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Blog | Tuesday October 24, 2017

New BSR Report: The Future of Sustainable Business

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On the occasion of BSR’s 25th anniversary, we have taken the opportunity to consider our accomplishments. With our member companies and other partners, we are proud to have imagined and worked toward a new vision of business that creates prosperity and fairness for all and preserves the natural environment on which we all depend.

Looking back is important; there is much to learn. But it is even more essential to look ahead: BSR, and the sustainable business movement more broadly, have always been about the future, and we must maintain that focus. This focus on what’s next is even more urgent today, when so many aspects of business, the economy, and culture are changing in profound ways.

And as we look ahead, it is clear that the time is here for a new approach to sustainable business. Many of the conditions that inspired the creation of BSR—a growing sense of resource scarcity and climate change, an increasingly interconnected world, and the rise of the purpose-driven business—have only accelerated over the past 25 years.

The need to reinvent, however, is shaped by three big developments that are creating a new context. First, business is undergoing systematic change—disruption—that is challenging every enterprise to reorient its strategy and approach. Second, we have a clear and universal roadmap for sustainable development, best expressed through the Paris Agreement on climate change and the UN Sustainable Development Goals (SDGs). Third, governance gaps—and failures—create the need for business to lead the way, often in partnership with others, if we are to achieve our shared goals.

Business as usual won’t get the job done—and sustainability as usual won’t suffice. If we are to avoid catastrophic climate change, build truly fair and inclusive economic growth, and navigate a radically reshaped world, it is time for change. Put more positively, we have within our grasp the ability to reorient business and turn the tide on climate change, deliver economic opportunity for all, and build connected societies in which all people can live in dignity and with respect.

For the companies that are addressing these challenges head on, there is the promise of remarkable innovation—not only in technology, but also in business models, partnerships, products and services, and ways of engaging consumers. What’s more, many of the new strategic imperatives for companies have the potential to bring massive improvements in sustainability. The changes that are emerging could deliver great leaps forward—through both direct and indirect means. For example, progress on climate is coming through ambitious targets and through technological innovation that is enabling a clean energy revolution, and digital payment systems have the potential for greater transparency and financial literacy for people in all corners of the world.

With these changes in mind, we believe it is time for a new agenda, new approach, and new advocacy. In other words, it is time for business and other partners to embrace new issues, new ways of pursuing sustainability, and a new—and more assertive—voice. Sustainable business leadership will increasingly be defined by how well companies approach climate resilience; inclusive growth in an era of automation; and technology, human rights, and ethics.

BSR was founded on the belief that a just and sustainable world is within our grasp, and that business is central to realizing that vision. We are as just as motivated today by this belief as BSR’s founders were a quarter-century ago. Never in BSR’s history has there been a time when the opportunity for impact has been so great, and the broad imperative for change so clear. That is a potent combination, and one that we aim to make the most of by working with you.

Today, we are excited to launch a paper that offers our thinking on where to go next. We hope this paper prompts new thinking, identifies new opportunities, and encourages you to join with us in redefining sustainable business.

It serves as an invitation to collaborate with us in the coming year to shape a new agenda, new approach, and a new voice for business that will meet our unique moment. Together, we can set a course for sustainable business, for business more broadly, and for the world.

Blog | Monday October 23, 2017

All the Ways to Follow Us at #BSR17

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Tomorrow, we’re kicking off the BSR Conference 2017 in Huntington Beach, California. Over the next three days, we’ll hear compelling stories from changemakers at companies, foundations, governments, and other organizations who are taking the lead and embracing the need to redefine sustainable business for an era of profound change and political and economic volatility. 

It all starts tomorrow evening with opening remarks from BSR President and CEO Aron Cramer, followed by a keynote speech from Former U.S. Vice President Al Gore. On Wednesday, we’ll hear from National Geographic Photographer Annie Griffiths and Microsoft’s Brad Smith, among many others. And Thursday we’ll feature a panel on Corporations and the Challenge of the Global Refugee Crisis, featuring TripAdvisor’s Stephen Kaufer, Mercy Corps’ Neal Keny-Guyer, and Mastercard Center for Inclusive Growth’s Shamina Singh, as well as a presentation from Morgan Stanley’s Audrey Choi. We’ll close the Conference with a keynote address from Planned Parenthood’s Cecile Richards.

