Report Says Sustainability Improvements Needed

Too many companies are only taking incremental steps to address pressing issues in the field.

While there are pockets of sustainability leadership in the U.S. business community, too many companies are only taking incremental steps to address pressing issues in the field that could impact their bottom lines and the future of the environment and economy, a report released Wednesday by Ceres and Sustainalytics found.

The report, which assesses the sustainability performance of 613 of the largest publicly traded companies in the U.S., tracks corporate performance against 20 key metrics, including governance, disclosure, greenhouse gas emissions and labor standards, and identifies sustainability trends across key sectors.

“Given the acceleration of environmental and social challenges globally — floods, droughts and workplace tragedies — most U.S. corporations are not keeping pace with the level of change,” said Mindy Lubber, president of sustainability advocacy group Ceres. “Those that step up to the challenge will be best positioned to thrive in the rapidly changing, resource-constrained 21st century economy.”

RELATED CONTENT: WWD Research Roundup >>

The report, “Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability,” said more than two-thirds of the companies evaluated have activities in place aimed at reducing greenhouse gas emissions, but only 35 percent have established time-bound targets for doing so. The U.S. Supreme Court on Tuesday upheld the authority of the Environmental Protection Agency to regulate emissions from coal plants that drifts from 28 Midwestern and Appalachian states to the East Coast.

The report said a growing number of companies are incorporating sustainability performance into executive compensation packages — 24 percent of firms link executive compensation to sustainability performance, up from 15 percent in 2012. The retail and health-care sectors stood out for their minimal commitment to sustainability-management accountability. Of the 35 companies in the retail sector, 83 percent were graded in Tiers 3 and 4, with one notable exception being Wal-Mart Stores Inc., which was the only company in the retail sector graded Tier 1 for this expectation.

More companies are also setting clear sustainability standards for suppliers, with 58 percent having supplier codes of conduct that address human rights compared with 43 percent in 2012. Only 31 percent of companies have formal human rights policies or statements for their employees and just 26 percent have policies or statements that cover an employee’s right to freedom of association and collective bargaining. Among 35 retailers, only Best Buy, Costco, CVS, Nordstrom and Sysco have human rights policies, and only CVS recognizes its workers’ right to freedom of association.

PVH Corp. was spotlighted for its supplier code of conduct that’s based on the International Labor Organization’s Core Conventions and the United Nation’s Framework on Business and Human Rights. The report noted that PVH, in response to the Rana Plaza building collapse in Bangladesh, was the first U.S. company to sign the Accord on Fire & Building Safety.

Additional innovation is needed to drive sustainable products and services, the report surmised. Of the 419 companies evaluated for this expectation, 14 percent have formal programs to invest in and promote sustainability products and services compared to 10 percent in 2012. Nike Inc. was cited for integrating sustainable design across its product portfolio, including innovations such as the FlyKnit running shoe that creates two-thirds less waste in production than its counterparts.

In the area of renewable energy, 37 percent of companies have implemented a program, while only six percent have quantitative targets to increase renewable-energy usage. The retail sector also received poor grades in this area. Only 20 percent of companies fell into Tiers 1 and 2, although Target Corp. and Staples Inc. were among the top performers for this expectation. Target, for example, is aiming to have 75 percent of its U.S. buildings Energy Star certified by 2016. Gap Inc. and Nike were also cited for their water-efficiency programs.