On April 1, Head of Research and Corporate Governance John Wilson hosted a panel discussion to address current topics in corporate governance, such as:

John was joined by Catherine Jackson, Founder of Jackson Principled Governance, a firm that brings the investor and sustainability perspectives into the boardroom to help prudent boards identify, understand and manage their ESG risks and opportunities; Karina Litvack, a corporate governance and sustainable investment expert with a 25-year career in finance and sustainable business practice (and current board member of energy firm Eni); and Timothy Smith, Director of ESG (Environmental, Social and Governance) Shareowner Engagement at Walden Asset Management.

Here is a replay of that video discussion.

In conjunction with the recent CEO Investor Forum hosted by CECP, a CEO-led coalition that believes a company’s social strategy determines company success, the organization’s Strategic Investors Initiative (SII) issued an open letter to its members providing guidance on engaging with long-term investors. The guidance is intended to steer CEOs toward greater emphasis on long-term goals and strategies, in an effort to combat the excessive focus on short-term quarterly performance that permeates the current landscape. The letter was signed by a number of corporate leaders, including Cornerstone’s CEO, Erika Karp. Download the letter here.

The CFA Institute’s “Take 15” series recently posted a video interview with John Wilson, who explains how to integrate key tenets of environmental, social, and governance (ESG) investing into the equity research process. John also offers insights into the outlook for ESG investing, including the opportunities and challenges it offers, as well as the prospects for improved ESG-related disclosure by firms. Watch the video here.

Executive Summary

Can investors be confident that International Oil Companies (IOCs) are sustainable for the long term? Technological, policy and market trends intended to mitigate climate change threaten permanent displacement of oil demand. The long-term investments of oil companies may prove to be liabilities if future demand falls short of expectations. The potential implications for investors are significant, but uncertain since the likelihood and impact of these trends are difficult to forecast.

In uncertain circumstances, business strategies and practices that historically have served shareholders well may become a hindrance to adapting to new operating environments. The primary risk for oil companies is an inability to adapt to scenarios that fall outside of historical norms.

Given the difficulty of making accurate forecasts in an uncertain environment, the most useful current signal of how well a company is positioned for the long term is its corporate governance. While there is no doubt that oil companies are preparing for the future, the question for shareholders is whether the companies are envisioning a future that looks much like the present or preparing to adapt to societal change that could result in an entirely new operating environment.

As we discussed in our June 2017 piece, “Making Their Voices Heard: Shareholders Vote for Greater Transparency on Climate Change,” a majority of shareholders at two IOCs and more than 40% at a few others supported proposals asking companies to disclose an analysis of the impact on their businesses of a global shift to a “low carbon” economy – one in which greenhouse gas emissions are sharply curtailed in order to limit global warming to 2 degrees Celsius. Some companies, such as Shell, Statoil and Total, have done so. Within the past few days, Exxon Mobil has promised to produce a report as well.

While these analyses are important, we believe oil company shareholders should be primarily concerned with whether the company has adopted practices for governance, disclosure and engagement that indicate flexibility and resilience in the face of secular decline for its primary product.

We explore six key questions to guide investors as they engage with oil companies and review upcoming climate risk reports:

Download the full report here.

John K.S. Wilson is the Head of Corporate Governance, Engagement & Research at Cornerstone Capital Group. He leads a multidisciplinary team that publishes investment research integrating Environmental, Social and Governance (ESG) issues into thematic equity research and manager due diligence. He also writes and presents widely about the relevance of corporate governance and sustainability to investment performance for academic, foundations, corporate and investor audiences. John has nearly two decades of experience in sustainable investing and corporate governance.

The Principles for Responsible Investment (PRI) and United Nations Global Compact released the first version of Coping, Shifting, Changing in 2014. The central premise of the report was that companies could be long-term even in a short-term world, offering practical recommendations on how to achieve this.

This new report, released on September 18,  responds to feedback that investors could, and should, do more to support companies on those recommendations. It builds on important work done by other organisations also working to tackle this problem. It presents three main strategies, each including recommendations focused on measures that companies can adopt to address the problems caused by market short-termism, and actions that investors can take to support companies in those efforts.

Below we excerpt the report’s executive summary. You can download the full report here.



Companies that operate with a long-term outlook have consistently outperformed their industry peers since 2001 across almost every financial measure including revenue, earnings and job creation.[1] Similarly, strong corporate performance on environmental, social and governance (ESG) factors correlates positively with improved cost of capital and financial performance.[2] However, research shows that companies will forego efforts to create long-term value because of pressure to meet short-term objectives.[3]

Short-term pressure is an obstacle to creating a global financial system that supports long-term value creation and benefits the environment and society.[4] In 2015, 193 world leaders agreed upon 17 Sustainable Development Goals (SDGs), covering issues ranging from climate change to gender equality. The SDGs provide an opportunity for business leaders, investors and companies alike to re-think their approach to value creation,[4] serving as a blueprint for action in both capital and investment markets. However, excessive short-term pressure will hamper progress unless action is taken by both companies and investors.

The perceived investor emphasis on short-term financial performance creates pressure on companies to focus on short-term financial performance and pay less attention to fundamentals.[6] It can result in forgoing opportunities with a positive long-term net present value, including those that provide wider sustainability-related benefits. It can also affect how ESG factors are considered in strategy, capital expenditures and daily operations.[7] Consequently, companies may miss opportunities to: drive sustainability-related innovation; develop their human capital; expand to new markets; grow their customer base; create operational efficiencies; and effectively manage social and environmental business risks.

