Shareholders request The Middleby Corporation (Middleby) issue a report describing the company’s environmental, social, and governance (ESG) policies, quantitative performance metrics, and improvement targets, including a discussion of greenhouse gas (GHG) emissions management strategies and metrics. This report should be updated annually, be prepared at reasonable cost, and omit proprietary information.
Middleby should consider the resources and recommendations made by the widely accepted Global Reporting Initiative, CDP, Sustainability Accounting Standards Board, and the Financial Stability Board’s Taskforce on Climate related Financial Disclosures when identifying ESG topics to be included in this report. Proponents believe significant ESG issue areas for Middleby include operational environmental impacts (including air emissions, energy use, and water use); product safety and quality; employee health and safety; chemicals and hazardous materials waste management; and manufacturing and supply chain management.
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 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, strengthen risk management programs, stimulate innovation, enhance company-wide communications, and recruit and retain employees.
Middleby last published a sustainability report in 2010. In the absence of an up to date discussion of ESG policies and practices, performance metrics, and goals to reduce environmental impacts, investors are unable to evaluate whether Middleby is adequately prepared to adapt and respond to key ESG risks and opportunities.
In contrast, Assa Abloy, Barnes Group, Donaldson Company, Masco Corporation, Flowserve Corporation, Lennox International, and Lincoln Electric are examples of the numerous small industrial companies publishing sustainability metrics alongside qualitative supporting details.
Corporate Sustainability Reporting is widespread:
• In 2015, KPMG found that of 4,500 global companies, 73% had ESG reports.
• The Governance & Accountability Institute reports 82% of the S&P 500 published corporate sustainability reports in 2016.
• CDP, representing 827 institutional investors globally with approximately $100 trillion in assets, calls for company disclosure on GHG emissions and climate change management programs. Seventy percent of the S&P 500 reported to CDP in 2015.
The link between strong sustainability management and value creation is increasingly evident. The University of Oxford and Arabesque Partners recently reviewed 200 studies on sustainability and corporate performance and concluded 90 percent of studies show “sound sustainability standards lower the cost of capital of companies” and 80 percent show “stock price performance of companies is positively influenced by good sustainability practices.”
Furthermore, a study by the Society for Human Resource Management found employee morale was 55% better, loyalty 38% better, and workforce productivity 21% better in firms with strong sustainability programs.
Last year, this proposal received a vote of 44.6%, a significant level of support that management should not ignore.