GAINING GROUND: CORPORATE PROGRESS ON THE CERES ROADMAP FOR SUSTAINABILITY 2014 A JOINT REPORT BY CERES AND SUSTAINALYTICS Explore additional !ndings at www.ceres.org/gainingground Acknowledgements REPORT PARTNERS ACKNOWLEDGEMENTS Ceres is a non-pro!t organization advocating for sustainability Ceres and Sustainalytics would like to acknowledge the following leadership. We mobilize a powerful network of investors, people for their leadership in the development of this report: companies and public interest groups to accelerate and expand From Ceres: Kristen Lang, Andrea Moffat, Peter Zeutlin, the adoption of sustainable business practices and solutions to Amy Augustine, Natasha Scotnicki, Mary Gardiner, Veena Ramani, build a healthy global economy. Peyton Fleming, and Aaron Pickering. Sustainalytics is an award-winning provider of environmental, From Sustainalytics: Azadeh Sabour, Zachary Paris, social, and governance research and analysis. We support Andrei Apostol, and Simon MacMahon. investors around the world with the development and implementation of responsible investment strategies. Sustainalytics This research was funded in part by the Gordon and Betty also partners with institutional investors that integrate ESG Moore Foundation and Humanity United. information and assessments into their investment decisions. SPECIAL THANKS DESIGN Ceres and Sustainalytics also wish to extend special thanks Patricia Robinson Design to those colleagues that provided support, insightful feedback and guidance in the development of this report: PRINTER From Ceres: Mark Allegrini, Dan Bakal, Brooke Barton, Recycled Paper Printing Andrew Logan, Kevin Maley, Alba Muñoz Saiz, Katrina Stanislaw, Ryan Salmon, Brian Sant, Kirra Stutchbury, John Weiss, and Rob Wittenberg. PHOTOS iStockphoto (iStock.com), Shutterstock (www.shutterstock.com), From Sustainalytics: The Sustainalytics global analyst team, To view the Full Report go to: Thinkstock (www.thinkstockphotos.com) Bob Mann, Esther Hougee de Vet, Heather Lang, www.ceres.org/gainingground Martijn Van Schaik, Irene Sosa, Greta Fearman, Kevin Ranney, and Max Zehrt. The opinions expressed in this report are those of Ceres and Sustainalytics and do not necessarily re"ect the views of any of FOR MORE INFORMATION, CONTACT: our clients, donors or member organizations. Ceres and Sustainalytics do not endorse any of the organizations, which are used Andrea Moffat as examples or referenced in the report. This publication has been prepared for general guidance on matters of interest only, Vice President, Corporate Programs and does not constitute professional advice or investment advice. The information herein re"ects the situation as of the date Ceres of the report and is thus subject to continuous modi!cation. The information herein was obtained from corporate and third- [email protected] party sources that are considered to be reliable. Though the greatest possible care was taken in the research and analysis, no representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained Simon MacMahon in this publication. Ceres and Sustainalytics do not accept any liability for damage arising from the use of this report. Global Director, Advisory Services Sustainalytics [email protected] 2 Table of Contents 04 LETTER FROM THE PRESIDENTS 37 PERFORMANCE 05 EXECUTIVE SUMMARY 38 Operations 05 Corporate Progress on the Ceres Roadmap for Sustainability 40 Greenhouse Gas Emissions and Energy Ef!ciency 06 Key Findings 43 Facilities and Buildings 45 Water Management 09 INVESTING IN SUSTAINABLE CORPORATIONS 47 Human Rights 11 Methodology Snapshot 49 Supply Chain 12 TAKE ACTION 51 Policies and Codes 54 Align Sourcing Practices 13 GOVERNANCE FOR SUSTAINABILITY 56 Engaging Suppliers 15 Board Oversight 58 Measurement and Disclosure 17 Management Accountability 19 Executive Compensation 60 Transportation & Logistics 20 Corporate Polices and Management Systems 61 Transportation Management and Modes 23 STAKEHOLDER ENGAGEMENT 63 Products & Services 25 Focus Engagement Activity 65 Design for Sustainability 26 Substantial Stakeholder Dialogue 27 Investor Engagement 67 Employees 68 Training and Support 29 DISCLOSURE 31 Standards for Disclosure 70 METHODOLOGY 32 Disclosure in Financial Filings 70 Methodological Approach 34 Vehicles for Disclosure 71 Methodology Improvements 35 Veri!cation and Assurance 72 Sustainalytic’s Standard Research Process 73 What We Measured: Indicator Mapping www.ceres.org/gainingground 3 Letter from the Presidents In 2010, Ceres released The 21st Century Corporation: The Ceres In some cases, companies have substantially accelerated and Roadmap for Sustainability with 20 expectations in the areas of broadened their sustainability efforts. These companies