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Utility companies began practicing corporate social responsibility long before the movement took hold in other economic sectors. That’s partly due to the legal and social obligations that come with being a regulated monopoly, and partly due to the localized nature of water, gas and electricity service.

There are important differences between utilities and other companies, but one area in common is the need to satisfy customers and build loyalty. Practically any business, from the corner laundromat to a global brand, can gain important insights by looking at the elements that factor into customer satisfaction.

For a closer look at the topic, CR Magazine spoke with Andrew Heath, Senior Director for Utilities Practice at the leading market research firm JD Power.

(The following remarks have been edited lightly for flow.)

Tina Casey: How do you measure customer satisfaction?

Andrew Heath: For utilities, there are six factors in customer satisfaction: power quality, reliability, billing and payments, communication, customer service, and then also corporate citizenship.

These factors all have a direct impact on customer satisfaction. If you get a higher performance in any one of those areas, you’re going to get higher performance in overall satisfaction.

Obviously the biggest and most important area when you think about electric service is going to be power quality and reliability. The biggest thing that customers care about is having their utility keep the lights on.

Whether it’s water, natural gas or electricity — safe, affordable, reliable utility service is what people are after.

TC: How does corporate citizenship impact customer satisfaction? AH: Corporate citizenship is not the only driver, but it is an important driver in customer satisfaction.

In particular, we look at how well people remember or know about a company’s corporate citizenship and community engagement.

Questions examine respondent’s awareness of the company’s performance. For example is the respondent aware of the work the utility does to increase the safety of the system, things they may do to help customers become energy efficient or conserve energy, things they do directly to plan ahead, things they do to impact the environment?

We even ask a question, “Do you know what your utility does to protect or restore wildlife?” One of the things that is most influential is whether or not the customer is aware of what a company is doing to protect wildlife within its service territory.

I can think of examples where a utility has had wildlife caught in its infrastructure. For example at one utility, workers rescued a baby otter caught in some water infrastructure. People hear these stories and they reflect positively on the company.

The organization did a good job getting the word out about their wildlife efforts. That positively impacted their corporate citizenship score, which then impacted their overall customer satisfaction score.

There are other instances where it’s very proactive. For example, a lot of of electric companies will do things to help birds nesting. A number of utilities have webcams of birds of prey nesting at their power stations, things of that sort.

It’s a case of ‘are people aware of what utilities do to help wildlife and protect the natural environment?’ That does have an impact on customer satisfaction.

TC: How can companies improve? There are definitely opportunities for organizations to do a better job of communicating what they’re doing.

The highest awareness level we have is 40 percent. Forty percent of people said they were aware of that work. The average is about 14 percent. There is a lot of room to improve with customer awareness.

TC: Is it more important to engage locally or globally?

Each utility has a very specific local footprint. They are serving a particular town or community. The way customers think about that is, if you’ve got the privilege of being a monopoly serving a community, then it’s important that you return that favor by being a good corporate citizen and doing good things for the community that you’re serving.

Some of the drivers of being a good citizen for utilities also apply to national brands quite clearly. They apply even more so when you’re a local brand. People think of your brand as a member of the community in relation to their friends and their families.

At the end of the day, people value when businesses behave well and respond well, and that might be even more satisfying than the service they get.

Examples in Action
For utilities, good citizenship has a significant impact on the level of satisfaction. Heath made it clear that wildlife conservation is part of a much broader approach to corporate social responsibility that fosters customer satisfaction.

Coincidentally, though, on the day this interview was conducted, the North Carolina power companyDuke Energy announced some company news that underscores the importance of tending to every element that drives customer satisfaction.

In a press release, Duke described how its Top of the World wind farm in Wyoming has been working with the company IdentiFlight to fine-tune a high-tech system for preventing wind turbines from injuring or killing eagles and other birds.

