Increasing Pressure
from Investors and NGOs

Other Stakeholders

For companies, being able to satisfy customer demands, and to do so better than the competition, is the key to success. In some cases, however, meeting the requirements of other stakeholders can be equally important. With regard to sustainability performance, three important groups of stakeholders are investors, NGOs, and employees.

Investing is all about risk and return. Shareholders, banks and pension funds base their investment decisions on the risk/return profiles of the investment opportunities available to them. Increasingly, sustainability is included in this analysis. For example, a company with high carbon emissions is exposed to potential cost increases due to emissions trading and similar regulations, which has a negative impact on company valuation.

To assess the sustainability related risks and opportunities, investors request information from listed companies. A prime example is the Carbon Disclosure Project. This organization, established by a group of institutional investors, sends annual questionnaires on climate change related risks and opportunities, as well as emissions reduction strategies, to thousands of companies across the globe. The results are published in various reports and rankings.

Modeled on the CDP, several other disclosure programs have been established, covering water use, plastics use, and impact on forests. These programs gradually improve transparency on the sustainability performance of companies. This information is used to establish rankings and indices (e.g. Down Jones Sustainability Index, FTSE4Good) to help investors in their decision making.

A second important group of stakeholders are non-government organizations (NGOs) like Greenpeace and Friends of the Earth. These organizations can put substantial pressure on companies through ‘naming and shaming’ techniques. The campaigns are often focused on oil & energy companies, but also extend to other industries like food and clothing. On the other hand, several NGOs try to engage in constructive conversations with companies. For example, the World Wildlife Fund has worked with companies to establish sustainability standards like MSC (sustainable seafood) and RSPO (sustainable palm oil), and publicly endorses what it considers to be sustainability leaders.

For companies with a good reputation, it is easier to attract and retain high quality personnel. People like to work for sustainable companies. A solid sustainability program can therefore contribute to a company’s success in the increasingly competitive labor market.

Pressure from these three stakeholder groups can be used to a company’s advantage. To do so, a company must:

  • Measure and report performance on several sustainability KPIs, such as carbon emissions, water use, waste, etc.
  • Develop a credible sustainability strategy, including clear targets and regular progress reports
  • Develop a communication strategy, tailored to the various stakeholder groups