Embracing Corporate Sustainability for Long-Term Success (feat. Andrew Behar)

Hi, I'm Susan Drumm and welcome to the Enlightened Executive where your personal evolution sparks your leadership evolution. Each episode we feature groundbreaking techniques and strategies to help you get the edge in personal and leadership effectiveness. Today we're talking about a major inflection point for executives to embrace environmental sustainability and social justice as a path to business success. My guest is Andrew Behar and I'm really looking forward to this thought provoking conversation. Andrew is a CEO of as you Sow, the nation's leading nonprofit for shareholder advocacy and engagement. Since 1992, as you sow has used shareholder power to align investments with values and compel companies to reduce their contribution to serious issues including climate change, toxins in food systems, ocean plastics, racial injustice and wage inequity. He's on the XPRIZE Brain Trust for abundant energy and he's author of the book the Shareholders Action Unleash youh Hidden Power. Welcome Andrew.

Hi, thanks for having me.

So first tell us a little bit about the mission of as you Sow. Because as I read the intro, it's quite a mission driven organization for sure.

Yeah. So as you saw has been around for will be 30 years. Next year we're celebrating our 30th anniversary. So we founded in 1992 and we're focused on corporate accountability. So we engage big companies on big issues like climate change, toxins in the food system, ocean plastics, racial justice, gender equality, slavery and supply chain. So we speak to the companies as shareholders, we represent shareholders and we do a lot of data, we do a lot of research. And this year we published nine original research reports. And we bring this data to the company and we say, look, we have discovered that there is a material risk that you may not be considering. And here's a solution and here's the return on investment to solve it. Generally we're welcomed by executives who say this is a good idea. Those who do not welcome us in that way, we then file a shareholder resolution which is a formal SEC sanctioned communication. And what happens is then our resolution goes to a vote at the annual meeting. So we escalate it in that way. It becomes in the public eye. We do a lot of media around it, associate the brand. So you know, an example might be trying to yum brands around Ocean Plastics. And they didn't want to really do anything. So we filed the resolution, we got a good vote. It embarrassed them publicly. They came back, we negotiated and they said we're going to stop using styrofoam in 6700 stores, about 3 billion styrofoam cups will not be produced this year. That's the kind of interaction we have with companies. Most of them listen to us and agree with that. We have a pretty good idea.

My sense is also, they may not be aware of the impact some of their business practices are having, and that's where you bring the data. Is that true?

Yeah, I would say that's quite true. Particularly around Ocean Plastics, a lot of companies just don't even realize the impact of their operations. And once they do, and they realize that it's being associated with their brand, they want to fix it. And there's generally a way to do that. Some companies are very aware of what they're doing in the oil and gas industry, in the utility industry, and they're generally not that interested in changing, for instance, their carbon emissions for climate change. But other companies are. What's been interesting in the last year and a half after the George Floyd murder, we started a racial justice initiative. We scored the S&P 500 on 26 key performance indicators on racial justice. And we brought it to these companies and said, look, this is how you're being seen by the world. This is what you're saying. This is what you're doing. This is how you're out of alignment with yourself. This is how you're. The culture of your company is looking at how your employees are looking at it. And many companies have a lot of gratitude and say, wow, how do we fix this? And you show them these are best practices. This is what other companies or direct competitors are doing. And then others just simply want to ignore it. So that's really a choice that management makes. And we often escalate to the board as well. And we said, look, the board, you have oversight for this company. This is really a serious, important issue, as is diversity, equity, and inclusion. Three years ago, we sent out a letter to 3,000 companies saying, Diversity, equity and inclusion. The disclosure of this data is material. And we had about $2 trillion of assets of investors sign the letter. And then we started to engage companies. We engaged about three dozen companies. And to this day, we are still pushing to just to try to get disclosure, just to know where we are. And I feel that. And we say this to companies all the time. They say, well, we don't want to put it out there publicly because we're doing so badly. We're like, investors will reward you if you tell them exactly where you are with honesty, which is total transparency, total transparency and where you want to get to. Because investors invest in where you're going to be, they invest in your trajectory, particularly if you set six month, one year, two year, three or five year milestones and then you meet them. And if you don't meet them, explain why you need to do a course correction. You will be rewarded by not only investors, but customers for that level of honesty and also intention. So it's a changing mindset right now that we're seeing that five years ago, these conversations that companies would go, no, we're just doing what we're doing, business as usual. But now, particularly after the World Economic Forum has embraced a fourth manifesto, the New Manifesto of Business, and the Business Roundtable has embraced the new purpose of a corporation that talks about stakeholder capitalism. Take care of your employees, take care of your community, take care of your supply chain, and please don't poison your customers. Milton Friedman was like, yeah, poison your customers. Have slavery in your supply chain. Whatever you got to do to make a buck, it doesn't work. It's given us the world that we live in today, which nobody's happy with. Our ecosystems are collapsing, our social fabric is shredded. And basically the World Economic Forum and Business Roundtable got together and said, you know, that didn't work. And all that stuff those shareholder advocates have been saying for 50 years actually makes sense.