The new equipment is part of an elaborate program of raptor protection strategies at the wind farm, developed after a 2013 legal case against Duke over bird deaths. Notably, the good citizenship expressed in the program is not simply a statement of caring. It consists of concrete, measurable steps, and its effectiveness will be clear and quantifiable.

If the system improves bird safety at the site, it could have a far-reaching impact across the wind energy industry, globally as well as in the US, and it will also reflect positively on companies that rely on wind energy to enhance their corporate social responsibility profile.

By Jane Carten

Though it seems incredible, we’ve learned that there are some among us who have managed to skate by, oblivious to the numerous and systemic obstacles women face in their professional lives. This year is shaping up to be a reckoning. But broad discussions of the discrimination and barriers women face have been a consistent part of at least some of the media landscape over the past forty years; why are we only now starting to be heard? Many factors are certainly at play, but I wonder how much of our recent progress is due to women finally seeing ways to color outside the lines, to avoid having to play by someone else’s rules.

The Sufi mystic and poet Rumi wrote, “Everyone has been made for some particular work and the desire for that work has been put into every heart.” My path to finance has not been unusual; throughout my childhood, my parents ran an investment management and brokerage firm, so I quite literally grew up in the industry. Instead of taking this for granted, however, it helped me – as Rumi says – to find my particular work. Watching and admiring the dedication my parents put into their business and their careers showed me the value of entrepreneurship, independence, and of planting a garden, digging in, and tending it. I’m grateful for the lessons in responsibility, hard work, and drive that have been ingrained in me, and early on it became obvious to me that finance could – and should – be a tool for good. By the age of thirteen I was fascinated by the possibilities of angel investing; I am now the President of Saturna Capital, a socially responsible asset manager in Bellingham, Washington.

I’m aware that growing up within the industry puts me in a much different position than the many women trying to break in from the outside, but I do believe that everyone has an opportunity to plant their own garden. Technology has made it possible for anyone to raise her voice, find support, and connect with those others out there who get it. Staying true to core beliefs, being unafraid to carve out a non-traditional niche, and tending carefully to the surrounding community have been huge factors to my, and to Saturna’s, success. I also believe that with every challenge comes the opportunity to find a creative solution. Instead of playing by someone else’s rules we now, more than ever, have the opportunity to strike out and lead outside of any traditional framework – and specifically seeking those opportunities should be a personal mandate for all. It will ultimately be the diversity of our experience, and of our expertise, that makes our industry richer overall.

Jane Carten is President and Director, Saturna Capital 

Photo: Saturna Capital

Originally published on GreenMoney Journal and distributed by 3BL Media

Pictured: Gabrielle Upton, NSW Minister for the Environment and Professor Veena Sahajwalla at the launch of the world’s first e-waste microfactory.

The world’s first microfactory for converting e-waste into reusable materials has been opened in Australia.

The new plant consists of small modules that break down unwanted smartphones, laptops, computers, printers and other devices and filter out potentially useful components.

The system fires up a temperature-controlled furnace that extracts metals including copper and tin and turns them into useful alloys.

One of the modules takes the plastics from computers and printers for use in 3D printing or to produce materials for industrial-grade ceramics.

The concept of the microfactory came from the Center for Sustainable Materials Research and Technology at New South Wales University in Sydney. The plant was planned as the first of many making commercial use of waste, including glass, plastic and timber.

The university developed the technology with the Australian Research Council and has now built partnerships with businesses and organizations, including manufacturers and an e-waste recycling company. One of the partners makes spectacles.

Veena Sahajwalla, the university’s materials science professor, the research center director and an inventor behind the project, said: “We have proven you can transform just about anything at the micro level and transform waste streams into value-added products.

“For example, instead of looking at plastics as just a nuisance, we’ve shown scientifically that you can generate materials from that waste stream to create smart filaments for 3D printing.

“These microfactories can transform the manufacturing landscape, especially in remote locations where typically the logistics of having waste transported or processed are prohibitively expensive.

“This is especially beneficial for the island markets and the remote and regional parts of the country.