Whether you’re joining us in person or online, here are the best ways to follow along:

1. Catch the livestream.

We’ll broadcast our plenary sessions on Wednesday and Thursday in a live video feed. Visit the livestream registration page to sign up and join in.

2. Get social.

No matter your favorite social media platform, we’ll be there:

• Twitter: We’ll live tweet nearly the entire event from @BSRnews using the hashtag #BSR17. 
  
  
  
  
   
• Instagram: Follow our Instagram account, @bsrorg, for exclusive, behind-the-scenes looks at the Conference. Post your photos using #BSR17—and don’t forget to tag us!
  
  
   
• Find out more information and join in the conversation on Facebook, LinkedIn, and Flickr.

3. Ask questions. 

We’re opening up our plenary sessions for questions from Twitter—while you’re watching our livestream, ask our keynote speakers about their experiences using #BSR17.

4. Follow up.

We’ll have videos, wrap-ups, and other content available after the event, so be sure to visit the BSR blog, our YouTube channel, and the BSR Conference website.

Single-day passes are still available, so if you’re in the area, join us! Whether you’re with us in the plenary hall or participating virtually from your desk this week, we look forward to hearing your thoughts on #BSR17.

Blog | Friday October 20, 2017

Practical Guidance from the Frontlines of the Corporate Fight against Modern Slavery

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Having worked to combat human trafficking through my roles in the U.S. government, a global NGO, and, most recently, inside a Fortune 500 company, I see momentum building on this issue in the corporate world like never before. As practitioners, we are past the stage of asking what needs to be done; we are now asking how it should be done. Answering this question will require innovation, agility, and collaboration—all strengths found in successful businesses.

My colleagues across the globe in major corporations have tremendous reach on the frontlines of the fight against modern slavery. Many of them have seen abuses and the damage done to workers firsthand, and they also have pragmatic solutions to prevent trafficking in global supply chains. Working within a company, the challenges to taking effective action to address these issues are often both internal and external.

Here are my recommendations for building an effective program to address modern slavery:

Internally

• Seek Executive Support: In creating a program, it is critical to gain leadership buy-in from the outset, with budget and resources to take the necessary first steps. 
• Never Waste a Crisis: If and when your firm is spotlighted for alleged human rights abuses, act quickly and decisively, and use the opportunity to further embed good human rights practices deep in your established management systems. 
• Identify and Celebrate Your Allies: Leverage every ally you have within your company. It shouldn’t look like you are solving the problem alone—the most sustainable solutions come when actions flow from and into traditional business functions.
• Illustrate the Issue: Be creative in explaining the human rights challenge you are facing. For example, CH2M used an infographic to show how it addressed the conditions of construction workers on engineering projects. Clear, visual communication can go a long way to helping your colleagues understand why it is time to act.
• Embrace Transparency and Flexibility: Addressing modern slavery requires transparency and humility—characteristics that may be counterintuitive to the polished image that many corporate brands aspire to project. If your innovative pilot project goes off track or has unintended negative consequences, be candid about your experience and try another tactic.

Externally

• Be Open to Feedback (Positive and Negative): It can be difficult for companies to be taken seriously by NGO advocates, and it can be disheartening to hear criticism of an approach you are working hard to execute. Don’t react defensively—recognize that your civil society colleagues have a job to do, as you have yours, and we can learn from each other.
• Collaborate with Your Peers: Join or create a pre-competitive industry coalition, like Building Responsibly, which is a global initiative of the engineering and construction industries, supported by BSR and Humanity United, to promote the rights and welfare of construction workers. Learning from other sectors, Building Responsibly is modeled after the successful initiatives that the Electronic Industry Citizenship Coalition (EICC) champions. The Global Business Coalition Against Human Trafficking (gBCAT), which BSR supports, is another example of cross-industry collaboration on human rights.
• Share Your Experiences: I recently had the privilege of joining a BSR Human Rights Working Group meeting. With more than 20 companies around the table, we reviewed ideas and strategies on how to prevent slavery in supply chains. It was energizing to see so many empowered and talented corporate professionals candidly discussing their plans and challenges as they strive to embed human rights principles in their management systems.  