What you're doing is offering a level of transparency and encouraging these corporations to, to have that transparency as a way to build trust with all stakeholders. And then also the accountability piece, right? There's so many times where I see these values of companies and I talk to leaders inside and I say, do you really walk that talk? Do you really feel like this company honors that value? And I would say the majority of time the answer is no. So that's why these company values tend to be so superfluous, like it doesn't actually have any meaning. And by you bringing it back to what is it that you really want to stand for? And if you hold these values dear, then you're making a promise to people to hold them.

But also it's how deep does it go? So you've got companies that, you know, they have an sdg, a Sustainable Development Goal, and they apply it to their operations, or they apply to one thing but not another. So let me give you an example. We have a whole system, a whole platform of tools that evaluate mutual funds. And we evaluate them. So we look at the 3,000 most held mutual funds in corporate 401 plans. So 100 million people with $10 trillion are invested in these funds, yet it's really, if you look at where the investments go, it's not aligned with what you would consider to be the values. And we've done a lot of surveys of people, and about 70% of them say that they want to have environmental, social and governance as part of their investing, that they don't want to invest in destroying their world. So you take a company like Amazon. Now, they've done great stuff operationally on climate change. They've got 100,000 electric vehicles, they are powering their data centers with renewables. And yet in their 401k plan, every Amazon employee owns companies that are burning down the Amazon. And so what we did is we decided we were going to talk to them about this, and so we sent a letter to management. So these ads are going to be in the social media feed of Amazon employees starting later this week. So things like this, they're not aware of this. We've interviewed a lot of Amazon employees and they totally don't know what's inside their 401 plan. And yet they literally own companies that are burning down the rainforest, the Amazon rainforest. So it's this kind of a thing where, you know, you make them aware of it, you show them that there's a really easy fix for this, which is simply change. They have a sustainable option in their plan. They just need to make it the default option. They can literally, they could do this in, in an hour if they decide to do it. And employees could shift their money in, you know, probably under two minutes if they decided to do it, but no one's aware. So we're just shining a bright light. And let me tell you something, it's every company. So Comcast is up next. And Comcast, we're going to be doing a whole thing around private prisons, because they get an F on our scorecard on private prisons and they don't even have a sustainable option. They only have the default. So we're going to work our way through the s and P500 and just say, is this where you want to put your money? And the answer, we know, is no. And the other thing is, when you compare the returns, that the returns of the sustainable option are generally better. So you're also taking a financial hit for not doing that because you're invested in big oil, which is the worst performing sector. So this is a whole piece of transparency, is how deep do you go and when you do it, and you do it well, and you actually educate your employees about this, you create a culture where you retain the best and the brightest. Yes, as an executive, you know that is your number one cost of goods is your employees. When people leave, when you've got to recruit and train, it's the most expensive thing you've got. So maintaining that, attracting the best and the brightest, retaining them, that is how you're going to have a successful business, how you're going to be competitive. So this is really about business 101. Take care of your employees.

Yes.

You know, number one, I mean, at.

The end of the day, it's a longer term focus than the short term of just profit. And we're in that game. And so that's what I want to go back to when I said we're in a major inflection point for executives. Can you share more what you believe, why you believe that to be true, and what is that inflection point?