Investors themselves are also under considerable short-term performance pressures, with the benchmarking and evaluation of investment managers often based on one- and three-month timeframes.[8] Even those organisations with long-term investment time horizons often focus on quarterly or even monthly portfolio performance. Regulatory developments further influence short-term behaviours. Following the global financial crisis, for example, regulatory bodies began to place greater emphasis on short-term performance management and reporting, particularly in situations where pension funds have shortfalls against their liabilities.[9]

While it is important to recognise that there are diverse external and internal pressures on companies that reinforce this emphasis on short-term performance, the relationship between companies and their investors is of fundamental importance. Encouragingly, both have become more vocal about the importance of combating the negative impacts of short-termism in recent times, such as through the Commonsense Principles of Corporate Governance, released by a group of CEOs in 2016.[10] To create a truly sustainable financial system, which will play a role in achieving the SDGs, both investors and companies must join forces to drive meaningful change.


Below is an overview of the recommendations, which are not comprehensive solutions, but aim to mitigate some of the most serious consequences of short-termism through changes in strategy and practice. They are framed around the belief that companies, with support from investors, can advance strategies that support long-term business growth and improve their impact on society and the environment.

  1. McKinsey Global Institute (2017): Measuring the Economic Impact of Short-Termism.
  2. Deutsche Asset Management and the University of Hamburg (2015): ESG and Corporate Financial Performance: mapping the global landscape. 
  3. Examples include: Graham, J., Harvey, C. and Rajgopal, S. (2005): The Economic Implications of Corporate Financial Reporting, Journal of Accounting and Economics, Vol. 40, Issue 1. Graham, J., Harvey, C. and Rajgopal, S. (2006): Value Destruction and Financial Reporting Decisions, Financial Analysts Journal, Vol. 62. FCLT Global (2016): Rising to the challenge of short-termism.
  4. PRI (2016): Sustainable financial system: nine priority conditions to address.
  5. Accenture and UN Global Compact (2016): CEO Survey
  6. See endnote four.
  7. Aviva Investors (2014): A Roadmap for Sustainable Capital Markets.
  8. Sullivan, R. (2011): Valuing Corporate Responsibility: How Do Investors Really Use Corporate Responsibility Information?
  9. For example, solvency requirements, MIFID and Dodd Frank. Only in recent years (five years after the crisis) has there been growth in regulation looking at ESG integration and system purpose.
  10. (2016): Commonsense Principles of Corporate Governance

ABOUT THE UNITED NATIONS GLOBAL COMPACT: The United Nations Global Compact is a call to companies everywhere to align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues embodied in the Sustainable Development Goals. The UN Global Compact is a leadership platform for the development, implementation and disclosure of responsible corporate practices. Launched in 2000, it is the largest corporate sustainability initiative in the world, with more than 9,500 companies and 3,000 non-business signatories based in over 160 countries, and more than 70 Local Networks. www.unglobalcompact.org

ABOUT THE PRINCIPLES FOR RESPONSIBLE INVESTMENT: The PRI works with its international network of signatories to put the six Principles for Responsible Investment into practice. Its goals are to understand the investment implications of environmental, social and governance (ESG) issues and to support signatories in integrating these issues into investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice. The Principles were developed by investors, for investors. In implementing them, signatories contribute to developing a more sustainable global financial system. More information: www.unpri.org








Last week at the New York Stock Exchange, Ecolab hosted an event to unveil a new version of its Water Risk Monetizer (WRM) solution. WRM, a financial modeling tool, was developed through Ecolab’s partnership with sustainability data firm Trucost and in collaboration with Microsoft. The event focused on WRM’s new operating features.

Alongside the debut of the technology updates, the event featured a panel discussion amongst corporate leaders who discussed best practices and lessons in implementing water risk management strategies for their businesses. Also present were representatives from the financial sector to discuss the investor’s perspective on water efficiency strategies. Panelist included representatives from Microsoft, Marriott International, Coca-Cola, BASF, S&P Dow Jones Indices, CERES, and Cornerstone Capital’s own Sebastian Vanderzeil.

The opportunity for the WRM arises from regulation (or lack thereof), growing public pressure, and rising demand by investors for disclosure. WRM enables companies to understand the impact of water quality and quantity in their business, turning water risk into an actionable element of their overall strategy. The upgraded WRM can now provide comprehensive monetary analysis of the incoming and outgoing water risks, including the future cost of water, pollution and water treatment costs, the potential revenue at risk, and the enterprise risk.

Several key themes emerged during the panels and concluding remarks:

Water risk management has “arrived” as a strategic issue for corporates. Firms must consider both the operational role of water and the reputational consequences of mismanagement of water strategy.  Creation of a “smart water culture” requires awareness of water efficiency and risk at all levels of the organization and the embrace of water management strategy.

Water risk is a multi-stakeholder issue, with engagement of local communities a key to successful risk management. Companies must understand the social and political issues relevant to water sources and uses and align their strategies accordingly.

Water is already an investment strategy, with both passive and active approaches possible. The creation of investment indices can serve to pressure companies to adopt more proactive water risk management practices. Managers may also face a push from “dark green” investors, who want to understand the material issues and emerging technologies.

Metrics are in the early stage of development. However, existing metrics, such as Global Reporting Initiative (GRI) standards, can help companies prioritize efforts; for instance, by assessing the materiality of water relative to other environmental issues and by providing a framework on how to consider the relevant issues. Sound governance requires companies to demonstrate effective policies and outcomes to stakeholders, including investors. Technology solutions like WRM can help companies deal with the risks.

Alfonso Carrillo is an analyst with Cornerstone Capital Group.  He holds an MBA from Babson College where earned the Dean’s Leadership award. Previously Alfonso worked for a family office focusing on business development opportunities in e-commerce and fin-tech. He is a member of the Guatemalan Bar Association, and prior to 2014, he worked on fraud and insolvency cases, as well as anti-corruption cases against Guatemalan authorities. Outside his professional training, Alfonso helped create, and still holds advisory positions on, various youth and social-impact organizations in Guatemala. 