In my work to combat modern slavery over the years, I have seen that there are always new tools to develop, new solutions to propose, and new allies to be found. So, for those of us tackling this issue, let’s work together to use our collective talent, power, and reach to make global supply chains a source of empowerment and opportunity for workers across the globe.

I’m looking forward to candid conversations about solutions in this space at the BSR Conference in Huntington Beach, California, next week, during sessions like Human Trafficking and Modern Day Slavery and Protecting Workers on the Move. I hope to see you there.

Blog | Wednesday October 18, 2017

Why Business Supported the Clean Power Plan: It Made Economic Sense

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The last few weeks in the United States have seen an unprecedented number of consecutive natural disasters—including both hurricanes and wildfires—exacerbated by our changing climate. In fact, a September poll shows that a majority of Americans assess that it is likely that climate change indeed worsened the impact of these events.

In this context of heightened public awareness and increased devastation due to climate change, EPA Administrator Scott Pruitt signed a rule last week that will begin to roll back the Clean Power Plan (CPP). The Administrator made an economic argument in support of the repeal, claiming that regulations “ought to work with folks all over the country and say, 'how do we achieve better incomes by working with industry, not against industry'.”

However, all evidence points to the fact that climate action is good for the economy. That’s why many companies in the private sector have supported the CPP, arguing that it is good for business.

The state of California, which has the sixth-largest economy in the world, is in many ways a poster child for this argument: In 2015, California simultaneously reduced its greenhouse gas emissions and achieved its strongest economic growth since 2005. The state has some of the most ambitious climate targets in the United States, and in 2016, it created more jobs than any other state for the third year in a row.

California isn’t unique. The renewable energy industry overall is creating jobs at a rate of 12 times the rest of the U.S. economy. One recent study found that putting cities on a climate-friendly growth trajectory could save as much as US$22 billion by 2050 and avoid carbon emissions equal to India’s entire annual footprint.

The private sector sees this. When the CPP was instated in 2015, 365 companies and investors, including General Mills, Mars Inc., Nestle, Staples, Unilever, and VF Corporation, wrote a letter in support of the plan. In it, they stated that their “support [was] firmly grounded in economic reality … Clean energy solutions are cost effective and innovative ways to drive investment and reduce greenhouse gas emissions. Increasingly, businesses rely on renewable energy and energy efficiency solutions to cut costs and improve corporation performance.”

Since then, four of America’s largest companies—Amazon, Apple, Google, and Microsoft—filed amicus briefs in support of the CPP. As large consumers of electricity, these businesses sought to limit their environmental impacts in response to concerns about climate change. While they have developed their own renewable energy facilities to meet their sustainability goals, they argued that the Clean Power Plan would provide them with more and more cost-effective options. 

Even in the traditional energy industry, which arguably is more vested in a coal-friendly future than business writ large, not all companies have the same perspective on the CPP. While Peabody, America’s biggest coal miner (which came back from bankruptcy under the new U.S. presidency), welcomed the repeal, utilities have not been as vocally opposed. In fact, Reuters found that of 32 utilities in the 26 states that filed lawsuits over the CPP, “the bulk of them have no plans to alter their multi-billion dollar, years-long shift away from coal.” 

Business action in favor of climate-compatible solutions gained momentum leading up to the Paris Agreement in 2015, and it has continued since. For example, 619 companies are taking bold climate action through the We Mean Business coalition, which represents a market capitalization of US$15.5 trillion, including 32 companies with individual market capitalizations of more than US$100 billion. These companies emit a total of 2.31 gigatons of in their direct operations and purchased electricity, which is equivalent to the annual emissions of the Russian Federation. Moreover, more than 100 of these influential companies are committed to sourcing 100 percent renewable power globally, working to massively increase demand for—and delivery of—renewable energy.