Sure. So from where I sit, we engage a lot of companies. So this year, as you so engaged 161 companies on a range of issues that I mentioned. Now, of those, 75 welcomed us and said, great idea, let's go do it. 86 said no. And so we filed a shareholder resolution and we escalated that. And of those, about half we withdrew. Once we settled, we came to terms with them. So out of the 161, about four, about a quarter of them went to a vote. We had a 43% average vote, five majority votes, including a 98% vote and 81% vote. But 1.6 trillion assets voted yes on as you so resolutions. So 75% of the companies we engaged said, yeah, let's go do this. And that's what we're seeing more and more. And so when I say that these are executives are realizing this is to their own advantage, that this gives them a competitive lead. An example, I'll tell you a little story. So we sat down with the board of Kellogg, and now Kellogg and every food company has been spraying their wheat, oats and beans for quite a few years with a chemical called glyphosate, also known as Roundup. It's a known carcinogen and it is. Well, so we went to them and we said, look, we think it's just a bad idea to be poisoning your customers, which is getting to that whole stakeholder capitalism thing. And their reaction was, why so? And we said, well, because there were lawsuits recently on glyphosate for people spritzing it in their backyard. And one had a $200 million settlement, one had a $400 million settlement. When people realizing that they're eating it in Every bowl of their Special K. This is going to be bigger than tobacco. This is going to put your company under. Or you can make a decision right now and say, kellogg food is safe to eat and be the only company out there to say it. And they said, oh, well, that's a no brainer. And they signed a pledge to remove glyphosate from their entire supply chain. We're right now in year two. They're working their way through it. And because they did that, now General Mills said, wait, we got to do something. And so they declared regenerative agriculture. And then Pepsi said, oh, we're going to set aside 7 million acres for regenerative ag. And now Campbell's. So what we saw was leadership from Kellogg's. They want to be the company that customers look to for leadership and investors too. And that's what's going to happen. The companies who say, you know, we're going to keep spraying poison on our food, they're going to be going out of business. They're going to be winding down because investors and customers are not going to want to be associated with them. We see this across every sector. There are leaders who are emerging and they're getting the signals from the investors. This is a good thing. They're getting overweighted in mutual funds. Customers are realizing it. Our racial justice scorecard that I mentioned, it's going to be turned into an app so that people can at points purchase go, oh, Nikes or Adidas. Oh, wow, they only get a 7 on racial justice and these guys get a 26. I'm going to go with those sneakers. And that's going to start to make buying decisions across the board as people become more and more aware. So again, transparency, good data leads to decisions, which leads to messages and signals sent to executives who can say, yeah, I want to be on that leadership side. I want to be part of the regenerative economy based on justice and sustainability, which is where we're heading.

Well, so much of your work then is around the research, right? How are you doing that level of research in order to make people aware and bring the transparency? Because that to me sounds like the major goal of what you're doing focused on.

Yeah, well, we do a lot of research. So we wrote our first report on, called Roundup Revealed about four or five years ago. Then we followed up with pesticides in the pantry, which went through all the foods that you're eating that are, that have all these pesticides and which companies are doing it. And in the pesticides of the pantry. We actually ranked and rated all the food Companies on about 30 key performance indicators on pesticide policy, pesticide use, just all the runoff, what they do with water, all these different things. We're actually doing another version of it where we're going to do an Update. It's been two years. That one came out in 2019, 2021. We'll have new data showing which companies have increased and have improved. We're doing that on Ocean Plastics. We're looking at 50 companies on 35 key performance indicators on Ocean Plastics. Again, we did that in 2019. We're doing it again this year to see how they've improved. That was based on research we did in 2006 on recycling recyclability in the bottling industry. What all of the major soft drink companies did. That's what our teams do. We do the research that we can separate leaders from laggards so we know which companies to talk to. And we can also determine what are best practices to say this is what you want to emulate. As I mentioned on diversity, equity, inclusion, we're literally scoring companies on do you disclose? Because we don't have enough data to even establish what are best practices. Now, when we started, very few companies were disclosing their EEO1 or their equal employment opportunity. It's a report that they do for the government if you have a government contract, but every company does one, they have it, they just don't make it public. Since we started it when there were almost none, sasb, the Sustainable Accounting Standard Board, said that disclosure of an EEO1 is required as part of Human capital Management. And we filed about 15 shareholder resolutions about this. BlackRock decided to endorse what we were doing. And they said, if you don't disclose, according to sasb, we're going to vote against your board. We now about 60% of the S&P100 have disclosed their E01. But the E01 is just the baseline. That's just like the basic. You can't tell if there's like promotion gaps. So women and men starting at an entry level, 50%, 50%. When you get to a senior vice president level, it's about 80, 88% men. And so there's a promotion gap and a wage gap. Also with, you know, in the year one, you can hide that you hire a lot of people of color, but you never promote them or you don't pay them equally. So what we're asking for is we want recruitment, retention and promotion data cut by gender, race and Ethnicity. When you have that, you can actually tell which companies are promoting, which companies are retaining, which companies, all that information, you can actually see a trend in their policies and practices. So that's what we're asking for in DEI and we'll get there. We know in 2006 when we asked companies about plastics, they all got Fs because nobody disclosed anything. By the next report they were all disclosing. And so it's always the first step.