Cornerstone Capital CEO Erika Karp recently participated in BSR’s annual conference, themed “Be Bold.”  She shared her views on the shifting dynamics of the capital markets in recent years and how these changes spurred her to form Cornerstone. Erika also presented her vision for a convergence of priorities across capital markets constituents (particularly asset owners), corporates, regulators and academia in support of investing for long-term, sustainable shared benefit.

Paraphrasing Albert Einstein, Erika notes that imagination is more important than intelligence — but it must be accompanied by execution and pragmatism.

BSR is a global nonprofit business network and consultancy dedicated to sustainability. It works with its network of more than 250 member companies and other partners to build a just and sustainable world.


Below is an executive summary of our in-depth report. Click here for an extract of that report. The full version is available to clients of Cornerstone Capital Group. 


The extractive sector is vitally important to the global economy and will in fact be critical to a sustainable future. With a market cap of over US$6 trillion, the extractive sector encompasses over 5,000 companies. It provides raw materials for everything from energy creation to high-tech manufacturing to electronics. Even as the world starts to transition from greenhouse gas emitting commodities like oil and coal, natural resource extraction will remain essential. Smartphones and electric vehicles, for instance, require metals sourced from extractive operations around the world. Yet natural resource extraction is, by its very nature, environmentally destructive and socially disruptive — and managing the risks inherent in mining is of prime concern to extractive companies and the host countries in which they operate. Extractive companies’ success will be in part determined by their ability to position themselves for this future.

Risk Assessment in Context

The environmental and social (E&S) issues we address in this report highlight strategic concerns for any mining or extractive company. Tailings risk (tailings are the effluents generated in a mine processing plant, and require long-term, secure storage), community-company conflict, contract workers and labor disputes, and management of global reputational risk (using biodiversity impact as its proxy) create event risks such as mine failures, shutdowns or license denials. They also impact longer-term operational planning because they require proactive engagement with local, global and contextual stakeholders to assure passage. We assess selected companies’ corporate governance as it relates to actively managing E&S issues, identifying leaders and laggards based on relative “attentiveness” to material E&S concerns.

Detailed analysis of E&S issues provides predictive insight. We offer a proprietary framework to assess extractive companies’ underlying values, leadership, and culture based on a bottom-up analysis of material, yet underappreciated environmental and social (E&S) issues. We then explain how the issues impact specific items within a company’s financial statements.

Key observations. At a high level, we came away with these conclusions:


We evaluated companies according to seven metrics that together provide a clearer picture of their potential for long-term success in executing their strategies. These metrics are:

We performed our assessment on a range of representative companies, shown below. We “score” the companies on each of the seven metrics, then roll those up into an overall “attentiveness” indicator.


Sebastian Vanderzeil is a Global Thematic Research Analyst with Cornerstone Capital Group. He holds an MBA from New York University’s Stern School of Business. Previously, Sebastian was an economic consultant with global technical services group AECOM, where he advised on the development and finance of major infrastructure across Asia and Australia. Sebastian also worked with the Queensland State Government on water and climate issues prior to establishing Australia’s first government-owned carbon broker, Ecofund Queensland.

Carolyn Trabuco is a Managing Director and Global Thematic Research Analyst at Cornerstone Capital Group. Carolyn has spent more than 25 years in the global equity investment space where she has identified dynamic secular changes, made investment decisions, developed business and industry models, valued companies, and assessed risk around global commodities, companies and industries. Previous firms include Pequot Capital, Phibro, Montgomery Securities and Fidelity Management and Research.  She is an independent member of the Board of Directors of Azul Brazilian Airlines.

Michael Shavel is a Global Thematic Research Analyst at Cornerstone Capital Group. Prior to joining the firm, Michael was a Research Analyst on the Global Growth and Thematic team at Alliance Bernstein. He holds a B.S. in Finance from Rutgers University and is a CFA Charterholder.

Emma Currier is a Research Associate at Cornerstone Capital Group. Emma graduated with a Bachelors of Arts degree in Economics from Brown University in May 2016. While at school, she worked with the Socially Responsible Investing Fund and as a teaching assistant for the Public Health and Economics departments. She spent her sophomore summer researching differences between American and Indian educational styles in Arunachal Pradesh, India, and completed a summer investment bank analyst position with Citi in the Media & Telecom group in 2015.

We extend our thanks to Fiona Ewing, Cornerstone Capital Group summer intern, for her contributions to the report.

The Farm Animal Investment Risk & Return (FAIRR) Initiative has issued a second booklet of case studies that showcases how leading investors and investment service providers from around the world are integrating issues relating to factory farming into their investment processes. Cornerstone’s Michael Shavel was asked to contribute to the booklet regarding his work on antibiotics and animal farming. Other featured investors include ACTIAM, Australian Ethical investment, Coller Capital, IFC, New Crop Capital and Robeco Institutional Asset Management. Below we offer an excerpt from the FAIRR report, which can be accessed in full here.  A summary of Cornerstone Capital Group’s October 2015 report can be accessed here.

Michael Shavel, Cornerstone’s Global Thematic Analyst, explained to FAIRR that clients and prospects are increasingly asking about sustainability issues related to intensive farming. He said, “It is an important issue that is moving from the niche to the mainstream. Some clients are concerned that there are serious health issues potentially connected to the factory farming model and they want to know how they can align their portfolios with their concerns, or make sure they don’t own companies that are ignoring these issues”.

Assessing Managers

On behalf of its investment management clients, Cornerstone Capital Group performs due diligence on managers, evaluating both their financial performance and the degree to which they incorporate ESG factors into investment strategies.

