Will Your Stocks Survive Until 2020?

Creating more sustainable businesses will pave the way to a better economic future overall. Although responsible business practices that respect the environment and integrate positive social practices haven't always been first and foremost on many investors' minds, more and more long-term shareholders see the important connection.

Sadly, most corporate managements are way behind the curve on this common sense, even survivalist, strategy.

Ceres, a sustainable investment advocacy organization, held its 2012 conference this week: "Igniting Innovation, Scaling Sustainability." In addition, and in conjunction with environmental, social, and governance (ESG) research firm Sustainalytics, Ceres released a report revealing 600 publicly traded companies' sustainability progress -- or lack thereof.

Moving forward in the new century
First things first: despite some heartening areas of corporate progress, there's still a long way to go in constructing what Ceres has called "the road to 2020" and the creation of the "21st Century Corporation." Ceres' threw down the gauntlet in 2010, outlining the importance of corporate strategies that allow for survival and success in a low-carbon, resource-constrained future economy.

Ceres and Sustainalytics point out the benefits of better sustainability processes and planning from both economic and social standpoints: "We see it as a world of opportunity for companies to improve competitiveness, realize large savings through energy efficiency, invest in their workers, strengthen their supply chains and, in many sectors, reap the benefits of the enormous investment opportunities in clean technology and clean energy."

These moves sound like perfect common sense. However, common sense is not so common, as the old saying goes, especially when so many corporate managements and boards are too often stuck on this quarter or next quarter alone.

Unfortunately, two years in, a measly 26% of the 600 corporations evaluated have integrated sustainability into their governance and management processes. Only a quarter are disclosing details about supply-chain monitoring and performance, and just a third are setting specific goals for slashing greenhouse gas emissions.

Hall of fame
Although it's clear many corporations are just starting out or remain clueless about the importance of long-term sustainability planning, some companies are ahead of the game in integrating these concerns into their business plans. The report called out Intel (Nasdaq: INTC  ) and Alcoa as two of the 157 companies that have proven themselves trendsetters for their overall governance strategies on sustainability.

Some highly specific areas are either relatively weak or relatively strong in terms of corporate action and attention.

Nearly half the evaluated companies have some kind of supplier code in place. On the other hand, only 10% of the 600 companies specifically reference International Labor Organization guidelines. Nike (NYSE: NKE  ) and Hewlett-Packard (NYSE: HPQ  ) are among the 25% of the companies that publicly disclose supply-chain monitoring and performance information.

On the other end of the spectrum, a woefully small percentage of the companies ranked address human rights issues in a systemic way. Only 13% gained Ceres' highest "Tier 1" or "Tier 2" rankings on this metric, which evaluates policies covering discrimination, working conditions, and other human rights issues. 3M (NYSE: MMM  ) , General Electric (NYSE: GE  ) , and Hess were among the very few lauded on the human rights measure.

Although only a third of the companies evaluated have specific goals for slashing greenhouse gas emissions, there is some good news. Nearly half -- 47% -- of the companies are at least making some progress in cutting electricity usage, using renewable energy resources, and increasing energy efficiency.

Looking for leaders
According to the data gathered by Ceres and Sustainalytics, very few corporations are leaders in sustainability measures. That's unfortunate, and doesn't bode well for a healthy economy or healthy investments in the far-flung future.

Given America's reputation for ingenuity, American corporations can do better than this, and hopefully this data will spark more movement by more companies in these areas.

As for those of us who are investors, let's keep a close eye on whether our stocks show signs that they're ready for the new century. If they're not, they may not make it to 2020 and beyond.

Speaking of revolutionary ways of doing business, our analysts have identified 3 Stocks to Own for the New Industrial Revolution. This video report is absolutely free.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of Nike, Intel, and 3M, as well as creating diagonal call positions in 3M and Nike. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On April 28, 2012, at 11:00 AM, bbell46356 wrote:

    Corporations should be focused on profitability and growth. When sustainability interests are aligned with that goal, progress will be made. Until then, and until things like solar power pay, then these companies are wasting shareholder's money.

  • Report this Comment On April 29, 2012, at 6:36 PM, Darwood11 wrote:

    Thanks for the article.

    Interesting report. I decided to see how AAPL is doing, I expected that they should be a leader. According to Ceres they are in the "technology-hardware" sector. However, I was surprised. They are not a leader; in fact, to the contrary.

    So I think Ceres is doing a great public service. It's difficult to overcome those slick ads. Nothing like a reality check.

    In the technology-hardware sector, not a single company is considered to be "setting the pace" in Stakeholder Engagement. That's an opportunity for AAPL to step up to the plate.

    AAPL made it to Tier 3, which is considered to be "Getting on Track." Both Dell and HP performed better and made it to Tier 2, which is considered "Making Progress."

    Even old die hard GE is dong better than AAPL. So too for Duke Energy. Duke is, by the way, one of those nasty coal burning companies. American Electric Power, Ford and even Newmont Mining have made it to Tier 1 in some way.

    As for AAPL, I guess they are doing what they need to do to be so profitable.

  • Report this Comment On May 03, 2012, at 4:41 PM, mesConfitures wrote:

    I would love to know where all these people who say companies "waste" money by focusing on doing business according to sustainability guidelines & principles are going to live in 2020 - is there some other planet unaffected by these issues that they plan on moving to?

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