High Meadows Institute’s research interest in this area is on the integration of corporate responsibility into the management and investment decision-making process of public and private companies. The first focus area for us is on the investment decision-making process of the private equity and mainstream capital markets and how corporate responsibility management impacts organizational and financial performance. The second focus area is collaborative models for rule making and the development of standards and norms for regulating corporate behavior in society.
High Meadows Institute Insights and Working Papers
Working with our partners, the High Meadows Institute is currently meeting with public and private companies and investors and academic and nonprofit partners to explore how we can more effectively link corporate responsibility management to organizational performance management and reporting.
Managing for the 21st Century
1. Bringing discipline to your sustainability initiatives – by Sheila Bonini & Steven Swartz (McKinsey & Company, August 2014)
Companies across industries have come to accept the importance of sustainability programs, both for their own benefit and for the benefit of the societies they operate in. To ensure the highest level of success of these initiatives, this McKinsey analysis identifies a few basic principles, very similar to good performance management, that every sustainability program should consider. First, companies need to keep their programs focused on 3-5 priorities. Secondly, they need to set specific concrete goals, and then create accountability for performance. Finally, companies should communicate the financial impact of the sustainability programs to everyone in the company.
2. Why sustainability leaders don’t impress Wall Street – by Joel Makower (GreenBiz.com, August 4, 2014)
This article looks at McKinsey & Company’s research on sustainability and shareholder value. McKinsey senior experts Sheila Bonini and Steven Swartz conducted interviews of 45 companies to understand how they capture and communicate the value of sustainability, leading them to publish “Profits with purpose: How organizing for sustainability can benefit the bottom line.” They conclude that there is massive mis-communication between investors who don’t have the data they need and don’t understand how sustainability creates shareholder value, and companies that don’t know how to tell a financial success story that’s relevant to the financial sector and other investors. To combat this miscommunication, Bonini and Swartz advocate for investors to set aggressive external targets for their sustainability initiatives, have a unified sustainability strategy with clear strategic priorities, set aggressive internal targets for their sustainability initiatives, involve a broad leadership coalition in co-creating the sustainability strategy, and ensure that the financial benefits of sustainability are clearly understood across the organization.
3. The Performance Frontier: Innovating for a Sustainable Strategy – by Robert G. Eccles & George Serafeim (Harvard Business Review, May 2013)
In order to create sustainable programs that increase both financial gains and environmental, social and governance (ESG) performance, companies need to focus in on the most relevant, impactful ESG issue to create shareholder value, and they must begin innovating in products and processes that reflect this issue. The authors provide a framework for business, broken into four action items: 1. Identify which ESG issues are most critical to the business 2. Quantify the financial impact of ESG programs 3. Begin innovation in products and the business model to achieve these programs 4. Communicate these innovations to stakeholders.
4. Framework for the Future: Understanding and managing corporate citizenship from a business perspective – by Chris Pinney (Boston College Center for Corporate Citizenship, February 2009)
For business to effectively manage corporate citizenship in today’s new operating environment, this article recommends five essential components: 1. Understand key elements of corporate citizenship management 2. Identify corporate citizenship risks and opportunities 3. Align corporate citizenship with business strategy 4. Create organizational competency to manage corporate citizenship 5. Measure and communicate corporate citizenship performance.
5. Corporate culture: Lofty aspirations – by Andrew Hill (The Financial Times, July 2012)
This article examines the financial sector and its corporate culture exclusively focused on short-term profits and bonuses. This culture of excess and bad behavior not only fueled the global economic crises, but also public anger and mistrust. Because regulation and external intervention so often fail, the solution needs to be a cultural change from top management within the company.
6. Integrating ESG in Private Equity: A Guide for General Partners – by Principles for Responsible Investment (2014)
This practical guide provides organizations with ideas on how to integrate environmental, social and governance (ESG) factors both within the GP organization itself and within its investment process. The framework suggests such things as organizations committing to ESG integration by setting ESG objectives and engaging with stakeholders. They must also screen for ESG risks and then include ESG considerations as standard practice in investment decisions.
7. The Value Driver Model: A Tool for Communicating the Business Value of Sustainability – by the Global Compact LEAD (United Nations, December 2013)
This report identifies a “value driver model” that provides companies with a handful of important metrics to measure the performance of their sustainability practices. Companies can use this model to understand the financial impact of their sustainable business strategies, communicate this value to shareholders, and keep employees motivated with these effort.
8. Global Survey of Environmental, Social and Governance Policies of National Governments, International Organizations and Institutional Investors – by Michael J. Kane (EPA, December 2009)
This survey provides readers with examples of environmental, social and governance (ESG) programs adopted by governments, international organizations, and global investors. Examples include the “Equator Principles” adopted by financial institutions to promote ESG performance, national agencies such as Japan’s Ministry of the Environment or the US State Department’s Office of International Labor & Corporate Social Responsibility that adhere to ESG policies, and other organizations focused on promoting corporate governance.
1. Sustainability goes mainstream: Insights into investor views – Investor Survey, winter/spring series (PwC, May 2014)
New research by PricewaterhouseCoopers found that sustainability issues significantly influence investment decision-making among large institutions providing capital for finance growth to companies. While these institutional investors seek more common standards and better information, they consider incorporating sustainability issues into their investment strategy as relevant and helpful to reducing risk.
2. The Impact of Corporate Sustainability on Organizational Processes and Performance – by Robert G. Eccles, Ioannis Ioannou & George Serafeim (Harvard Business School, July 2013)
Using a sample of close to 200 companies, this paper analyzes the impact of CSR on businesses’ performance, concluding that companies adopting sustainability programs, or “high sustainability companies,” have more responsible boards of directors and executive salaries that are more closely tied to sustainability metrics. These companies also tend to be more transparent and over the long run outperform “low sustainability companies.”
3. Valuing social responsibility programs – by Sheila Bonini, Timothy M. Koller & Philip H. Mirvis (McKinsey & Company, July 2009)
This McKinsey report shows how companies are creating value through ESG programs. This value includes increased sales and growth through enhanced reputation and hence new customers, decreased costs and higher returns on capital from operational and workforce efficiency, and reduced risks of detrimental activities such as boycotts through increased public support.
4. The Integration of Environmental, Social and Governance Issues in Mergers and Acquisitions Transactions: Trade Buyers Survey Results – by PricewaterhouseCoopers (December 2012)
In 2012, a survey was conducted to assess corporate buyers’ attitudes towards environmental, social and governance (ESG) risks and opportunities in their mergers and acquisitions. The takeaways from the survey are that ESG programs can affect the likelihood of a deal occurring, poor performance of ESG programs can have negative impacts on the valuation of deals and used as leverage in negotiations, ESG factors are increasing in importance, and more companies are rolling out systematic approaches to ESG.
5. RCM Sustainability White Paper – by RCM (July 2011)
This paper sheds light on the impact of environmental, social and governance (ESG) policies on portfolio performance from 2006 to 2010. It concludes that investors’ portfolios are not negatively impacted by ESG criteria in the stock selection process, but rather that there is a probability of outperformance of portfolios with stocks from companies integrating ESG programs over the longer term. The study found that investors could have added 1.6% a year over a five year period to their investment returns by allocating to portfolios that invest in companies with above-average ESG ratings.