For clients with a focus on animal welfare and factory farming, the firm leverages its research to include questions related to these topics into the manager due diligence process. Shavel explains, “Where relevant, we ask portfolio managers questions on areas such as the food safety supply chain to get a sense of whether they take these issues seriously. It becomes clear pretty quickly whether they have considered intensive farming issues without any depth”. For example, if the manager owns a poultry producer, Cornerstone will ask how that manager thinks about the development of the antibiotic-free chicken market and what impact it might have on margins and future market share.

Antibiotics and Animal Health

One of Cornerstone’s flagship reports and work streams has been their thesis on antibiotics and animal health. In brief this argues:

Shavel elaborates on this theory, pointing to growing consumer demand for meat and poultry raised without the routine use of antibiotics. Market research firm IRI, he notes, found that in the year up to 25 Jan 2015 sales of antibiotic-free chicken increased 25% in dollar terms to 11% of overall chicken sales in the US.

This changing consumer demand, and changing regulation presents significant near-term and long-term risk to earnings for some animal-health companies. And Shavel points to US poultry producers Sanderson Farms as an example of a company that has so far resisted the industry’s moves to curb antibiotic use.

Turning Risk into Opportunity

Cornerstone’s research argues that as nutritional feed additives are generally produced by major chemical companies and sit as only a small portion of overall revenues, investors should look to companies with more concentrated exposure to prebiotic and probiotic feed additives for a chance of good returns. Shavel points to companies like Danish biotech firm Novozymes, who recently partnered with Adisseo to develop a new probiotic product for poultry that could act as an alternative to using antibiotics as a growth promoter. “It’s important to watch these companies,” says Shavel, “because if the data around some of their products is compelling it could be scaled up and really move the needle for a business of their size.” Cornerstone has also highlighted other areas of potential opportunity such as vaccines and biosecurity – i.e. alternative processes, systems or products that can help replace antibiotics and reduce the chances of an infectious disease being carried on farms.

Beyond Antibiotics

Shavel acknowledges that the overuse of antibiotics is not the only ESG issue associated with factory farming, but says that Cornerstone has yet to do in-depth research on other factors such as environmental damage. “On a personal level,” he adds, “it’s clear to me that advances like antibiotics have enabled factory farming to be one of the primary methods for feeding the world but that some rethinking of intensive farming is going to need to come into play”.

Antibiotics and Animal Welfare

Shavel also points to the complex, ongoing discussion on the relationship between antibiotics and animal welfare. He says, “We’ve observed consumers campaigning for ‘no antibiotics for animals ever.’ But when engaging with companies on this we also hear the argument that antibiotics are necessary to treat certain types of disease (even on less intensive/non-factory farms), and refusing to treat sick animals wouldn’t be consistent with animal welfare obligations. Thus there is an important nuance, says Shavel, between slogans such as ‘no antibiotics ever’ and investors’ calls for an end to the routine use of antibiotics important to human health in their global meat and poultry supply chains.


The FAIRR Initiative is a collaborative investor network. It aims to raise awareness of the material impacts that factory farming can have on investment portfolios and works to help investors share knowledge and form collaborative engagements on issues related to factory farming.

Michael Shavel is a Global Thematic Analyst at Cornerstone Capital Group.  He is responsible for researching industries, companies and trends in the field of sustainable finance.  Prior to joining the firm, Michael was a Research Analyst on the Global Growth and Thematic team at AllianceBernstein where he covered the energy, industrials, and materials sectors. He holds a B.S. in Finance from Rutgers University and is a CFA Charterholder.

We are pleased to share a recent video interview with BlackRock’s Michelle Edkins and Cornerstone’s John Wilson in which we discuss the value of the “Shareholder Alignment Frontier TM (SAF).”   The SAF is a tool inside Cornerstone’s proprietary framework which was specifically developed to help companies make the business case for improved stakeholder relationships through shareholder engagement thus building value for the long term.

As we continue to build the field of Environmental Social and Governance (ESG) analysis, we have broadened our engagement tools for shareholders and companies seeking to enhance corporate governance, sustainability and performance. For shareholders, our recently published A Voice in the Boardroom offers practical guidance on corporate engagement through proxy voting.  For companies, our report “The Networked Corporation makes the case for shareholder engagement as a means to anticipate and address emerging issues as they become financial risks and/or opportunities.

The video offers a high level look at important elements of this report including:

Edkins on materiality:  “It changes a lot from sector to sector as to what of these external factors are most likely to impact the business and what internal drivers are really driving value long term. And the data, I think, isn’t available yet because there isn’t really a reporting framework that makes sense,” says Edkins. “And that’s what I like about this framework – ‘The Shareholder Alignment Frontier’ – as it provides a conceptual way to think through what that materiality might be, and therefore what we need to be anticipating, and what we need to be describing to our investors and to our other stakeholders so that we can all be better informed about where those options are.”

For more information, download a copy of “The Networked Corporation” and the Executive Summary of “A Voice in the Boardroom.”

Additionally, we offer Cornerstone’s recent Letter to the SEC on the importance of consistent disclosure of sustainability issues to investors.

Erika Karp is Founder and Chief Executive Officer of Cornerstone Capital Group.


At Levi Strauss & Co., our business depends on water. From cotton to manufacturing to consumer care, this precious resource plays a vital role over the lifetime of our products. We’ve studied this issue in great depth, including two comprehensive life cycle assessments. We know exactly how much water a pair of Levi’s® 501® jeans traditionally uses over its lifetime — and where.

That knowledge helped us make a lot of changes in our business to reduce our own water impact. And it’s helped us educate consumers about the impact of their laundering habits. But for us, that’s not enough. As a leading apparel company we have a responsibility to be a catalyst for change — because time and again we’ve found that where we lead, others follow.

