One might argue that the leading stock gainers on SN’s annual stock performance report were aided by their good works for society.
Take the top three leaders: Whole Foods has long been recognized for its earth-friendly support of sustainable agriculture, locally sourced foods and “certified organic” foods, among others.
A&P has elevated its profile by investing in energy-efficient technology to reduce its carbon footprint, conserve water and reduce harmful emissions.
United Natural Foods has made the Sustainable Business 20 list of the world's top sustainable stocks for six years of the past eight years, including 2009.
It's difficult to gauge the impact of good deeds for the betterment of society as it relates to a company's sales, profits and stock performance. At the dawn of this new decade, shadowed by glacial meltdowns, a disgust with Wall Street and a globally connected world, it is clear corporate social responsibility is a critical value to be weighed against financial performance.
The food industry is well aware of this. A Grocery Manufacturers Association report on achieving superior financial performance in challenging economic times noted a dramatic increase in sustainability reports published by companies over a 10-year period from 1% in 1997 to 70% in 2008. Moreover, a PricewaterhouseCoopers analysis of 64 large companies — 28 reporting on sustainability and 36 non-reporting — found that over the last five years those producing sustainability reports had a 10% to 15% higher median gross margin than non-reporting companies. The report added a caveat. It wasn't clear which came first: better performing companies able to focus on sustainability issues or better performance as a result of sustainability efforts.
Food retailers, dealing with consumers at the grass-roots level, know about good corporate stewardship and its impact on the bottom line.
But is this enough? Socially responsible investors want more accountability and disclosure. The Social Investment Forum, a nonprofit association of investors and professionals, dedicated to advancing socially responsible investing, last year sent a letter to President Obama and the chairman of the Securities and Exchange Commission asking for mandatory sustainability reporting in SEC filings. The SIF contends corporate reporting is mostly voluntary, far from universal, and often inconsistent and incomplete. It recommends using Global Reporting Initiative standards, used by many companies outside the United States. It also asks the SEC to issue interpretative guidance to clarify that companies are required to disclose short- and long-term sustainability risks in the Management Discussion and Analysis section of their annual 10-K filing.
Given that businesses are averse to mandates and regulations, I doubt mandatory reporting would be favored by the food industry. But expect new sustainability scorecards factored into financial performance one way or the other.
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