What gets measured gets worked on. You're bringing the pressure to measure these important details around. If you say you care about it, then you should be willing to reveal where you are and what you're working on. And you can use that again as a benefit towards your company, something that you can celebrate as a company, something you can do to retain others.

As I said before, if you're transparent, it's sort of like your GPS location of where we are now. You know where you want to get to. If you set that course and then you stay with it or very course correct, you will be rewarded. And that's what the best leaders, the best managers are realizing that it's actually better to just be honest. That right now in this world where honesty sort of took a break for a few years there true veracity, truly. This is the data. It shows something about your character and the character of your company. Emissions, carbon emissions data, CDP data, carbon disclosure project data. So much of it is estimated. And scope three, which is the actual, what we really care about, that's the emissions from your products for an oil company, for Exxon's scope 3, it's the tailpipe emissions from the oil that they make. We filed the shareholder resolution with GE, General Electric last year. They got a 98% vote on climate change. 98%. Management agreed to it. We met with them afterwards. And these are non binding resolutions so companies don't have to do it. And what they agreed to was to actually have real scope three. When they say scope three, they're going to be counting the emissions from their jet engines. They're basically a turbine company. The emissions from all the turbines, from energy production. And they're going to, and they've agreed to reduce it 5% a year for the next 10 years. So 50% by 2030 and 100% by 2050. So that's a real commitment. We are going to be checking in with them, we're going to be holding them to it and how they account for that is going to be very, very critical. So we have an initiative called Sale and Climate which is asking every public company to put forth to adopt a Paris compliant transition plan and to report against it every year. And this means net zero 2050, which just so people understand, because a lot of people say 20, 50, so far away, it's saying net 50, 50% reduction of emissions by 20, 35% a year for the next 10 years. And those are going to be the easier ones than the next 20 years where it goes down to two and a half percent a year. Because those are. You're going to have to really dig a lot deeper. So again, we're asking every company to do this right now. Unilever is on it voluntarily. S and P. Moody's, there's a bunch of companies in Europe and we're not the only group working on this. There's a group in Australia, one in Asia, one in the eu, and then a group in Canada. And we're all looking at this and going, this is. Every company in the world needs to do this. If the countries are going to make their Paris numbers, the companies must do it, too. And the companies who are stepping up, those are the leaders. Those are the ones that you want to invest in because they're the ones who are going to. They are going to be the leaders and the ones who thrive in the future. So this is a really incredible opportunity, this moment in time, for corporate leaders to actually say, I want to be part of that, I want to be part of the future. Because the other option is you're going to wind down and we're going to see a lot of companies that say, we're going business as usual. We're going to keep in this extractive destruction, destructive paradigm. Yeah, you're not going to be around.

I'm sure you've had a lot of skeptics over the years and even recently when you get pushback on what you're trying to do, what is usually that argument and how do you counteract it?