That’s why we took a cue from our neighbors in the tech industry and opened up our innovative Water<Less finishing techniques for anyone to use. The Water<Lessprocess can save up to 96% of the water used in the denim finishing process. Since 2011, we have used the process to save more than 1 billion liters of water in our own manufacturing, and we’ve set a goal to use Water<Lesstechniques for 80% of our products by 2020.

Water scarcity is too important for us to keep these techniques to ourselves. Just as tech companies open their APIs in order to accelerate change, LS&Co. is welcoming our industry partners to build on what we have done to accelerate water conservation. We believe our Water<Less innovations could save the apparel industry at least 50 billion liters of water by 2020 — enough to supply every family in New Orleans for a year.

This isn’t the first time we’ve joined with others to address water issues. In 2009, we were one of the founding members of the Better Cotton Initiative (BCI), aimed at fundamentally changing how cotton is grown. Seventy percent of the water used by a pair of jeans is from cotton agriculture. BCI farmers use up to 18% less water than non-BCI farmers in comparable locations.

We’ve also saved 30 million liters of fresh water through the industry’s first Water Recycling and Reuse Standard, which we piloted with one of our vendors in China; we’re sharing that standard across our industry as well.

We are committed to doing even more in the future. We’ve committed by 2020 to train 100% of LS&Co.’s corporate employees in a water education program we developed in partnership with the Project WET Foundation. The goal is to increase employee awareness of the social and environmental impacts of apparel, and to train our employees to become water conservation ambassadors so they can share what they have learned in their communities.

Lastly, we’re working hard to educate consumers about reducing their impact through care labels, awareness campaigns including the “Are You Ready to Come Clean” consumer quiz and “Don’t Be a Drip” water education program as well as through
e-commerce sales channels.

This sounds like a lot of work, and it is. But it’s absolutely vital to our business, our employees, and workers in our supply chain, their communities – and our entire planet. We want to use our leadership position in the apparel industry to spur even more innovative ways we can all work together to preserve this scarce, vital resource.

Michael Kobori is Vice-President, Sustainability at Levi Strauss & Co. He leads the development of LS&Co.’s environmental vision and strategy, including its efforts to collaborate with other brands on sustainability and to extend its standards throughout the supply chain.



The idea behind sustainable and responsible investing is to invest in companies that reward shareholders with strong financial returns as well as deliver positive environmental, social and economic impacts.  Beyond explicit sustainable investing, more and more stakeholders are expecting companies to marry purpose with profits and to do more good for society.

When it comes to the betterment of human health, such as raising the state of physical, mental and social well-being, this responsibility looms large, and the inputs, outputs, and impacts may be difficult to pin down.

Until now, this challenge has been met by accounting for social impacts in buckets of negligence or malpractice, such as human rights violations, occupational injury and illness, child labor, slavery, and the like.  As such, the business case for well-being translates into avoiding reputational risks and ensuring that legal and regulatory requirements are met.

In this pursuit of simplicity we miss the forest for the trees.  We effectively skip over all the “good things” that human well-being generates, like mastery, autonomy, purpose, good health, safety, security, trust, and belonging.

Moreover, well-being is greater than the sum of its parts.  Well-being is a true reflection of a system that operates in a sustainable and healthy way: a business system that places well-being as central to its purpose, products, people, and the planet; that commits to developing human potential with opportunities for learning, progress, and collaboration; and that builds resilience for an evolving dynamic system by deliberately elevating the absorptive and adaptive capacity of individuals.  In sum, we may appreciate and generate thriving if we value these things as much as, or more than, grievances or violations attached to various business activities.

Measuring the Forest

Now is the time to focus on the forest—the positive impacts on well-being that businesses consciously create. This pivot in attention could be the engine that drives social impact, the economy and civic engagement.  If this is so, how do we measure it?

Researchers in the SHINE program at the Harvard Center for Health and the Global Environment have been busy working with companies to measure their well-being handprint — changes that companies cause to happen beyond doing business as usual.

Working with Johnson & Johnson, a participant with SHINE, our researchers have developed well-being metrics that connect the dots between the internal business operating environment, well-being (engagement) and performance (productivity).  SHINE is using these measures to survey employees and take a pulse on the culture of well-being within the company and its effects on the business.

For companies motivated by measuring improvements in well-being, such as Owens Corning, these proof points may help to set priorities and align strategy.  At EYP Architecture and Engineering, these metrics may translate into environmental features or building designs that improve human well-being.  For Levi Strauss & Co, the idea of measuring well-being in the supply chain is tantamount to making the communities in which they operate thriving and healthy places to live and work.

Every June, these companies and others come together at the SHINE Summit to learn and share the science and business of handprint accounting—how companies measure positive environmental and well-being impacts—and to cheer on the race to the top organized by a NetPositive strategy, a deliberate intention to do more good than harm in the world.  Altogether, this is a collective system for thriving.

In a recent book review, Peter Senge wondered: “What if growing our people was the true strategic core of the enterprise?” In the same vein, I wonder whether maximizing human capital is fundamental to sustaining all other capital resources (see Capitals, a report by the International Integrated Reporting Council that explains how 6 capitals of business—financial, manufactured, intellectual, human, social and relationship, and natural—are affected and transformed by the activities and outputs of an organization).

If human potential is core to the sustainable future of business, can well-being metrics capture the business impact?  Research on well-being would say so.  A recent study by Alex Edmans examined companies from the annual “100 Best Companies to Work For” list published by Great Place to Work Institute and found that the profitability of companies that valued and developed their employees outpaced the sector benchmarks.

Studies that have measured well-being, including those inside SHINE companies, have shown that higher levels of employee well-being are associated with better productivity and performance, such as less lost work time or unhealthy days, better engagement, and increased job satisfaction.

