Social and Environmental Resolutions: Pain and Gain

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Corporate Social Responsibility (CSR) programs can be controversial and difficult to measure. However, they will be a staple for the foreseeable future.
Indeed, 93% of 766 global CEOs surveyed believe that sustainability will be "important" or "very important" to the success of their business, according to A New Era of Sustainability, a study conducted last year by Accenture and the UN. 96% of the CEOs thought sustainability should be fully integrated in corporate operations and strategy. Perspectives had shifted dramatically since the previous study in 2007, but CEOs still see significant challenges in truly embedding sustainability in their businesses. Many also feel investors don’t reward corporations that embrace sustainability practices. (Businessweek article)
Whether or not investors are rewarding CSR programs, they are definitely pushing for them in shareholder proposals. Ernst & Young published a report today - Shareholders press boards on social, environmental risks - that points out a significant increase in sustainability focused shareholder proposals, as well as voting in support of them. In fact, shareholder resolutions focusing on social and environmental issues comprised the largest portion of all shareholder proposals in 2010, according to the report. Its authors predict that half of all shareholder resolutions in 2011 will center on social and environmental issues.
Interest and successful passage of corporate social responsibility related proposals has increased measurably over the last decade. In 2000, 150 such proposals came to a vote. 191 came to a vote in 2010. Furthermore, the percentage of social and environmental shareholder resolutions that garnered at least 30% shareholder support (a critical threshold for many corporate directors) increased to 26% last year - - up from from just 2% in 2005.
Driven by concerns about the financial and reputational risks associated with climate change and sustainability, institutional investors are increasing the number of environmental and socially focused shareholder proposals and making them more specific. The report's authors state that a growing number of these proposals are linking social and environmental matters to traditional governance issues, such as compensation and the qualifications of board members. 
View the full report.
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