“Our e-waste microfactory and another under development for other consumer waste types offer a cost-effective solution to one of the greatest environmental challenges of our age, while delivering new job opportunities to our cities, but importantly to our rural and regional areas too.”

An international perspective is put on discarded technology by the Global e-Waste Monitor, a specialized UN development agency. The organization’s latest report records that more than 44 million tonnes of electronic waste was generated worldwide in 2016. This figure could pass 52 million tonnes by 2021.

Photo: UNSW/Quentin Jones

 

The Environmental Defense Fund (EDF) has just released its first annual survey on how top business executives both view and utilize seven technology innovations: blockchain, sensors, data analytics, mobile ubiquity, dematerialization, automation, and sharing technologies.

The results are encouraging. EDF’s findings have revealed that despite policy setbacks at the U.S. federal level, 70 percent of the over 500 respondents said their companies are investing in technologies that could help solve today’s most pressing environmental challenges. “As you know, every day companies are making sustainability and climate commitments, but this survey shows that many top companies are actually taking action,” said an EDF spokesperson.

Here are five examples of how these innovations have been implemented across various industries.

Automation

Levi Strauss & Co. recently announced a new digital manufacturing capability that automates part of the jeans production process. The technology allows Levi’s to tailor supply to meet demand, creating several business and environmental benefits: a reduction in textile waste, the elimination of thousands of chemical formulations previously needed for finishing, which together could potentially result in significant water savings.

Dematerialization

Amazon is working with vendors across its supply chain on dematerialization and waste diversion within the online retailer’s pet food category. With one of the largest global manufacturers in pet food, Amazon found a way to convert retail packaging into ready-to-ship e-commerce packaging. These redesigns reduced the number of packaging components by half and packaging volume by 34 percent. The new packaging designs also reduced damage in their distribution network by 84 percent, and damage before final delivery to customers by over 30 percent.

Sharing technologies

Over three quarters of the executives surveyed believe that sharing data with outside parties can lead to better outcomes for businesses. For example, Starbucks is working with the Closed Loop Partners to launch the NextGen Cup Challenge, a $10 million open source project that seeks to develop and commercialize fully recyclable and compostable cups.

Data analysis

Google is partnering with World Resources Institute and research institutions to launch a free global database of power plants, which would allow users to gauge data on the equivalent of 80 percent of globally installed electrical capacity across 168 countries. Such data could help researchers better monitor air pollution problems and could also spur more investments in low-carbon technologies.

Blockchain

Blockchain incorporates cryptography to provide a secure means of recording transactions in a public ledger, which makes this technology valuable for storing and manipulating sensitive data such as financial, medical, identity, voting, or chain of custody information. For businesses, this could result in a more sustainable and accountable supply chain.

Walmart, Unilever, and Nestle are among large companies working with IBM to identify blockchain applications for global food supply chains. The technology could help to secure supply chain records for commodities such as chicken, chocolate and bananas. The upside for the environment is less food waste and emissions – and for business, a boost in supply chain efficiencies and more assurances of food safety.

Image credit: EDF

By Whitney Dailey

Last week, nonprofits and companies alike convened in New York City for the 4th Annual Cause Marketing Summit (CMS) – dedicated to unpacking Purpose-driven marketing, partnerships and the most engaging cause marketing campaigns of the past year. The one-day event featured the latest key insights from cause marketing experts on issues such as civil liberties, mental illness and STEM, as well as how the field continues to innovate to engage stakeholders around these critical issues. For those not on the ground at CMS, here are the four need-to-know takeaways from the event:

• Create Multi-Dimensional Partnerships to Share Values: A conversation between Danielle Silber, director of strategic partnerships at the ACLU and Keni Thacker, senior event technology specialist at JWT, shared how the current political environment meant a surge in companies courting the ACLU to engage consumers and share values. One example, shared Silber, was Lyft’s “Round Up & Donate” program, which launched last spring. To participate, users simply opted to round up each fare to the nearest dollar and donate the remainder to the ACLU, raising $1.3 million to date. However, there was another natural synergy between the two organizations. Since a significant portion of Lyft’s drivers are immigrants, the ACLU tapped this base to share its “Know Your Rights” information.