Not only do the economic claims of the current EPA seem unlikely, but there is increasing evidence that the agency’s policies may harm the economy. Companies recognize this, which is why we’ve seen so much business support for the CPP. It’s also why business will continue to lead on climate action more broadly, even if it must do so without the policy frameworks that support U.S. leadership on this issue. Indeed, other countries around the world, including China, increasingly recognize that climate leadership translates to economic leadership—a perspective that they are likely to be rewarded for in the long run.

Blog | Monday October 16, 2017

Q&A: The Future of Business Action on Climate Change

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As part of our Q&A series with our experts on the past, present, and future of sustainable business, we sat down with Climate Change lead David Wei to discuss innovations, opportunities, and challenges in the field.

Elisabeth Best: What has been the single most important innovation in business action on climate change in the last 25 years? 

David Wei: For climate practitioners, the adoption of the Paris Agreement in 2015 is the most important development of the past 25 years. For the first time in history, countries rich and poor alike agreed to reduce their emissions and build climate resilience. This sends a strong signal to the business community.

The agreement was as ambitious a text as 195 countries could agree on, and it includes clear long-term goals that set a new international standard to hold warming well below 2 degrees Celsius: to peak global emissions as soon as possible, rapidly reduce them to reach net zero in the second half of this century, build climate resilience, and reduce vulnerability. Equally important is the fact that the agreement asks governments to enhance their commitments every five years, repeatedly creating opportunities to push the global emissions trajectory downward.

Best: What does sustainable business, specifically as it relates to climate change, look like in 2030? 

Wei: It’s only 2017, but emissions reductions in direct operations are already becoming mainstream. The business case for renewable energy procurement and energy efficiency, for example, is very strong. Leading companies are moving to new frontiers of climate action—engaging their supply chains to reduce Scope 3 emissions, assessing and disclosing the climate risks that their businesses face, and building and implementing strategies to become more resilient to those risks. 

In 2030, supply chain climate action and the integration of climate resilience throughout companies’ value chains could be mainstream sustainable business. Indeed, by 2030, high-carbon business models in energy, transport, and agriculture could be relics of the past.   

Best: What’s the biggest challenge or opportunity you see looking forward?

Wei: While our collective direction toward the resilient, low-carbon economy envisioned by the Paris Agreement remains clear, the U.S. Administration’s intention to withdraw has injected short-term uncertainty into the policy landscape, which is a challenge. However, other major economies have made their continued commitment to climate policy clear.

As the BSR/Globescan 2017 State of Sustainable Business Survey anticipated, the U.S. decision about the Paris Agreement has not changed company commitments to climate action. Indeed, climate action is warranted by a broader business case, including companies’ desires to demonstrate leadership, respond to shareholder resolutions, manage risk, address stakeholder expectations, and control energy costs. The challenge for business will be to take the broader and medium-term perspective to continue to lead on climate.  

Best: What are leading companies doing today to make a sustainable future a reality? 

Wei: More companies are engaged on climate today than ever before, and individual companies are making commitments on an unprecedented scale.

For many large companies, climate action increasingly means collaboration—no matter how ambitious these organizations are, they cannot reach their GHG emissions reduction goals without forging partnerships throughout their value chains. Leading businesses are adopting emissions reduction targets that follow a trajectory to hold warming well below 2 degrees Celsius, and they are also stepping up by engaging their suppliers to reduce emissions and build climate resilience. 

Best: What aspect of this year’s BSR Conference are you most excited about?

Wei: I’m excited about Al Gore’s opening plenary speech. I’m also looking forward to the discussion about the 2018 Global Climate Action Summit, which BSR is proud to sit on the Steering Committee for on behalf of business. The Summit will feature climate leadership from businesses, investors, cities, sub-national regions, and civil society, and demonstrate our collective impact in achieving the vision articulated by the Paris Agreement. 

