Outcome: Successfully withdrawn after Middleby published a new Sustainability Report outlining a materiality assessment and a discussion of the company’s performance on key environmental metrics.
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 utilized Global Reporting Initiative, CDP, Sustainability Accounting Standards Board, and the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) when identifying ESG topics to be included in this report. Proponents believe significant ESG issue areas for Middleby include operational environmental impacts (air emissions, energy use, and water use); product safety and quality; employee health and safety; workforce development; 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.
Last year, this proposal received a vote of 57.2% – a majority level of support that management should not continue to ignore.
Since Middleby last published a sustainability report in 2010, the company has more than tripled its net sales and added a Residential Kitchen Segment that now accounts for more than 25% of net sales. Investors cannot rely on such outdated and inaccurate information as they seek to evaluate whether Middleby is adequately prepared to adapt and respond to key ESG risks and opportunities.
The Governance & Accountability Institute reports 85% of the S&P 500 published corporate sustainability reports in 2017; Middleby is clearly an outlier. Furthermore, Assa Abloy, Barnes Group, Donaldson Company, Masco Corporation, Flowserve Corporation, Lennox International, and Lincoln Electric are examples of the numerous small industrial companies regularly publishing sustainability metrics alongside qualitative supporting details.
Corporate sustainability reporting has become the norm that investors expect. The 1,500 signatories of the Principles for Responsible Investment, representing over $60 trillion in assets, have pledged to seek “appropriate disclosure on ESG issues.” The TCFD, whose members include JPMorgan Chase, UBS Asset Management, Generation Investment Management, and BlackRock, recommends companies disclose their governance structures, strategies, risk management processes and metrics and targets for managing climate related risks and opportunities.
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.”