2015 Sustainability Managers Market Survey

New York, NY  | April, 2015

GOVERNANCE & ACCOUNTABILITY INSTITUTE  in partnership with ISOS GROUP

ABOUT THE SURVEY:

The objective of this engagement was to gain a better understanding of the challenges faced by, and future needs of the corporate sustainability management community in the United States. We succeeded in obtaining input from just over 100 sustainability managers at corporations across the country in January 2015.The following identifies five (5) key revelations that surfaced in reviewing responses from sustainability managers within our combined networks of ISOS Group, ISOS Center for Social Responsibility, and Governance & Accountability Institute (G&A). Though some of our findings may not be a surprise, they serve to confirm the current challenges faced by sustainability managers.More information about this survey's collection, analysis, and results may be obtained by contacting ISOS or G&A.

REVELATION #1: You are not alone

Time and time again, we hear, “but our team only consists of a brave 1 or 2,” from multinationals with annual revenues equal to some nations. This sentiment was proven by our survey results to be more common than not. In general, we found that the majority of those sustainability managers who responded, were organized into small teams of less than 5 people – often juggling multiple responsibilities and led by a passionate, fearless leader reporting directly to an executive committee.

REVELATION #2: Sustainability professionals are magic makers!

There's a popular saying -- "You’re not a true sustainability professional unless you know how to pull a rabbit from a hat." Challenges expressed by respondents included difficulty with employee engagement, lack of internal communication, resource availability, and the strain of conflicting interests present moderate challenges to the sustainability managers who responded to our survey. Respondents also feel that one of the most important challenges in tackling these tasks are what they perceive to be a lack of internal support from the C-Suite and Board level decision-makers. Each year, sustainability managers describe an uphill battle to prove the business case, raise the bar and educate management and peers along the way. These challenges are punctuated by a lack of resources, the inability to properly measure return on sustainability investments (ROI), and limited internal buy-in. The situation may be turning in the favor of sustainability managers in the months ahead as more supply chain pressure results from questions (and demands) raised by major customers captures the attention of senior managers. Also, a rising number of asset owners and their managers are adopting sustainable investing approaches with emphasis on analysis of ESG performance indicators, which will result in CEOs, CFOs, investor relations officers and others making serious attempts to meet investor expectations.

REVELATION #3: Money does make the world go around.

Sad, but true – sustainability managers may see hesitancy to change unless the bottom line is involved. While most respondents expressed a lack of internal buy-in in the previous question, interest in sustainability from Investor Relations (IR) departments seems to have increased over the over the last 5 years. Paradoxically, the limited number of questions received from investors about corporate sustainability remains a challenge in making the internal investor relations case. Why Investor Relations specifically? These departments, too, are very often resource-constrained, with a very small number of professionals. The general comment by IR officers is that until now, very few investor contacts asked "sustainability questions." Companies are disclosing important metrics and narrative on reduced costs, increased efficiency, product / service innovation, competitive advantages, more engaged employees, new opportunities, lower risk, and lower environmental and social impacts -- all key ESG performance indicators, but not necessarily labeled so. Bloomberg terminals (300,000 in use worldwide) carry extensive data sets about corporate ESG performance on 4,000+ companies, and this is the fastest-growing feature of the Professional Investment Service ("the Bloomberg"). This is an important factor in providing ESG information to analysts and asset managers -- which is having an increasing impact on corporate ESG disclosure. A rising demand for information for ESG disclosures from investors are considered to be the fuel needed to elevate sustainability in the corporation, and mobilize IR teams and the senior managements they report to (such as CFOs and CEOs). This trend is beginning to accelerate. The US Social Investment Forum's (SIF) latest survey of the US capital markets found that 1 out of every 6 dollars is now incorporating ESG into their decision making processes. This is up from 1 out of 11 in their previous survey 2 years ago. IN our conversations we see the IR departments increasingly focusing on sustainability in the years to come and will watch this trend closely.

REVELATION #4: Reporting is not passé.

Corporate Sustainability Reporting is not likely to lose traction any time soon. In fact, approximately 72% of the S&P 500 report on ESG topics and issues as of the beginning of 2014-- the "non-financials" -- and that is a steep increase from previous years (20% in 2011; 53% in 2012). Due to increased attention on the critical issue of "materiality" in disclosure and reporting, organizations are expanding the breadth of content (narrative and data sets) to focus more on "what matters" most within their industry. Frameworks such as CDP, GRI, SASB and others are increasingly producing sector specific guidance in response. The top sustainability activities among organizations polled for the next financial year are publishing a sustainability report, applying the GRI framework, engaging with stakeholders, completing a materiality assessment and integrating more sustainability info into the annual financial report. In addition, the largest changes in planning from the previous year to the next year are companies beginning to consider applying SASB metrics, exploring integrated reporting through the International Integrated Reporting Council (IIRC) framework, and beginning to assure the data in their reports by third party assurance providers.

REVELATION #5: Some Stakeholders Matter More Than Others...

As sustainability managers, a key question to ask is which stakeholder groups do we get the most value from engaging with? Though we regularly advise organizations to engage with as broad a universe as possible, the simple truth is that certain stakeholder groups have more impact on the bottom line. Customers and employees ranked at the top of the list as many would expect, as without these two important stakeholders the business would cease to exist. When customers are happy they purchase more, and they tell their peers about their great experiences. Employees that are treated well and feel valued are more likely to work harder, stick around and treat customers better. Surprisingly regulators, NGOs and the media weren’t considered the most important stakeholder to any of CSR managers that we surveyed. Although they are not ranked as the most valuable to engage with, positive public perception in the media and productive relationships with the regulator and the NGO community can generate real returns when done effectively. In considering the responses to our other survey questions, internal communications and engagement would be strengthened if each functional unit better understood the value of sustainability. How would the Board of Directors, supply chain partners, communities or government entities benefit from better communications channels with the sustainability team? These are important considerations for the future. Effective corporate sustainability is a collaborative effort and all functions, business units and stakeholders need to play a role. Integration doesn’t only occur through reporting mechanisms, but through relationships.

We were not surprised with some of the responses, but we could say that we were disappointed at the apparent lack of progress that some respondents expressed. It is clear that many US corporations are limiting the resources made available to the sustainability team, even as the importance of sustainability increases. Across the enterprise managers are feeling the pressure of cost-cutting, reduced resources (such as through budget- and cost-cutting) and lack of internal attention paid to sustainability efforts. There are forces at work that could change these conditions in the months ahead; our next survey may demonstrate the changes taking place. From top down (suppliers, employees, major customers, service providers, investors, media and regulators) there is increased attention paid to ESG performance. Traditional investors (asset owners, such as pension funds and the managers they hire) are applying ESG approaches in the decisions they make. Governments in various countries are mandating sustainability or CSR reporting. Within industries and sectors, peers are reporting and the lack of adequate effort and accompanying reporting is creating gaps -- identifying "leaders and laggards" among industry and investing peers. But -- as the survey respondents indicated -- making the business and investing case internally, to generate necessary resources and to ignite employee interest, is a continuing challenge at many US-based companies. As part of the mission of G&A Institute and ISOS Group we will continue to raise the level of awareness of sustainability through our research, writing, speaking engagements, training and services. We can help you to provide the "ammunition" needed internally to make the business case, and to accelerate the benefits that being a leader in sustainability can bring you, your company, and your stakeholders. Thanks for being a part of our network, and please stay in touch let us know how we can help!