Values shift

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We are experiencing a widespread reassessment of the values that underpin society. There is a growing realisation that we need to apportion more value to natural systems and become aware of the limitations and threats posed by conventional economic growth.

For more on Values shift, including changing expectations over business behaviour and the shifting balance of power between stakeholders, see Forces for Change

Decreasing trust in business

We are now in the ‘age of trust’: 72% of CEOs cite “brand, trust and reputation” as one of the top three factors driving them to take action on sustainability issues. [i] Following the financial crisis, consumers’ confidence in business has been dropping. For example, only 53% of consumers in the UK are willing to trust their bank or building society, and 63% don’t trust any banks at all. [ii]

High-profile media events, such as the horsemeat scandal demonstrate the risks to businesses that fail to meet consumer expectations. In Europe, about one third of CEOs currently feel that their company is not trusted by the public and stakeholders. [iii]

Key implication:

  • Those companies that have meaningful engagement with their stakeholders may be building better brand loyalty and market share.

Investor pressure

Investors are gradually asking more and more businesses to report on and value environmental and social impacts. 86% of CEOs see accurate valuation by investors of environmental and social challenges in long-term investments as important to reaching a tipping point in sustainability. [iv]

In the United States, the Ernst & Young LLP report Leading corporate sustainability issues in the 2012 proxy season: is your board prepared? shows that environmental and social proposals will lead all other major proposal categories, in terms of shareholder resolutions on proxy ballots. These proposals accounted for 40% of all shareholder resolutions in 2011, up from 30% in 2010. The proposals also broke new ground averaging support from 21% of votes cast, up from 18% in 2010. [v]

Across the board, investors are asking companies to value and report on environmental impacts. A record 722 investors worth $87 trillion have called for businesses to report their greenhouse gas emissions and climate change plans, according to the Carbon Disclosure Project (CDP). To launch its 2013 round of reporting it asked investors to sign up to its program, with a record high number of signatories and a larger geographic spread taking the plunge. New members from Brazil and Taiwan joined the call for more than 5000 businesses to submit their data to the CDP. [vi]

When the CDP launched their FTSE 350 Climate Change Report in 2006, 49% of listed companies responded, detailing their carbon risks, opportunities and emissions. In 2012, 69% responded, including almost all (96%) of the FTSE 100. [vii] Transparency and disclosure on supply chain impacts, water use and broader environmental impacts (via the Dow Jones Sustainability Index for example) are now also commonplace with the majority of large corporates participating.

Key implication:

  • Growing investor interest in social and environmental challenges may require companies to develop a clear narrative on the costs and benefits of their strategy that goes beyond the financial bottom line.


References

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