While individual improvements in well-being may accumulate to collective impact at the organizational level, the holy grail for the SHINE well-being studies is to “fingerprint” a thriving culture and climate according to its unique features.  For stakeholders, including consumers, employees and investors, this global measure of company well-being could be the key to thriving at work and become the gold standard for integrated reporting.

Well-Being: More than Wellness

A sticking point for successfully implementing a well-being strategy that is hard-wired to the business operating system is that well-being is often confused with wellness programming: individual programs that target employee health behaviors such as exercise, smoking, nutrition, health care utilization, etc.  Traditional wellness programs often narrow the focus on individual behavior and trade off corporate responsibility for employee responsibility.

The shift to well-being changes the emphasis from what employees should be doing to what companies can be doing to ignite higher order change at the system level.  For a well-being strategy, health programming is only one part of the approach.  The business goal for well-being is to first invest in human capital rather than to aim to reduce health care costs.  Studies have shown that raising employee well-being enables better lifestyle choices that return better health and, ultimately, lower health care costs.  At the same time, businesses that invest in growing human capital achieve returns on talent acquisition and retention through operational efficiency, quality, and brand reputation.

Can we agree on measuring, managing and reporting on well-being?  SHINE companies believe this idea already has legs and is running through the forest!

Eileen McNeely teaches at Harvard T. H Chan School of Public Health. She is Co-Director of SHINE at the Harvard Center for Health and the Global Environment. SHINE works with companies to test new methods and develop the evidence base for positive impacts on people and the planet. She has extensive experience in health policy and environmental and occupational health.


The pacemaker, the three-point seat belt and ultrasound — these life-altering inventions all originated in a country that 100 years ago was among Europe’s poorest. Today, Sweden is renowned for its culture of innovation, strong global brands, and a social system that encourages risk-taking and responsibility.  For investors seeking to make tech and sustainable investments, as well as for corporations and funds seeking to raise capital from sustainability-focused institutional investors — Sweden is a natural first pick.

Stockholm is Europe’s hottest unicorn city. Over the past few years, it has produced no less than five unicorn companies: Skype, Spotify, King, Mojang and Klarna. It is the world’s second most prolific tech hub on a per capita basis, behind only Silicon Valley. With a population of only 9.8 million people, Sweden pulls well over its weight, accounting for around 5% of all global BUSD tech exits in the past decade. In 2015, its tech industry attracted $1.1 billion in growth capital alone, making it number one in Europe, with 1.7 times more capital per capita then the UK, its closest contender at number 2. However, an increasing number of Swedish startups are finding it necessary to cross the Atlantic to secure access that’s sufficient to meet their capital needs. For investors who want to find tomorrow’s unicorns first, the answer is simple: go there.

This recent startup growth has not sprung from a vacuum. Sweden’s longstanding entrepreneurial climate, which fosters innovation and leadership, has delivered many multinational corporations, and a position as the world’s third most innovative economy. This can be attributed to Sweden’s heavy investments in R&D, with 3.3% of its GDP in R&D compared to the EU-wide 2020 target of 3%. It’s also an outcome of Sweden’s access to skilled labor built by its free education system, and the necessity for Swedish companies to look abroad for larger markets than its own small one from the outset.

The tech startup success can be attributed to the government’s heavy investments in tech infrastructure during the 1990s, which created a generation that grew up with access to computers and the Internet. Its subsidized childcare, parental leave policies, and the government’s role as a venture capitalistproviding both microenterprise loans and up to $15 million venture capital investmentshave enabled entrepreneurial risk-taking. As such, Sweden has established a sustainable, investment-friendly breeding ground for continuous innovation.

Swedish Companies Among the Most Sustainable

The innovative business climate, coupled with close ties between public and private entities, strong market incentives and stringent regulation, have also positioned Sweden as the world’s most sustainable country according to RobecoSAM, and one of the world’s most innovative environmental technology countries. Companies like Electrolux, H&M, MTG, SKF, Volvo and Sandvik are all listed as industry leaders in the Dow Jones Sustainability Index; and H&M, Atlas Copco, SEB, and Ericsson are all in the Global 100 Index, ranking among the world’s most sustainable corporations. Sweden established its position in the environmental vanguard in the 1960s, when it created the world’s first Environment Protection Agency, and it has kept this position by using market incentives to discourage environmentally harmful activities and to foster new technologies.

Cleantech and many of Sweden’s most innovative sustainable technologies are implemented in its several sustainable city districts. To name a few, Hammarby Sjöstad is a model for urban development projects around the world; Stockholm Royal Seaport is the world’s first city district to feature full-scale smart grids and was recently awarded the C40 Cities’ best sustainable urban development project; and Malmö’s Western Harbor is a carbon-neutral neighborhood. On a country level, Sweden aims to become the world’s first fossil fuel free nation by 2045. Investments of over $540 million are already committed for 2016 – but more is needed, opening up opportunities for foreign investors, especially within cleantech.

Institutional Investors Driving Change Through ESG Investing

While the Swedish tech start up industry is booming, the trend of social enterprises or impact investors is not growing at the same rate as in the United States, mainly due to the role of the welfare state as a reliable provider and payer of social services. However, there are some promising initiatives and this February, Leksell Social Ventures, founded by the co-founder of Elekta, the company revolutionizing surgery with the gamma knife, introduced Sweden’s first social impact bond addressing youth mental health.

Leading Swedish institutional investors committed to responsible investing are however a great potential source of financing for foreign corporations and funds. And Europe has a large lead over the United States in terms of ESG investing: almost 60% of European assets are invested in a sustainable way, compared with 18% in the United States. Swedish investors are at the forefront of developing standardized tools and investment products, and growing the asset base for responsible investing: from the bank SEB, which introduced the world’s first corporate Green Bond in 2007, to the Swedish AP pension funds, which have included ethical, social and environmental responsibility in their definition of fiduciary responsibility since 2000 and which are developing a publicly available standardized carbon emission reporting tool for all their portfolios.

