Posts Tagged ‘canada’
By Selena Lucien & Sophie Langlois
As outlined by Andrew Kitching when discussing director liability under the Canadian Business Corporations Act, some commentators assert that shareholders should only make up one part of the broader stakeholder interest in making decisions for the corporation. They believe that the shareholder primacy model, concerned primarily with profit maximization, sidelines stakeholder interests and actually restrains directors’ ability to provide long-term guidance and leadership.
There is growing evidence that shareholders can actually be better served with improved stakeholder engagement and consideration beyond meager public relations campaigns. A UN Global Compact report states, “If stakeholders are adversely affected by a company’s actions, shareholders’ value will suffer. With the growth in pension and insurance funds and other institutional investors, shareholders are increasingly also company stakeholders…therefore these groups’ needs are increasingly interconnected.”
Moreover, shareholders are demanding change and are gradually pushing for strong corporate sustainability strategies. A study conducted by Ernst & Young titled Shareholders press boards on social and environmental risks: Is your company prepared? evaluated American shareholder proposals from 2010 and found that resolutions focusing on environmental and social issues made up the largest portion of shareholder proposals. Moreover, it concluded that shareholders increasingly believe that a robust social and environmental business model correlates strongly with risk management strategies and ultimately its portfolio performance.
A more recent collaborative study by The Conference Board and FactSet indicated that the number of shareholder proposals in the United States concerning social and environmental policy issues (243 proposals in 2011) continued to increase since 2007, despite the decline in other subjects; they constituted 35.2% of the total number of proposals. This data represents the “increasing sensitivity of shareholders to the long-term value generation potential of a cohesive corporate sustainability strategy.”
A forward-looking trend is revolutionizing the expectations placed on corporations. This is exemplified with the B Corps model, an organization that has successfully pushed for the creation of a new legal classification for corporations which aims to “create a material positive impact on society and the environment.”
The trend observed in Canada has been less active, with only 2% shareholder proposals related to social and environmental issues appearing on the S&P/TSX Composite Index in 2010. The S&P had only 254 corporations in 2010, compared to the American Russell’s 3000 and the S&P’s 500. This may reflect a cultural difference in outspokeness or interest in environmental and social sustainability amongst Canadian and American shareholders.
At a recent lecture at Toronto’s Rotman School of Business, Richard Ross, previous Chair and CEO of Inmet Mining Corporation, a Canadian mining company, elaborated on the decision-making process surrounding Inmet’s involvement in the Papua New Guinean Ok Tedi mine. His main message was that mining companies today must “grow responsibly” to increase value for shareholders. Such an approach requires a sound knowledge and understanding of all aspects of corporate responsibility. It also requires a willingness on the part of companies to make decisions that impact short-term profitability and growth with a view to minimizing longer-term reputational and financial risk. During Inmet’s involvement, Ok Tedi was successful in striking a balance between profitability and mitigating environmental impact.
When other shareholders in Ok Tedi decided to follow a course of action that did not meet Inmet’s view of sustainability, they decided to end the partnership and exit the mine. No doubt Inmet could have made a profit in the short-term by staying in the project; however, the risk to their “social license to operate”, which is the key to achieving long-term growth and value creation, could have been impacted.
As a leading force behind the first MBA program with a specialization in global mining management at the Schulich School of Business in Toronto, Ross explained that senior management in mining companies must now have, as a core competency, a strong appreciation for and understanding of all aspects of corporate responsibility. Ultimately they must have a clear vision of what sustainability looks like for their companies and to make sure that their directors and shareholders understand the cost and opportunity of growing responsibly.
While the Board of Directors is responsible for ensuring profit maximization for the shareholders, it is becoming increasingly evident that long-term sustainable value creation depends on a robust social and environmental risk management plan. Directors are most effective when they are able to address increasingly complex environmental and social risks. The trajectory towards responsible and sustainable investment supports a more balanced approach to the director’s fiduciary duty and this suggests stronger consideration for stakeholder interests.
CSR Research Digest – February 2013
NBS’s Leadership Council met in September 2012 to identify the issues inside their organizations, in their value chains, in the marketplace, in government and in society that limit sustainable development. Representing the private, public and non-profit sectors, the roundtable includes organizations well known for their environmentally sound practices and public support of sustainability such as LoyaltyOne, TD Bank Group, Tim Hortons Inc. and Suncor Energy.
- Collaboration is just one of 10 challenges facing Canadian industry in 2013 as defined by a roundtable of leading “green” companies.
- Leading companies have already secured the easy wins, such as reducing emissions, going paperless and reduced packaging.
- To continue on their sustainability journey, these leaders recognize the need to tackle system-wide challenges beyond the boundaries of their organizations.
- The top 10 Canadian business sustainability challenges:
- How can businesses contribute to effective, integrated public policy on the right issues?
- How can companies best engage value chain, industry and NGO partners to achieve sustainability goals?
