Shareholders request Acuity Brands, Inc. (Acuity) issue a report describing the company’s environmental, social, and governance (ESG) policies, performance, and improvement targets, including a discussion of greenhouse gas (GHG) emissions management strategies and quantitative metrics. This report should be updated annually, be prepared at reasonable cost, and omit proprietary information.
Proponents believe tracking and reporting on ESG practices strengthens a company’s ability to compete and adapt in today’s global business environment, which is characterized by finite natural resources, changing legislation, and heightened public expectations for corporate accountability. Transparent, substantive reporting allows companies to better integrate and capture value from existing sustainability efforts, identify gaps and opportunities in policies and practices, enhance company-wide communications, and recruit and retain employees.
Support for the practice of sustainability reporting continues to gain momentum:
In 2015, KPMG found that of 4,500 global companies 73% had ESG reports.
The Governance & Accountability Institute reports 82% of Acuity’s peers in the S&P 500 published corporate sustainability reports in 2016.
One of the United Nations’ Principles for Responsible Investment (PRI) is to seek “appropriate disclosure on ESG issues”; the PRI has more than 1,500 signatories with over $60 trillion in assets under management.
The link between strong sustainability management and value creation is increasingly evident. A 2012 Deutsche Bank review of 100 academic studies, 56 research papers, two literature reviews, and four meta-studies on sustainable investing found 89% of the studies demonstrated that companies with high ESG ratings showed market-based outperformance. Similarly, a report published by WWF, CDP, and McKinsey & Company, found that companies with GHG targets achieved an average of 9% better return on invested capital than companies without targets.
Acuity has not disclosed a qualitative description of its ESG policies nor quantitative metrics conveying the company’s operational ESG performance, its GHG data, or established goals to improve environmental performance. In contrast, Assa Abloy, Cabot Corporation, Minerals Technologies, Cytec Solvay Group, Osram, Cree, Rockwell Automation, and Lincoln Electric are examples of the numerous, small- to mid- sized industrial companies publishing sustainability metrics and improvement targets, alongside qualitative supporting details.
As shareholders, we believe it is prudent for Acuity to disclose how it is managing its ESG impacts, which can pose significant reputational, legal, regulatory, and financial risk to the company and its shareholders. Without appropriate disclosure, investors and other stakeholders cannot adequately assess how Acuity is managing its material ESG risks and opportunities.
Proponents believe Acuity should review the resources and recommendations made by the Global Reporting Initiative, CDP, and the Sustainability Accounting Standards Board in identifying topics to be discussed in this report. These widely accepted platforms suggest topics such as operational environmental impacts (including energy and water use and air emissions), product safety, hazardous materials waste management, business ethics, labor management (including health & safety), and supply chain management.