Blog | Thursday October 12, 2017

Q&A: The Future of Inclusive Economy

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As part of our Q&A series with our experts on the past, present, and future of sustainable business, we sat down with Inclusive Economy lead Susan Winterberg to discuss innovations, opportunities, and challenges in the field.

Elisabeth Best: What has been the single most important innovation in inclusive economy in the last 25 years? 

Susan Winterberg: The greatest advances in the inclusive economy field have been in the area of diversity and inclusion. Looking back just 50 years, it is astounding to see how much attitudes have changed regarding women and minorities in the workplace. Similarly, business leaders have been increasingly using their voices to stand up for diversity, which became evident when the U.S. business community came out in full force earlier this year: More than 100 companies signed an amicus brief on the U.S. Executive Order on Immigration.

It continues with new business commitments to advance the rights of women, refugees, the LGBTIQ+ community, and others announced almost every week. Nonetheless, much work still needs to be done on diversity. In particular, we will need to innovate and build a better evidence base on what works to retain and promote more women and minorities in key industries and occupations, close pay gaps, and increase representation in C-suites and boards.

Best: What does sustainable business, specifically as it relates to inclusive economy, look like in 2030? 

Winterberg: The 2020s will see major disruptions in social order, to governments, and perhaps even to capitalism itself. We’ve already seen the beginnings of this: first with Occupy Wall Street and Fight for $15, and more recently with the outcomes of the Brexit vote, the U.S. election, and a surge of interest in nationalist movements around the world. There are three major issues that business leaders will have to grapple with in the coming decade if we are going to have an inclusive, safe, and sustainable world in 2030: good jobs, taxes, and lobbying.   

A strong and secure middle class; a healthy government with fiscal capacity to fund education, infrastructure, and safety nets; and functioning democratic institutions are requirements for a peaceful and prosperous society. Many of the companies I have spoken to about the need to address these issues—particularly as they relate to their operations in the U.S. and other advanced economies—seem to see them as outside the purview of the sustainability department. However, these issues will become more critical—and sustainability professionals will be increasingly asked to address them—in the coming years.

Best: What’s the biggest challenge or opportunity you see looking forward?

Winterberg: Automation will be by far the biggest opportunity and challenge to an inclusive economy in the next decade. Technologies like artificial intelligence, big data, sensors, and autonomous vehicles will bring so many benefits to society—from enhanced health and safety to consumer convenience. Yet these technologies will also pose some hard questions on issues of privacy and discrimination. They will displace large numbers of people who will need to be retrained, and they will likely result in pockets of high unemployment in those communities most strongly affected by these changes. Companies need to begin preparing now to ensure a sustainable transition toward automation.

Best: What are leading companies doing today to make a sustainable future a reality? 

Winterberg: Companies are taking action on promoting a more inclusive economy through three main mechanisms: creating good jobs, expanding access to products, and engaging with society.  

Leading companies are thinking about good jobs by treating contingent workers more fairly, investing in training and career paths, creating predictable scheduling, increasing benefits coverage, and developing profit-sharing programs. They are also starting to develop ways to expand their diversity and inclusion efforts to include more groups who face challenges in employment. We have seen pioneering efforts to promote other types of diversity, like neurodiversity, and to create enhanced opportunities through their global supply chains through impact sourcing. Companies have also been increasingly vocal on key public policy issues affecting inclusion, from immigration to health care access.

Best: What aspect of this year’s BSR Conference are you most excited about?  

Winterberg: BSR is launching a new Sustainable Futures Lab—and we have a great line-up of sessions this year looking at sustainability challenges that will arise from new technologies: The 21st Century Social Contract, Ethics of Artificial Intelligence, Inclusive by Design, Human Rights by Design, The Just Transition, and Transportation of Tomorrow. I’m most excited to hear how companies are getting ahead of the curve and integrating concerns for ethics, inclusion, and human rights into their R&D processes to make a sustainable future a reality. 