are providing governance, stakeholder engagement, disclosure and performance that, real leadership and demonstrating that sustainability isn’t a luxury, if met, would transform companies into truly sustainable enterprises. but rather an essential strategy for building long-term shareholder value. Unfortunately, many We called it a “roadmap” not only companies are just beginning because it provides guidance, their sustainability journeys. but also because we understood In some cases, companies have substantially It is imperative that many more that sustainability is a journey accelerated and broadened their sustainability companies shift from being for any company. The Roadmap reactive to proactive in embracing is a resource to help companies efforts. These companies are providing real the sustainability challenges that visualize and re-engineer leadership and demonstrating that sustainability lie ahead. The need for investors, themselves for success in a businesses, NGOs and other world beset with unprecedented isn’t a luxury, but rather an essential strategy stakeholders to fully engage in environmental and social for building long-term shareholder value. the essential work of creating a challenges that threaten the global sustainable economy has never economy and local communities. been more urgent. In 2012, Ceres and Sustainalytics partnered to evaluate how 600 There is a world of opportunity that awaits businesses that act with U.S. companies were performing against the Roadmap expectations. full vigor in preparing for the complex environmental and social The result was The Road to 2020: Corporate Progress on the Ceres challenges we face. Those that embrace the expectations of the Roadmap for Sustainability. We found that while there were small Roadmap will be best positioned to thrive in the rapidly changing, pockets of corporate sustainability leadership, the vast majority of resource-constrained 21st century economy. companies were taking only small, incremental steps. Sustainability efforts were generally inconsistent and peripheral when they needed to be central to the company’s mission and integrated across all aspects of a company’s business. We concluded that, “sustainability has yet to gain traction at anywhere near the scale and speed needed if the Roadmap expectations are to be widely met by 2020.” Mindy S. Lubber Michael Jantzi President and CEO of Ceres CEO of Sustainalytics In the context of today’s intensifying sustainability challenges we are now unveiling a second evaluation of how 613 U.S. companies are performing on the Ceres Roadmap. We found that many companies are gaining ground with modest overall improvement. But given the acceleration of environmental and social challenges globally—"oods, droughts and workplace tragedies, among them— corporate actions and solutions are not keeping pace with the required level of change. www.ceres.org/gainingground 4 Executive Summary CORPORATE PROGRESS ON THE CERES ROADMAP FOR SUSTAINABILITY The scientific and economic realities facing corporations today have shifted substantially from even just a decade ago. From the risks posed to operations and the supply chain due to a changing climate, to an increasingly resource-constrained world with a growing population, to mounting human rights abuses—finding solutions to these business challenges will require collaboration, innovation and transformation. This report, Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability, evaluates how well 613 of the largest, publicly traded U.S. companies are integrating sustainability into their business systems and decision-making. The report— a collaboration between Ceres and Sustainalytics—assesses corporate progress across the four strategic areas !rst outlined in 2010 in the Ceres Roadmap for Sustainability: Governance, Stakeholder Engagement, Disclosure and Performance. Ceres and Sustainalytics last evaluated these companies in the 2012 report, The Road to 2020, where companies were placed into one of four performance “tiers.” Two years later, the Gaining Ground report reveals that while there is progress being made by an increasing number of companies and sectors, we are still not seeing the speed of change that is required—or the scale of innovation that is possible. Incremental progress in tackling global climate change and other sustainability threats is simply not enough. GAINING GROUND: CORPORATE PROGRESS ON THE CERES ROADMAP FOR SUSTAINABILITY www.ceres.org/gainingground 5 KEY FINDINGS Leadership and Responsibility Starts at the Top Engagement with Stakeholders is Critical to Success The ultimate responsibility for a company’s direction, From investors to the companies’ employees, more corporations accountability