Last week’s Financial Times had three articles highlighting the issues and cost around ESG and sustainability reporting for companies. For instance, it reported that Vanguard – the US investment titan with $7.7 trillion under management (more than twice UK national debt) – has backed just 2% of environmental and social shareholder proposals this year because of a rise in the number of resolutions it considered “overly prescriptive” and “overreaching.”
Vanguard said many of the shareholder proposals this year went too far, for example, by seeking “specific actions from companies including changes in company strategy or operations”. By way of reference, that 2% is down from 12% last year.
Across the pond, ESG investing is becoming increasingly politicised. Recently, Republicans rallied against investment managers such as Vanguard for “woke capitalism”, with Wall Street being attacked for pushing what the GOP calls “far-left” positions on environmental, social and corporate governance issues.
Here in the UK, it is reported that added transparency on issues such as climate are seen to take the focus off strategy – a view held by 80% of FTSE 350 boards. The Chartered Governance Institute has said that while company reporting is essential to transparency, the rapid emergence and proliferation of non-financial reporting requirements has, in effect, led to boards spending too much time looking backwards rather than forwards.
Here at Polestar, we have started the process of becoming a B Corp. What a summer project that has been! Thank you, Anusheh, for leading on this. Yes, there is plenty of looking backwards, ensuring we have the requisite policies in place, and so forth, but – and it is an important but – it has helped us focus on our future as we consider how to optimise ourselves as a sustainable business, through which we deliver on our mission: “to guide shareholders to achieve their business goals and give our people rewarding and purposeful work.”
Reporting pressures are expensive, time consuming and need to be appropriate, otherwise they get in the way of business. I imagine when accountancy was in its infancy it too was thought of as burdensome. Over time, however, I think we can all agree this has become a good thing.
We have all experienced how implementing new initiatives – such as meeting regulatory requirements and working out the associated data requirements – initially sucks excess senior brain power before the teams and processes are in place to deliver the business’ needs smoothly and effectively. This brain power is well invested in 2023, as not only is a business at reputational risk but, if the proposed new “greenwashing” penalties are instigated, this will be a married to significant financial risk. In the meantime, would it not be great if, in looking at our businesses in a different way, we found better approaches to deliver our goods and services in a manner which is less impactful on our environment and better for our employees and stakeholders?