Primers | Thursday October 5, 2017

Future of Supply Chains 2025

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This primer provides a new way of thinking about the future of supply chains—bringing together the top procurement priorities of leading global businesses and the key forces of change reshaping the very business models that have given rise to global supply chains—to enable supply chain leaders to envision and manage future-fit supply chains.

Deepening our understanding of both sets of drivers and their potential implications for supply chains creates a powerful lens through which to reimagine the ways that all parties to global supply chains create value and contribute to a more just and sustainable world. Supply chain leaders, and the organizations with which they work, should seize this moment of significant change to design and implement new supply chain management models. This primer sets out five specific recommendations to help supply chain leaders build future-fit supply chains that both drive progress on top procurement priorities and advance the sustainable business agenda.

The information here is gathered from a series of interviews and leadership dialogues with companies in our membership on the front lines of these changes; review of thought leadership from think tanks, academics, and practitioner surveys; as well as BSR’s experience helping companies in all industries evolve their approaches to supply chain sustainability.

In the months ahead, BSR will convene a series of targeted dialogues, experiential futures workshops, and a collaborative initiative that will incubate and expand on these solutions in real time, sharing and elaborating on new models that leading companies are already putting in place. We invite you to be a part of shaping the future of supply chains that we would all like to see—one in which supply chains enable human rights, climate resilience, women’s empowerment, and inclusive economies on a global scale.

Blog | Thursday October 5, 2017

Q&A: The Future of Women’s Empowerment

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As part of our Q&A series with our experts on the past, present, and future of sustainable business, we sat down with Women’s Empowerment lead Aditi Mohapatra to discuss innovations, opportunities, and challenges in the field.

Elisabeth Best: What has been the single most important innovation in women’s empowerment in the last 25 years? 

Aditi Mohapatra: In the women’s empowerment field, it is challenging to identify any one single innovation that has independently led to the advancement of women. Instead, when considering what has driven global businesses to pay attention to and invest in this field, it is clear that the cementing of the business and economic case for women’s advancement has been critical.

With new data points constantly emerging on the benefits of investing in women, companies are able to shift away from the moral case to a business one. As a result, we can unlock the innovative potential of businesses in thinking about how their full value chains—from their supply chains to their workplaces and their product and service development—can drive gender equality.

Best: What’s the biggest challenge or opportunity you see looking forward?

Mohapatra: The challenges here can feel overwhelming: there is not a single country globally that has reached gender parity as of today. Where there has been some progress for women—wages, for example—other areas, such as women’s health rights, are seeing a rollback of progress.

Working in this field means dealing with a lot of complexity. There are rarely straightforward solutions, so it’s critical to embrace, rather than be paralyzed by, the systemic and structural barriers that stand in the way of women’s advancement. For example, today 155 out of 173 countries still have at least one law impeding women’s economic advancement.

The opportunity, however, is equally multidimensional. Women’s progress fuels economic growth and reduces global poverty. We know that a focus on women creates benefits for communities, the environment, and societies at large.

Best: What does sustainable business, specifically as it relates to women’s empowerment, look like in 2030? 

Mohapatra: The speed and scope of changes affecting business today are unprecedented. This is leading to all sorts of new realities, some of which accelerate progress for women and others where women could fall even further behind. By 2030, businesses will have to completely rewrite their narratives on gender roles and careers, families, and workplaces—as this will be expected from a new generation of employees. The new, more fluid environments these employees demand, in which childcare, working hours, and workplace structures will be transformed, have the potential to alter the mindsets and preconceived notions that often hold women back. Leading companies today are starting to update their current structures to account for these changes.

At the same time, the next decade will also see an increase in automation technologies, which are likely to disproportionally impact women: Twice as many women as men are likely to lose their jobs as automation replaces human labor, according to a recent report from the Institute for Spatial Economic Analysis.  

Sustainable businesses will ensure that the future is female, and their businesses will benefit from these efforts. They will unlock new innovations and productivity gains by ensuring women are at the table, leading decisions, creating products, and designing solutions.

Best: What are leading companies doing today to make a sustainable future a reality? 

