.
The chairman of Walmart Inc.’s board of directors, Greg Penner also highlighted sustainability in his opening remarks to associates and shareholders: “We’ve seen boldness work in our company before and often in ways few predicted. One of the most important and meaningful examples is our work to solve big social and environmental challenges in our world.”
After tuning in to Walmart’s meetings, I decided to review the semi-annual report for my Roth IRA, which I started a dozen years ago. I’m a lazy investor, but initially when I began investing, I researched my decisions intensely and tried to find the most responsible investment options available. In graduate school I even took a course that taught me the power and importance of investing in companies that are socially and environmentally responsible.
However, what I found in my report was disappointing. The list of “sustainable” companies I’ve invested in aren’t the sustainability leaders I expected. Instead, the list includes companies who aren’t “vices” like alcohol, tobacco, guns, etc.
This reinforced something for me as a customer, shareholder and EDF employee: if we want to continue to see companies lead on sustainability, then we need the investor community to do a better job to both assess sustainability performance and recognize the companies who are truly leading. But what does it mean for a company to truly lead on sustainability?
As someone who has personally helped sustainability leaders like Walmart leverage their power to drive environmental innovation, leadership and advocacy up and down the supply chain, I’ve figured out what true sustainability leadership in the retail sector entails. Leadership looks like this:
1) Public-facing science-based sustainability goals and progress reporting. This includes using tools like CDP, a global disclosure system that enables companies, cities, states and regions to measure and manage their environmental impacts.
2) A safer chemicals policy (see our Behind the Label resource).
3) Science-based targets for greenhouse gas emissions that include rigorous engagement of the supply chain to address scope 3 emissions.
4) Promoting jurisdictional approaches to end deforestation.
5) Addressing on-farm impacts to water, soil, habitat and climate.
As investors continue raising up sustainability leaders, I hope to see more and more companies in my personal investment portfolio join the ranks of these leaders. I’m also encouraged by my colleagues on the EDF+Business Sustainable Finance team who are here to help the financial sector and investors find and scale innovative financing solutions that foster economic and environmental prosperity.