Their campaigns include efforts to remove all environmental polluters in the S&P 500 index from portfolios; the development of MSCI Global Low Carbon Leaders Indexes; the blacklisting of Wal-Mart for violating the human rights of American workers, and being an anchor investor in Al Gore’s Generation Investment Management’s global credit fund. With $150 billion in assets under management and a continual and increasing focus on long-term, sustainable investments, they provide great opportunities for funds and corporations raising capital, including public and private equity as well as venture capital.

Similarly, earlier this year, the Swedish Investment Fund Association mandated that all its asset managers implement standardized ESG reporting guidelines, making it easier for investors and consumers to make informed decisions. This is in line with an increased demand for sustainable investment products among Swedish consumers, and 2015 saw an increasing trend of fund managers moving from negative screening to proactive screenings of entities leading the charge in sustainability. In Europe’s leading unicorn and tech hub, consumers, companies, investors and the government all play a role in creating a resilient innovative ecosystem. Look no further for a highly competitive, inclusive model for sustainable capitalism.

Vivianne Gillman is Sweden’s Trade Commissioner in Southeast Asia. She has worked in an IT startup, as a Sustainability Director, and as a Strategy Consultant in a variety of industries.

Maria Mähl  is a Senior Manager with the Clinton Global Initiative. She curates the Clinton Global Initiative Annual Meeting working on issues such as health, climate change, energy, education, infrastructure, tech and economic development, with a special focus on sustainable finance and impact investing. Prior to the Clinton Foundation, Maria worked in Sweden at Volvo, Health Navigator and Capgemini Consulting. All views are her own.




The United Nations Global Compact is the world’s largest voluntary corporate responsibility initiative. Currently it has more than 8,000 business participants from more than 145 countries. Participants are required to support ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption.  In 1999, Kofi Annan, then secretary-general of the United Nations, introduced the concept of a Global Compact to multinational corporations gathered at the annual meeting of the World Economic Forum in Davos. He said: “Globalization is a fact of life. But I believe we have underestimated its fragility. The problem is this. The spread of markets outpaces the ability of societies and their political systems to adjust to them, let alone to guide the course they take. History teaches us that such an imbalance between the economic, social and political realms can never be sustained for very long”.[1]

Understanding Corporate “Moral Purpose”

Discussions about the UN Global Compact form part of a broader conversation about corporate responsibility and the moral purpose of business. There is a growing tendency to acknowledge that corporations have moral responsibilities and that their behavior can be subjected to moral scrutiny. The purpose of business is articulated by the concept of corporate responsibility – which is the idea that the corporation bears a moral responsibility towards society as a whole. The corporation is expected to make a positive contribution to society by extending its impact beyond its shareholders and the exclusive pursuit of short-term profit. But of course, corporations are also interested in a positive contribution to the bottom line.

The way in which people view the world (and the role of business in the world) is framed by a theoretical approach (how do we understand it?) and a practitioner’s approach (how do we change it?), as depicted below. The theoretical approach may be either normative, prescribing what ought to be done, or empirical, describing the way things are. Each of these views of the theoretical approach presents significant challenges and complexities. In brief, the normative view is often accused of being idealistic and not in touch with the business environment. The empirical approach is sometimes challenged because it does not grapple with the difficult ethical issues implicit in a business environment, and also because the large amounts of quantitative data associated with empirical investigation and the positive correlations between the data do not necessarily prove causation. From a practitioner’s perspective, there are many interventions and initiatives that can assist companies to make an impact, among them the Global Compact. These initiatives are often accused of using theoretical sleight of hand to sidestep the choice between the business case (we do things, including acting with integrity, because we will make more money) and the moral case (we do things because they are the right things to do, whether we will make more money or not). This sleight of hand is represented by the enlightened self-interest approach (we do things because they are the right things to do and fortunately for us they are also good for business).

Figure 9:  Understanding and changing the world

Daniel Malan 2


Integrative Social Contracts Theory (ISCT) was developed by Tom Donaldson and Thomas Dunfee to provide guidance on ethical issues in international business.[2] One of the major strengths of the work of Donaldson and Dunfee is that they provide a practical framework for decision-making that is based on sound theory, without getting stuck in the meta-debate about whether there can be one, all-encompassing approach to ethics.

ISCT suggests that there is a universally binding moral threshold (comprising universal principles or hypernorms) that would apply anywhere in the world and that forms the basis of a hypothetical macro contract for economic ethics. At the same time, context matters from a practical as well as theoretical perspective when deciding between right and wrong. According to ISCT, corporations should have respect for local customs and conventions and can therefore negotiate micro contracts within moral free space as long as they do not transgress the universal moral threshold. Micro contracts are actual, non-hypothetical and often implicit agreements that exist within corporations, industries and national economic systems. Moral free space refers to the freedom of individuals, corporations and other social actors to form or join communities and to act jointly to establish moral rules applicable to the members of these communities.

Figure 10: Visual representation of ISCT

Malan 3


The 10 principles of the Global Compact can be regarded as substantive hypernorms, and the principles, collectively, can be regarded as an example of a hypothetical macro contract. Within the context of the Global Compact, three different kinds of micro contracts can be identified: the local network structure of the UN Global Compact, collective action initiatives, and individual company behavior based on codes of conduct. However, empirical research indicates a limited focus on local conditions in many of these examples.