Mohapatra: Leading companies are making the decision to have an intentional focus on women—moving away from policies, data, and tools that are ‘gender neutral,’ and rather recognizing that an intentional integration of women into program design, analysis, and measurement is critical to closing gender gaps and building sustainable communities.

These companies are also looking at the system as a whole—and embracing the complexity. They are going beyond addressing individuals to influencing the norms that often shape a woman’s opportunities. They are developing products and services, creating marketing approaches, and delivering trainings and tools that challenge biases and perceptions of women’s roles in the workplace, in households, and in their communities.

Best: What aspect of this year’s BSR Conference are you most excited about? 

Mohapatra: In my experience, it is rare that BSR and the broader sustainable business community stop and reflect on our collective accomplishments, and I always appreciate that the BSR Conference allows us to both take a pause and think about the year’s developments. After a busy September in New York, I am thrilled to be back on the West Coast for a week at the beach, hearing from and conversing with our members and my colleagues from around the world. 2017 has already been quite memorable, and I’m excited to set a new, energized direction for our work in 2018.

Blog | Tuesday October 3, 2017

The Increasing Importance of Articulating Long-Term Value

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A few months ago, my colleague Laura Gitman wrote a blog post about the rise of short-termism in financial markets, describing how hedge fund activists are increasingly successful at influencing boards to maximize stock price before they sell off their shares. Indeed, there has long been a perception that investors care about short-term financial returns over long-term, sustainable growth.

However, some institutional investors are increasingly vocal about taking a long-term value approach to their decisions, and these investors care about environmental, social, and governance (ESG) issues. There is an opportunity for companies to rebalance their engagement to focus on these long-term investors: Companies likely have more ability to shape the agenda than they believe, and communicating their sustainability stories can be a central part of their approach.

The reality is that investors are a diverse set of stakeholders with various objectives and time horizons. As one BSR member company representative commented in a recent interview, “True investors are interested in long-term value. Traders are interested in the short-term share value. Raiders are interested in break-up value. We are the target of activists from all sides, and there is an inherent tension in managing those constituencies.”

In navigating the complexities of conflicting investor beliefs and objectives, companies should keep in mind that long-term investors are actually the majority. Calvert estimates that institutional investors hold an average of 84 percent of the shares of the 500 largest companies in the world. These include pension funds, insurance funds, mutual funds, and sovereign wealth funds, all of which invest on behalf of long-term savers and tax payers.

Long-term investors understand the link between sustainability and long-term value creation. In his letter to CEOs, Blackrock CEO Larry Fink writes that, “over the long-term, ESG issues—ranging from climate change to diversity to board effectiveness—have real and quantifiable financial impacts.”   

He isn’t alone in this perception. The U.K. pension fund Universities Superannuation Scheme states in its Statement of Investment Principles that it expects ESG investing "to both protect and enhance the value of the fund in the long-term ... The trustee therefore requires its investment managers to integrate all material financial factors, including corporate governance, environmental, social, and ethical considerations, into the decision-making process for all fund investments.”

This interest from investors in companies that embrace long-term perspectives is not surprising—a 2017 McKinsey report shows that companies with a long-term view outperform their peers.

Unilever, which made headlines for scrapping quarterly earnings guidance, conducted a survey last March to better understand its investors’ perspectives on investment horizons, quarterly reporting, and sustainability. Of those that responded, 70 percent indicated that they typically held equities for more than three years, and 80 percent agreed that the Unilever Sustainable Living Plan, the company’s sustainable business strategy, is a fundamental driver of long-term value creation.

Companies that are interested in attracting long-term investors can start by better articulating a compelling story on how their businesses are designed to create long-term value. A study of company reporting in the U.S., U.K., Eurozone, Singapore, and Chile found that few companies report on this in a relevant way.

What do effective communications about a long-term value proposition look like? Novozymes, a global leader in biological solutions, provides one example. The company has published a set of long-term financial and sustainability targets, which includes its goal of an earnings before tax and interest (EBIT) margin at 26 percent or above presented alongside its intent to reach six billion people with its biological solutions and deliver 10 transformative innovations. Johnson & Johnson’s CEO letter to shareholders addressing how the company invests for long-term growth also demonstrates what this can look like.