• Embrace Evolution: A “fireside chat” with Jeff Senne, senior director of Responsible Business Leadership at PwC and Whitney Dailey, vice president of marketing at Cone, touched on the evolution of PwC’s outlook on responsible business – starting with a 100-year legacy of philanthropy that transformed in 2007 to a focus on “corporate responsibility.” Since then, PwC has again evolved to “Responsible Business Leadership,” where “doing good” is embedded as part of the business strategy. The shift impacted PwC’s programs, as well. PwC’s financial literacy-focused “Earn Your Future” effort has evolved to a more multifaceted program. “Access Your Potential” equips young people in disadvantaged communities with the financial, technology and career-selection skills to succeed.


• Engage Employees, Drive Sales: In a session entitled, “Partnering with Purpose: The Drive for Strategic Impact, Fueled by Data,” panelist Deidre Fraser, manager, special projects, Alex and Ani, shared a key insight from a recent cause marketing partnership with Plan International USA. To drive awareness, engagement and sales, the jewelry brand educated its employees about the special “Because I am a Girl” charm to benefit Plan International USA, then challenged them to a contest. The store that sold the most bangles would send one employee on a service trip to Ethiopia. The contest was so successful, the “Because I am a Girl” bangle became the brand’s best-selling item.


• Gen Z is Primed to Engage, No Matter the Cause: Michaela Bethune, head of campaigns at DoSomething.org shared a provocative insight in the session entitled “Today's Activists, Tomorrow's Voters: Young People around the World are Speaking out and Changing the World We Live in.” Bethune stated when it comes to engaging Gen Z, “the cause doesn’t matter.” And although that may have shocked many in the room, Bethune expanded on the thought, saying Gen Z is not only primed to engage, they care deeply about nearly every issue. If cause marketers reach Gen Z where they are (primarily on social media) with an activation that resonates with the audience, they will jump at the opportunity to support it.

As the day came to a close, one overarching insight became clear: cause marketing is alive and well – it simply continues to evolve. Indeed, the Summit revealed new approaches to partnerships, novel nomenclature that reflects how impact can be embedded directly into the business strategy – even new audiences, in the form of Gen Z. These fresh perspectives, important insights and new models will continue to inspire practitioners for the year ahead.

Whitney Daily is Vice President of Marketing, Cone Communications 

Photo: Cause Marketing Summit

Originally published at Cone Communications and distributed by 3BL Media.

The World Business Council for Sustainable Development and its member companies—which include Microsoft, Accenture, and 3M—agree that businesses and governments, working together on policy, is the next necessary step in accelerating Climate Action. To that end, WBCSD has created a comprehensive guide for policymakers, Why Carbon Pricing Matters: A guide for implementation.

“We believe the time for debating the need for carbon pricing is over, now is the time for the business community to push for policies that place a cost on CO2 emissions,” said Peter Bakker, President and CEO at WBCSD.

A carbon price is a monetary cost put on the per-ton emission of carbon dioxide into the atmosphere from use of fossil fuels or process emissions. This is not a new idea, having been proposed by University of Cambridge economist Arthur Pigou in 1920.

In The Economics of Welfare, Pigou introduced the concept of externality and the idea that external problems could be corrected by the imposition of a charge. As WBCSD notes, some governments are already leading the way. However, carbon pricing alone is not enough to create a low-carbon society—policymakers need to invest in research and development to create new technologies that complement carbon pricing.

“Carbon pricing is an accepted concept for managing carbon emissions and many jurisdictions are looking to implement one instrument or another,” said Rasmus Valanko, Director of Climate & Energy at WBCSD. “We want to take the discussions to the next level of detail, helping policymakers with the choices they need to make.”

