Will investors be the key to closing the CR performance gap?

My initial reaction to the question I have posed above would usually be a straightforward “no”.

If we agree that a CR performance gap between the thin layer of leaders and the rest exists, the question is how do we reach those companies below the traditional ‘firing line’ of CR?

(The ‘gap’, for example, would be betweeen say, the FTSE 100 and those firms in the FTSE 350. Or the top 500 in the S&P index and all those below. Or the top 500 in the Russell Index and those below, you get the idea)

Campaigning NGOs don’t have the resources to focus on them. Regulators are scared of the impact of tighter regulations (not always but often), and B2B sustainability requirements from larger companies are only going to go so far. Employee demand is another factor, but despite all the research out there, appears to be only having a limited effect thus far.

If you need some evidence that the performance gap exists, here’s a couple of nuggets:

1) Last week at our sustainability in oil, gas and mining conference, out of 60 executives in the room, only four of them had heard of John Ruggie’s work on business and human rights. Only one of them thought his work would be significant for their business.

2) According to SocialFunds.com: (on climate change reporting) “…when the universe of companies is expanded to include the 364 companies representing the top 50% of market capitalization among the Russell 2000 index, only 39 addressed climate change in their reporting, and a mere four reported their greenhouse gas (GHG) emissions.”

This is despite the fact that the “Carbon Disclosure Project (CDP) found that disclosure of greenhouse gas (GHG) emissions by S&P 500 companies increased to 59% in 2010, and 54% of companies now include emissions data in their annual corporate reports.”

So there’s a gap here. How to close it?

SocialFunds.com reports that CERES, the investor coalition, is now taking up the reins in terms of the 1000 companies represented by the Russell Index, which ranks firms by market capitalistation.

CERES is asking companies “to encourage your management team and Board of Directors to address sustainability issues across your organization, which can enhance long-term company and shareholder value.”

The list of signatories is impressive by traditional SRI standards.

Of course, on the other hand it’s easy to say that CERES members represent only around $1 trillion in total assets under management, so are not significant by comparison with the much bigger mainstream players. After all, BlackRock alone are nearly four times as big.

The UN Principles for Responsible Investment have an impressive list of signatories. But critics claim they move too slowly and are too broad to drive change at the required pace.

With corporate responsibility slowly morphing into a proxy for good management, I wonder if perhaps, aside from specific regulation around carbon or reporting (or both), or other niche issues, it will be left to investors to play a greater role in closing the CR performance gap?

I’m dubious about the prospects as things stand right now. But the efforts by CERES are about as good as it gets at the moment.

Let me know if you think I’ve missed something here.

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