A New Conceptual Framework

The difficulties that corporations experience in negotiating between the global and the local, as well as between the moral case and the business case, inspired this author to develop a new conceptual framework based on ISCT. This framework can be applied by all corporations, regardless of whether they are participants in the Global Compact. The proposed framework aims to assist corporations to conceptualize, develop and implement effective corporate responsibility programs. It is underpinned by the need to have a thorough understanding of responsibility, with specific reference to the distinction between (but not separation of) the moral and business case. Such an understanding then enables the corporation to take responsibility, and informs a series of activities that relate to internal processes (governing responsibility, managing responsibility and reporting on responsibility) and respond to the external activities of regulating responsibility.

Figure 3: A practical framework for corporate responsibility
Malan 4

The significance of the framework lies in a combination of scientific rigor and managerial relevance. It has a strong theoretical underpinning while also being readily accessible to practitioners. Accessibility is the key, because practitioners will make most of the decisions that will have an impact on human rights, labor issues, environmental performance and the fight against corruption.

Daniel Malan, PhD, is a Senior Lecturer in Ethics and Governance and Director of the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School in South Africa. His focus areas are corporate governance, business ethics and corporate responsibility.  He is a member of the World Economic Forum’s Global Agenda Council on Values, the International Corporate Governance Network’s Integrated Business Reporting Committee and the Anti-Corruption Working Group of the United Nations Principles for Responsible Management Education.  He is also a portfolio partner at the International Centre for Corporate Governance at the University of St Gallen. This article is a summary of his recently completed PhD in Business Administration, obtained from the University of Stellenbosch.

[1] United Nations. 1999. Secretary-General proposes global compact on human rights, labour, environment, in address to World Economic Forum in Davos. [Online] Available: http://www.un.org/press/en/1999/19990201.sgsm6881.html  Accessed: 14 June 2015.
[2] Donaldson, T. & Dunfee, T. 1999. Ties That Bind: A social contracts approach to business ethics. Boston: Harvard University Press.

Forward-looking multinational corporations understand that they need to create inclusive work environments in order to recruit and retain top talent, and stay competitive in the global marketplace. But they face a significant hurdle to doing so globally: Many countries still host significant levels of societal discrimination against LGBT people.

Discrimination creates hugely significant negative impacts on economies. Professor Lee Badgett of UMass Amherst estimated in a study commissioned by the Williams Institute of UCLA that economic discrimination against LGBT people in India could cost the country 1.7% of their total GDP – a jaw-dropping US$30.8 billion a year.

The economic damage caused by societal animus towards LGBT people is not unique to developing economies. Last year, a study found that the United Kingdom could be losing £11.2 billion ($17 billion/€15.6 billion) in annual GDP due to the pressures and stresses lesbian, gay, bisexual and transgender engineers encounter in the workplace.

When LGBT employees do not feel comfortable being themselves at work, innovation and productivity suffer. At the recent World Economic Forum’s Annual Meeting in Davos, Kenji Yoshino and Sylvia Ann Hewlett introduced an important new study sponsored by Out Leadership and several Out Leadership member companies. According to “Out in the World,” one in five closeted LGBT workers say that hiding their identity reduced their ambition and caused them to work less.  And almost 30% of closeted respondents said that hiding their identity kept them from speaking up or sharing innovative ideas at work.

The study was based on a multinational survey of 12,206 respondents from 10 countries (Brazil, China, Hong Kong, India, Russia, Singapore, South Africa, Turkey, the United Kingdom, and the United States); its global reach makes it one of the most comprehensive pieces of market research into LGBT inclusion in the workplace.

42% of LGBT employees around the world reported that they had experienced discrimination in the last five years because of their identity. Given the prevalence of such negative experiences, it’s no surprise that a huge number of the LGBT respondents – 64% – said they were in the closet at work.  The study found that 80% of LGBT workers in Russia are not out at work. But even in an economy that is usually thought to be relatively accepting of LGBT people, such as the United Kingdom, 53% of respondents say they’re in the closet at work.

Increasingly, smart business leaders are recognizing that the enormous productivity toll created by such discrimination represents an opportunity for competitive differentiation – that letting LGBT people be themselves at work unlocks a tremendous resource. As a result, the private sector is leading the way in creating safe, inclusive workplaces in many countries.  Nevertheless, many openly-LGBT employees at major financial services and legal services companies, including very senior business leaders, have indicated to Out Leadership that they would have serious concerns about relocating to countries with anti-LGBT laws. When highly qualified candidates turn down assignments abroad because of concerns about the legal environment, it’s bad for everyone.

Out Leadership seeks to empower the leaders of our member companies to begin to persuade LGBT-unfriendly countries to adopt inclusive laws and policies. We produce Business Briefs for CEOs who travel to countries such as India, Singapore and Japan, providing succinct overviews of the national landscape for LGBT people in each country, as well as crisp, economic- and business-focused talking points about how the current situation for LGBT people in each country shapes their business decisions.

Even in the West, there is still work to be done to make sure LGBT employees feel comfortable in the workplace. In the United States, 46% of LGBT people are in the closet at work.  Of course, workers can still be fired for being gay in 29 states – or for being transgender in 30.  Indeed, 43% of LGBT workers report having been fired, harassed, or denied promotion at work because of their sexual orientation or gender identity.  Unfortunately, a large majority of Americans incorrectly believe that LGBT people are already protected from employment discrimination nationwide – all of which are reasons why we’re also producing an Out Leadership CEO Business Brief for the United States.

At our OutNEXT Summit for emerging LGBT leaders last summer, David Mixner noted that although the work continues for LGBT people to achieve true equality under the law in the United States, it is also now incumbent upon LGBT people in places like the US and Western Europe to work to help LGBT people who are in real, mortal danger in places like Saudi Arabia, Nigeria, and Indonesia. We look forward to continuing to partner with the world’s most influential businesses to do so.

Todd Sears is the Founder and Principal of Out Leadership, a global strategic advisory firm that connects leaders across the world’s most influential industries to create business opportunities, cultivate talent, and drive LGBT equality forward.