WBCSD’s guide gives a high-level overview of the who, what and why of carbon pricing before diving deeply into implementation approaches, potential social impacts and revenue use, and future considerations such as building a global trading structure beyond the Paris Agreement.

In the conclusion to their report, WBCSD makes the statement, “Business looks forward to dialogue with policymakers to find the most suitable and expedient path to establishing carbon pricing and steps towards a global carbon market over the course for 2018.”

Photo: World Business Council for Sustainable Development

 

As April is National Autism Awareness month, it behooves us to remember that large and small companies alike can do their part to cope with recent estimates that suggest as many as one in 45 children in the U.S. have been diagnosed with some form of autism.

One such company is a dog treat maker in upstate New York, which says it is giving adults a chance at building enriching and productive lives while creating, marketing and shipping goodies for our furry friends. Good Reasons, a North Salem, NY-based dog treat company, describes itself as a “social-good enterprise” at which half of its employees are adults who have autism or other developmental disabilities.

Good Reasons currently employs between 40 to 50 people. In addition to what the company says is a fully integrated work environment, those employed by the company are also offered assistance with everyday life tasks such as managing their salaries.

As for the treats themselves, Good Reasons canine treats are based on recipes developed by a Culinary Institute of America-trained chef. All the ingredients are sourced from the U.S.; they are also made and packaged at the company’s Westchester County facility. The products are sold online as well as at brick-and-mortar retailers.

Good Reasons was launched by Community Based Services, Inc. (CBS), a nonprofit that provides the highest level of individualized care for people with autism and developmental disabilities in both home and community-based settings. Founded in 1981, Community Based Services is among the first organizations to help serve and support the people of the Hudson Valley region of New York.

The agency’s mission is to provide each individual with the best possible quality of life through residential and community-based opportunities. Its work culture demands that all decisions be made with all of the individuals’ involvement while keeping their best interests in mind. This process is ensured through what CBS says is an innovative person-centered approach that delivers services based on the specific interests, abilities and the evolving needs of each person.

Good Reasons currently makes six different treats for pets, and sells branded clothing and gear online as well.

Image credit: Good Reasons

The Starbucks Coffee Company has often expressed support for diversity and promoting racial tolerance. In recent years its demonstrated that commitment through a variety of initiatives: its support of LGBT rights, pay equity and its efforts to increase gender and cultural diversity on its board.

But its most famous effort was in 2015, when the company launched its “Race Together" campaign. Baristas were encouraged to actively engage customers in a discussion about race relations in the aftermath of several troubling conflicts around the country. The objective, according to then-CEO Howard Schultz, was to encourage a national discussion that would engender more unity and respect.

The program didn’t last long. Customers complained about having to talk about a divisive issue over their morning coffee, employees expressed discomfort with the process and the media tore the idea apart. Some board members who had reluctantly hashed out the program with Schultz suggested that Starbucks would be better served focusing on “its own diversity shortcomings” rather than trying to engage the public in discussion that many might not be ready to have.

This week that insight came home to roost when Starbucks' current CEO, Kevin Johnson attempted to address why the manager of a Philadelphia Starbucks had two African American men arrested for trespassing. The two real estate brokers, dressed in casual clothes, had been waiting for a friend to arrive before ordering their drinks. They were later escorted out in handcuffs.

As would be expected, Johnson went into overdrive, issuing a public apology and scheduling a meeting with the two men who had by then been released and were now accompanied by their lawyer. The manager who had called the police was let go.

But Johnson didn’t stop there. Within hours he had reached out to civil rights experts around the country and began crafting the outline of a new training module, enlisting the help of experts like former US attorney general Eric Holder, the president of the NAACP Legal Defense and Education Fund, Sherrilyn Iffil, and others. Finally on Tuesday, he announced that all 8,000 Starbucks-owned stores would be closing for a half-day for racial bias training and invited the two men to join him in “finding a constructive way to solve this issue.”