Tools are emerging that help companies assess and communicate the financial impact of their sustainability strategies to investors. For example, using linear regression analysis, SAP quantifies for its stakeholders that a one percentage point change in employee engagement could lead to a €45 million to €55 million change in operating profit.

Companies can proactively engage and attract long-term investors who value ESG commitments. The sustainability team can play an important role in these efforts by collaborating with the investor relations team to shape their company’s long-term value creation story and deliver these messages through regular investor communications. 

Blog | Monday October 2, 2017

Q&A: The Future of Supply Chain Sustainability

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As part of our Q&A series with our experts on the past, present, and future of sustainable business, we sat down with Supply Chain Sustainability lead Tara Norton to discuss innovations, opportunities, and challenges in the field.

Elisabeth Best: What has been the single most important innovation in supply chain sustainability in the last 25 years?

Tara Norton: The first innovation came in the 1990s, with companies’ realization that the rights of workers in their global supply chains were their responsibility. This launched the labor standards and social compliance movement and the raft of industry vertical initiatives and certifications that we see today, addressing many of the most critical human rights and environmental issues in each industry’s supply chains.

I would say we are now waiting for the next innovation. There has been a definite realization that the current accepted approach is not driving meaningful change. Our leading member companies are looking for better solutions. There are many promising developments underway today, largely around the use of data and integration of technology, that are laying the groundwork for disruptive innovation. 

Best: What does sustainable business, specifically as it relates to supply chain sustainability, look like in 2030? 

Norton: What the future holds is always hard to say, but we are excited to publish a primer on the future of supply chains today that summarizes the biggest procurement trends and forces of change affecting supply chains between now and 2025.

Two big trends happening in supply chain management are the rising importance of the Chief Procurement Officer within businesses and the digitalization of supply chains. Increased digitalization is allowing for data analysis that wasn’t possible before: Companies can better analyze and therefore manage the risk in their supply chains. However, there is also the massive impact of the rise of automation in supply chains, where machines will replace people, not only as workers, but also, in some cases, as decision-makers.

One significant and related change that we anticipate is transparent supply chains, across industries. It’s going to be increasingly easy to see where things are made and how goods and finance flow, and sharing this data will become business as usual. Companies may as well get out ahead of this trend—it’s coming anyway, and it’s going to be increasingly difficult to keep supply chain information private or to hide behind the idea that supply chains are too complex for visibility. 

Best: What’s the biggest challenge or opportunity you see looking forward?

Norton: Supply chains are enablers for businesses to achieve positive human rights, climate, inclusive economy, and women’s empowerment impacts on a mass scale. This remains a huge opportunity.

One of the biggest challenges and opportunities is automation. The impacts of automation on supply chains, and specifically on the global work force, are enormous. There are obviously significant efficiency opportunities, but the impacts of automation on workers should be top of mind. The conversation about worker rights and worker empowerment changes completely when machines can replace entire workforces in factories. What is a company’s responsibility for the people in its supply chain that are being displaced by automation?

Best: What are leading companies doing today to make a sustainable future a reality? 

Norton: BSR articulates what supply chain leadership looks like in the Supply Chain Leadership Ladder—leading companies at the “driving impact” level described in our Ladder are shifting their activities away from compliance toward engagement and impact on the most critical areas of their supply chains. Leading companies are making commitments on their most material issues, integrating sustainability throughout their whole procurement lifecycles, and actively leading in the global collaborations that are improving global supply chains.

Best: What aspect of this year’s BSR Conference are you most excited about?

Norton: We have an excellent line-up of speakers, including Al Gore, and I expect to be inspired and come away with new ideas to meet the supply chain challenges of the future. I am looking forward to the discussion we are going to have during Harnessing New Technologies for Supply Chain Sustainability, where we will explore some of the trends we’ve discussed in this blog. And it’s going to be nice to hang out by the beach with an amazing group of sustainability professionals, many of whom are old friends at this point.