15 companies committed to change

By Larissa Fernand |  14-08-20 | 

The home page of Horizons Sustainable Financial Services assertively greets website visitors with: INVEST like you give a damn. In case that has left you flummoxed, let me hasten to add that the firm maintains an exclusive focus on sustainable, responsible, and impact investing.

All along, environmental issues grabbed the headlines under the ESG banner – an acronym for Environment, Social, Governance. Climate change, carbon emissions, affects all of us. People really do “give a damn”.

It is only in the recent past that the social dimension has started to become extremely apparent. The #MeToo movement brought corporate culture into mainstream discourse, and #BlackLivesMatter has seen swift and sweeping responses across firms.

Microsoft pledged $1.5 million to organizations working for advancing social justice. Additionally, Microsoft donated more than $15 million through matching employee donations to organizations advancing racial equality. “We have to create an environment where all voices are heard and valued, that’s why inclusion is a core priority for each one of us,” CEO Satya Nadella said.

Apple committed $100 million to education and criminal justice reform. Chief executive Tim Cook said in a memo to employees: “To the Black community — we see you. You matter and your lives matter.”

Walmart pledged $100 million over five years to create a new center for racial equity.

Starbucks committed $1 million in neighbourhood grants to promote racial equity and create more inclusive and just communities.

(I recollect the public outcry after a Philadelphia-based employee called the police on two black men. Starbucks shuttered more than 8,000 stores across the U.S. on May 29, 2018, as “racial bias education day”.)

Nike has stepped up it’s efforts and measures of accountability in the areas of diversity and inclusion. The company has pledged $40 million over the next four years to “support the black community in the U.S”.

(You may remember how American football star Colin Kaepernick was dropped by the National Football League after taking a knee during the national anthem before a 2016 match in protest against police brutality in the U.S. Sportswear giant Nike picked him as one of the faces for the company's 30th anniversary ad campaign. Nike’s solidarity was applauded then.)

You can’t change what you can’t measure.

While there are plenty of examples, how do investors hold companies accountable on an ongoing basis, and across indicators?

Black employees represented just 3% of CEO and 1% of CFO positions, according to a Stanford business school study titled Diversity in the C-Suite: The Dismal State of Diversity Among Fortune 100 Companies.

Are companies moving beyond mere tweets and tokenism? Are companies truly committed to change?

In 2018, Morningstar launched a Minority Empowerment Index. The aim was to provide exposure to U.S. companies that a) have embedded strong racial and ethnic diversification policies into their corporate culture, b) ensure equal opportunities to employees irrespective of their race or nationality.

This highlights diversity and inclusion beyond lip service.

Companies are assigned a Minority Empowerment Score based on their commitment to racial and ethnic diversity within their workforce, boards, supply chains, and society at large.

Policies and programmes are considered, but--importantly--emphasis is also placed on measurable behaviour. Therefore, a company isn’t eligible for the index if Sustainalytics judges it to have a poor track record on matters related to diversity and inclusion; this is determined based on a careful examination of incidents and controversies.

The main components of the Minority Empowerment Score:

  • Board diversity: This indicator assesses the level of gender and/or national diversity on the board. Sustainalytics looks at the proportion of women on the board and the quality of the board’s diversity policy (for example, does the company include targets and commitments to increase board diversity?)
  • Discrimination policy: This indicator assesses the quality of a company’s policies to eliminate discrimination and ensure equal opportunity.
  • Diversity programmes: This indicator assesses the strength of a company’s initiatives to increase the diversity of its workforce.
  • Scope of social supplier standards: This indicator provides a general assessment of whether a company has supply chain/contractor policies regarding items such as non discrimination.
  • The indicators marked with an “X” are areas where the company has demonstrated particular strength.
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