- How can businesses help Canadians become informed, inspired and engaged in a national dialogue about responsible consumption?
- What corporate structures enable companies to deliver on sustainability goals?
- How can companies keep their long-term sustainability agenda on track despite leadership changes?
- How should companies navigate issues regarding Aboriginal rights and entitlements?
- How can Canadian organizations become more innovative?
- How can companies embed social license to operate into their strategy?
- How can business and society prepare effectively for the impacts of climate change?
- How can companies respond to the proliferation of voluntary and mandatory reporting requirements?
NBS, Ivey School of Business and Deloitte
CSR Research Digest – January 2013
A research by hygiene and paper company SCA looks at the trends in sustainability in North America. The general adult survey was conducted online in the United States and the business professional survey in the United States and Canada.
- Corporate sustainability plans ‘almost double year-on-year’.
- In 2012, 64 percent of US companies said they had a sustainability plan in place or were in the midst of drafting one, up from 38 percent in 2011.
- 31 percent of US firms and 30 percent of Canadian firms said their sustainability plans are having a positive impact on the bottom line.
- But 57 percent of US companies and 60 percent of Canadian companies saw no impact on their bottom line, and 12 percent of US companies and 10 percent of Canadian companies saw a negative impact on profits from their sustainability initiatives.
- Industry has approached the end of “corporate sustainability 1.0″ – the picking of low-hanging fruit – and that there is now a large gap between the status quo and the next level of achievement.
- To get to the next level of sustainability achievement, businesses and consumers should consider the following initiatives:
- reducing food waste: Americans waste 40 percent of the nation’s food supply, the single biggest contributor to solid waste in landfills;
- adding a universal sustainability index, a guide to help consumers and companies make smarter product choices. This was deemed a good idea by three-quarters of people surveyed;
- reducing the amount of “green washing,” or false claims by companies that tout a product’s environmental benefits.
- Sustainability plans should also include the health of a company’s workforce, but this is generally not the case at present.
Governance Research Digest – December 2012
The “Canada and the Green Economy” report explores how the country deals with five aspects of green economic thinking, including governance and measurement, and what Canadian business and the accountancy profession can do to facilitate the transition. The report draws on information from experts at two green economy roundtable events held in Toronto and Vancouver this year.
- The green economy and the accountancy profession will play critical role in ensuring the preservation of the country’s natural resources for the future generations.
- Government policy was cited by 50 percent of respondents as the most important driver of the green economy, followed by consumer demand (46 percent), new market opportunities (36 percent and pressure from investors (32 percent).
- Some 46 percent of delegates surveyed said the adaptation and transition from existing business models is the most critical challenge posed by the green economy for business in the next five to 10 years.
- Clarity about global and national frameworks and targets was chosen by 35 percent of those surveyed, followed by consumer engagement (31 percent) and access to investment (29 percent).
- The report includes case studies on the following companies: Walmart, Better Place, Loblaw, Domtar and Vancity.
ACCA (Association of Chartered Certified Accountants)
Governance Research Digest – June 2012
Previous research on the moral foundations of transformational leadership has focused primarily on stage of justice reasoning; this study focuses on developmental mode of care reasoning. Multilevel regression analyses were conducted on data coded from interviews with a sample of Canadian public sector managers (N = 58) and survey responses from their subordinates (N = 119).
- Managers’ developmental mode of care reasoning significantly and positively predicted subordinates’ reports of transformational (but not transactional) leadership, with significant differences in follower reports of transformational leadership between those using more versus less advanced modes of care reasoning.
- Conceptual implications for understanding transformational leadership and the ethics of leadership, directions for future research, and suggestions for leadership interventions are discussed.
S. Simola, J. Barling and N. Turner
Journal of Business Ethics, 108 (2), 229-237
CSR Research Digest – January 2012
The Network for Business Sustainability releases its fifth annual sustainability priorities report, a document that represents the key sustainability challenges facing Canadian industry. The report highlights the Top 10 challenges according to the cross-sectoral group representing leading Canadian Business.
- Having the process and tools in place to embed sustainability into our business decisions model will help us to achieve our sustainability vision and goals.
- The combination of innovation, sustainability and profitability is powerful. If research can unlock the potential in our organizations to view our business model differently and encourage sustainable innovation in a meaningful way, then we will learn, adapt and lead change.
- A substantial part of our environmental impact depends on how consumers use the product, and we want to stimulate that environmental consciousness in the public.
- Though we’ve come a long way, we are still learning how to best balance the environmental and economic elements of sustainability.
- We’ve taken a big step in setting company-wide environmental goals. Now, we’re working to measure progress on those commitments.
- Many companies now have employees retiring or who are eligible for retirement. In some companies, this number can be over 30 percent. How do we meet this challenge to ensure a sustainable workforce and attract and retain the best employees?
- We’re working with partners across sectors, including NGOs, to develop best practices and set new standards.
Network for Business Sustainability