The $20 million that Starbucks is estimated to lose for the half-day closure is small compared to the loss of credibility that the company is facing in the wake of the scandal. Over the decades, Starbucks has fought hard to demonstrate its commitment to corporate responsibility. Its sustainability initiatives include advocating for fair, livable wages, supporting inclusive hiring and being among the first companies to voluntarily start recycling in its stores.

The company will most likely rise above this scandal, just as it had weathered the disappointing Race Together campaign. But it will do so not just because it took quick, decisive action, but because it learned from its earlier mistakes and built upon their lessons. This time it framed its efforts around the credibility of individuals and organizations that could speak with authority on the destructive impact of racial profiling in a business venue. And in doing so, it’s also demonstrating that solving America’s diversity problems truly affects everyone, even corporate responsibility leaders.

Ironically perhaps, the events of the past week have already accomplished just what Schultz and Starbucks’ board of directors set out to do three years ago when it encouraged its baristas to dial-up discussion on race relations. When the first leg of this sensitivity training is over (and there will likely be repeats in the years to come), Starbucks may be able to offer an example of how a company can truly change its culture and transform the way race and social differences are addressed by company policies, between workers and with its many stakeholders. Because as experts point out, having a dialogue on racial bias isn’t what makes the difference. It’s being accountable to the changes the company says it’s making. And as far as Starbucks' endeavor to address other social and environmental issues goes, that's been Starbucks' strong point.

 

Flickr images: Todd Huffman; Rodrigo Sampaio Teixeira

National Volunteer Week, which first launched in 1974, is wrapping up. Now largely driven by the Points of Light Foundation, the week offers communities, companies and nonprofits an opportunity to showcase the positive impact of volunteer service, as well as demonstrate what can occur when the power of volunteers to come together to take on difficult challenges in communities nationwide.

To that end, one company putting the spotlight on volunteering efforts is Comcast. Tomorrow, the company will bookend the week with what it calls “Comcast Cares Day,” a single-day volunteer event that Comcast says is approaching the milestone of 1 million volunteers.

Since Comcast Cares Day first began in 2001, volunteers have logged over 5 million hours across 8,800 projects. Comcast and its employees have since contributed more than $22 million in grants to participating nonprofit community partners.

A Comcast spokesperson said the company is working towards a goal of logging 500,000 employee volunteer hours on environmentally-focused projects alone by 2020. “As a company, giving back to local communities is in our DNA,” the Comcast representative explained in an email to TriplePundit. “Senior leaders and their families are strongly encouraged to sign up for projects and inspire their teams to do so as well.”

The process for Comcast employees is relatively simple. They can research and sign up for various projects at a company-sponsored web site.

Local volunteer opportunities are all over the map – literally and figuratively. Comcast employees, friends and family members last year planted approximately 1,000 trees in areas of California, Florida, and Texas that were affected by last year’s wildfires and hurricanes. In Chicago, employees worked with a community organization in Chicago to pack over 6,000 baby hygiene kits for underprivileged children. Comcast has also maintained a five-year relationship with Boys & Girls Clubs across the country, including a recent initiative that helps provide digital learning opportunities to early nearly 4 million Boys & Girls Club kids and teenagers.

One employee who feels enriched by this experience is Monica Lane, a finance and accounting analyst who is based at Comcast’s Norcross, GA office. On a regular basis, Lane works with several volunteers from her all-female motorcycle club to prepare meals for 50 to 60 families who are staying at a Nicholas House, a homeless shelter in the Atlanta area. For Lane and her fellow club members, this has been tradition they have kept up for seven years.

“We don’t have to encourage or remind people to help – everyone just knows to show up,” Lane, a Comcast employee for 21 years, explained. “They understand the importance of being dedicated to the community.”

This volunteering effort has since expanded, as other local motorcycle clubs have scheduled additional days throughout the year to help with anything from preparing meals to helping children with homework.

