Editor's note: This piece contains multiple corrections from the originally published version. The Fool regrets the errors.
With Chevron (NYSE:CVX) set to host its annual meeting on May 27, shareholders are pushing for the company to report on how the company's chemical segment is contributing to the human toll of climate change. Investors who prioritize social responsibility may not like Chevron's response.
The stage is set
This year, thanks to the COVID-19 pandemic, Chevron's annual meeting will be held by phone. The company will be talking about its financial position and growth strategies and calling for shareholder votes on various management issues and proposals from those same shareholders.
One proposal asks the company to report on how expanding the operations of its chemical division, CPChem, may affect public health in areas prone to climate-change-related natural disasters.
The organization that brought the proposal to the board, As You Sow, is a nonprofit group that uses shareholder advocacy to push for socially responsible business practices in several industries.
Since 2008, Chevron has been given proposals to vote on regarding the effects of its operations on climate change. Every year, the board of directors at the company has urged shareholders to vote against proposals where environmental sustainability was the central cause.
This year is no different
Prior to the annual meeting, the company produces a document that outlines the issues to be discussed and offers recommendations from the board on how it wants shareholders to vote for directors and proposals.
This year, the board urges shareholders to vote against As You Sow's initiative. The company cites the segment's "Operational Excellence" system as being adequate enough in portraying risks associated with its operations that stem from safety, health, and environmental issues.
But the operational excellence statements do not contain the specific information the proposal is asking for, including assessments of the potential effects on public health that expanding its petrochemical segment may cause.
Sometimes a company causes the public to bear costs to its operations beyond what the company pays -- referred to by economists as "externalities." They can be relatively minor, such as additional time in traffic because a plant was built between a neighborhood and people's workplaces, or major, such as health risks to an entire metropolitan region because a company didn't factor wind into the design and placement of its smokestacks.
Chevron's response may suggest that it has little interest in mitigating the externalities it causes, but it's only fair for the company to assess and disclose to shareholders any externalities the company may cause in expanding its operations in any region. Some might say it's the company's responsibility to do so. Investors who prioritize sustainability and corporate social responsibility are likely to find a better steward than Chevron.