There really isn't an argument, I got to tell you, because they can question the data. They can say, we see material risk. They say, well, we don't see the material risk. And so then we get into the data and they generally go, all right, you guys have done your homework. So that one's easy. Because we don't show up to a meeting unless we have the data and we have a plan. Then looking at the plan, like, what's the ROI on the plan? Well, it's going to cost you more money to put in a waste treatment plant than to dump your manure into the river. But when you dump your manure or your toxins into the river, what's going to happen is there's going to be an algal. There already is an algal outbreak that's going to get toxins into the local water supply, that's going to affect your employees and your customers. It's going to get a lawsuit that's going to taint your brand. It's going to cost you, you know, millions of dollars to defend the lawsuit. And all the while you're just going to be just funneling money into nothing. Or you could have floated a bond, you could have paid for the water treatment plant and you'd be taking care of your community and your employees and make that transformation. Tell me what's better.

Make that a selling point.

So what they come back with is, I can't do it and it's going to kill me in the short term. To which point we say. Or I say, well, you know what? I've got your register of investors sitting in front of me and I'm looking through it and looks like pension funds, looks like big asset managers, looks like people who hold stocks for like 30 years. I see maybe about 10% are short termers. So you're saying you're going to make all of your strategic decisions based on 10% of your ownership. Why not just tell those 10% to drop, sell your stock, the other people will buy it up. But short term is a myth. It is complete mythology. I've looked at this because whenever we file a resolution, we reach out to all the investors to say, vote for our resolution. We know who they are. And I can tell you that. And I tell these to executives. I can tell you the people who actually own your stock really care about the long term. And so you should be making your. And the boards, you're not doing your job. If you're letting your executives make short term decisions, encourage them to be long term. The job of the board is to set strategy and then incentivize the executives to get it done. Executives will get stuff done if they're going to get a bonus 100% of the time. And the board, you report to us, you report to the shareholders. So if you're not doing that, then we're going to have to replace you. And I mean, look at what happened at Exxon this year. Seven right now, five new board members, but ultimately there'll be seven new board members.

I mean, that's pretty true.

That was thought to be impossible. And yet 10 years of shareholder frustration. I mean, we filed 21 resolutions at Exxon, there's been 118 resolutions over the last 10 years and the company did nothing. There has been majority votes. They published a couple of defective reports, but like that frustration at the board for not directing their employees to do what they're supposed to be doing, not directing their. So that's what happened.

What's one thing our listeners could do to help further the kaise and be part of the solution?

Assuming being executives are your listeners, I would say the sustainability goals that you set, make them comprehensive and holistic across the entire company. Not just in the operations, not just in your supply chain, but in the 401k plan, in your culture. Because what you do is you create a sense of belonging for your employees and, and your customers know it and your shareholders know it. And what it does is creates attraction for your company, for investment, for customers, and it retains your employees. So what we find is that it's fragmented. We go into companies, we're doing stg, whatever on food. Okay. We're having a 5k run to feed the homeless this weekend. That's it. They're done. They've checked the box. No, no, no. It's like if you're going to actually adopt that sustainable development goal, then go deep, like look in your whole supply chain and change the way that they treat their employees. Look at your employees and see if there's, if there's food instability there. Like really focus, but be holistic and comprehensive. And it goes a long way for people just to perceive management as actually being thoughtful and actually thinking the whole thing through. So that would be my piece of advice.

Great. And where can people learn more about your work or getting involved?

Sure. So as you sew.org, the website's very action oriented website, if you click on resolutions, we have a tracker of all the 75 or so resolutions and you can see back 10 years. We have data visualization tools for all of our reports. Go into the reports section. You can read reports, but also you can run queries. You can actually compare overlay companies on top of each other. This is stuff we always did to determine laggards and leaders, but now we're sharing it with the public. There's all kinds of things. There's. We have a voting now, a proxy voting service you can actually register with as you vote. And we will vote all your shares as well if you own equities. So a lot of action happening on the website.

Awesome. Well, thank you so much for joining us today. This has certainly been an incredibly enlightening conversation, and I really applaud you for the work that you're doing in the world.

Well, thank you. I appreciate it.

If you like this episode, you're not going to want to miss my interview with Erica Ariel Fox, who shares the secrets to becoming a better negotiator by tackling your inner negotiator with yourself. First, hope you enjoyed today's episode, and I'd like to point you to the next important step. Hit the subscribe button to get notified when we release new content. I'll see you on the next episode of the Enlightened Executive.