And during tomorrow’s Comcast Cares Day, about 20 volunteers will arrive at Nicholas House – including 15 of Monica’s colleagues. They will prepare a meal, read to children staying there, play games and help them with homework. “It makes me so happy to know that we’ve helped connect the company to our community and the support just continues to grow,” Lane said.

Image credit: Comcast

It’s contagious, spreading fast, and is having serious consequences throughout society.

I’m not talking about this season’s virulent flu, but the recent announcements by the biggest global mainstream investors that they will be increasing oversight on governance among their portfolio companies.

Investment firms—including BlackRock, Vanguard, and State Street (which collectively manage $14 trillion in assets)—and several other investment entities are putting the thousands of companies in their portfolios on notice that their governance practices and strategies will be more closely monitored by the funds in the future. And they’re not looking just for traditional governance—that the social relevance of their operations and missions will be evaluated, too.

This notice was included in an open letter by BlackRock founder and chief executive Larry Fink to the CEOs of the world’s largest public companies this past January. “Society is demanding that companies, both public and private, serve a social purpose,” Fink wrote. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

Fink explains that he sees “many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining… As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges.”

Due to this cultural change, Fink says BlackRock will be adding substantially to its stewardship team, doubling the 32-member staff over the next three years and assigning a high-level executive Barbara Novick, BlackRock vice-chairman and co-founder, to oversee the ramped up effort. Fink stated that asset managers’ responsibilities now include “investing the time and resources necessary to foster long-term value.” With some 4,000 companies in its portfolio, BlackRock will indeed need to step up its oversight team to execute more in-depth engagement re. governance with a social purpose.

Another open letter to CEOs by Bill McNabb of Vanguard and nine other investment firms including State Street and CalSTRS—calls on companies to reset their strategies to focus on long-term growth plans that include their interactions with society.

The signees, operating as The CEO Force For Good / Strategic Investor Initiative of CECP, have produced a seven-point checklist for expanded, CEO-driven reporting that includes such items as:

• What are the key risk factors and mega trends (such as climate change) your business faces?”
• How to you describe your corporate purpose?
• How do you manage your human capital requirements over the long-term?
• How will the composition of your board (today and in the future) help guide the company to its long-term strategic goals?

McNabb sums up the rationale for the proposed change in governance oversight bluntly: “For too long, companies have sacrificed long-term value creation to generate short-term results.”

Representing $15 trillion in assets, the group’s statement is bound to have an impact equal to the size of its portfolio holdings. This doubling down on governance oversight is a paradigm shift in investment decision making. Andrew Ross Sorkin, editor of the NY Times Dealbook column, called the news “a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism.” He confirms the changed context of governance today in which previously “agnostic” investment funds and businesses which have avoided public stands on non-material issues have moved toward socially responsible principles. “It is a refrain that we’re hearing more and more from various pockets of the business community, and in fact, last year company leaders found themselves taking stands on issues like immigration policy, race relations, gay rights and more,” said Sorkin.

The funds are also reacting to the pushback against Exchange Traded Funds (ETFs), the guiding investment principle of the decade for the big firms. In this strategy, investments are made in thousands of businesses through passive equity vehicles that track indexes, not individual companies. With trillions parked in index funds which measure value by scoring macro-trends in specific sectors, the investment firms were reduced to passive investors, with little engagement with the executives and boards of companies.

That game has changed. Fink says, “the growth of indexing demands that we now take this [oversight of governance] to a new level.”

It has certainly captured the attention of public companies who are now scrambling to implement CR policies if they didn’t have any, and to review current CR policies for upgrades.

This shift has actually been underway for some time. The canary in the coal mine sang out last year, when BlackRock and Vanguard joined up to pressure ExxonMobil to report on the impact of climate change on its profit projections. It was an unprecedented move that was viewed as an anomaly, not a movement.

That initial solo warning has now escalated into a full-blown chorus of concern about governance that integrates social purpose.

Public companies, take notice. SRI (socially responsible investment) is becoming business-as usual.