1. Socially Responsible Investing – What’s the Buzz?
It’sincreasinglycommonforshareholdersand investmentprofessionals toconsideracompany’s degree
of “corporate responsibility”asa criterionforinvestmentdecisions. A recentsurveyof financial
institutions withbillionsof dollars undermanagement (pensionfunds,hedge andmutual funds,other
large assetmanagers) foundthatover80% of those surveyed indicatedtheyexpecttoconsider a
company’s sustainabilityinfuture investmentdecisions,withclimate riskasignificantinterest. Butwhat
doesthis emphasisoncorporate responsibility mean,andmore importantly,whyshouldyoucare?
There are differentwaysto characterize corporate responsibility. Beyond the basicsof sound
governance, mostevaluationsof corporate responsibility includesome measureof acompany’ssocial
and/orenvironmentalimpact. Howthatimpactis evaluatedcanvarybased uponwhois doingthe
evaluation (the company,atrade orprofessional group, aneutral party,awatchdog or advocacygroup),
whatis beingmeasured,andhow. Ratingsystems range fromassessingacompany’s performance over
time;to comparisonstoan industrybenchmarkoragainstthe competition;to rankingacompany
relative toa desired goal orexpectation. Anapproach can alsoinclude combinationsof these.
Sortingthroughthe complexityof optionstoassess corporate social andenvironmental responsibility
mightseema dauntingtask. The growingnumberof sociallyresponsible scorecardsandindices
intended toinformthe publicandinvestors canseemevenconfusing,evencontradictory.
Why botherinthe firstplace? Why woulda companycare aboutmeasuring itscarbonfootprint,for
example? Aren’tcompaniesinbusinesstomake money? Andwhy shouldaninvestorcare about
sustainability? Isn’tahealthybalance sheetenough tosatisfy shareholders,customersandemployees?
As itturns out,companiesthat establish environmental goalsalsotendtoimprove theirfinancial
performance. The reasonispretty straightforward, if youthink of pollutionaswaste andresources
(water, energy,raw commodities)asvaluable, oftenfinite assetsthatshouldn’tbe wasted. Companies
that setgoalsthat eliminate waste, improve efficiencyandconserve resourcestypicallyendupsaving
money. It’seasyto see how the bottomline canbe positivelyimpacted byachievinggreater
productivitywith lessenvironmental impactandwaste. Sofrom a financial standpoint, itmakessense
that environmental stewardshipisgoodforbusiness.
It alsomakessense froma marketperspective,if one considersthatacompany’svalue issignificantly
influencedbyitsreputation. Companiesspend vastsums of moneytodevelop,polishandmarkettheir
brands. Yet virtuallyovernight, abrandcan be badly tarnishedby revelations aboutexploitive orunsafe
workingconditionsorby a serious environmental incident. Therefore, itismore thanfiscally
responsible to avoidharmto a company’sreputation by firstassessingitslevelof environmental and
social risk,thenworkingtoreduce thatrisk. It isa critical part of modern corporate riskmanagement
and helps toprotecta company’softenmostvaluable asset,itsbrand.
Additionally,dataonenvironmental andsocial performancecanhelpacompany to developstrategies
and buildcapacitytobettermanage a changingregulatoryandlegislative landscape. Bysharingresults
publicly,acompanycan informandbe informedbypublicandscientificinterestand dialogue. This

2. interestanddialogue inturn canhelpshape future policydirection,sincelawsandregulations often
reflectthe directioninwhichinvolvedcitizensandotherstakeholders wanttheircity,state ornationto
go.
Increasingly,consumersandshareholdersare alsoengagingdirectly withcompaniesonthese issues.
Theywant to knowwhetheracompanyispayingattentionto itssocial and environmental impacts. Not
onlybecause doingso isgoodfor business,whichhelpstocreate jobs,generate revenueandprovide
economicopportunities, butbecause people wanttospend theirownvaluedresources –theirmoney
and time - in a waythat alignswiththeirvalues. It’saneffective anddirect wayforindividuals,families
and communitiesto expresshowtheywouldlike the worldtobe,now and inthe future, andto
contribute tothat vision,usingthe powerof theirpocketbook,socialmediaandword-of-mouth.
Researchalsosuggests thatcompaniesthatsetenvironmental andsustainabilitygoalsare farmore
likelytoimprove performance thanare companies thathaven’tsetgoals. Sosettinggoals actually
increases acompany’schancesto succeedin achievingthose goals. And,havinginvestedthe time and
energytoset a goal,a socially andenvironmentally conscientiousfirm willwanttomeasure its progress
towardachievingit.
Thishelpstoaddressthe “why” of growingpublic,academic, business,andinvestorinterestincorporate
responsibilityassessmentandreporting. Italsohelpstoexplainthe growingnumber of measurement
and reportingsystems,includingsociallyresponsible investing scorecardsand indices. Returningnow
to the “who,”“what” and “how”- Amongall the available options,isthere asingle bestapproach?
Giventhe complexity,there isn’t(yet) one frontrunnerapproachtofitall businesses. However, thereis
growingconsensusaroundafew common-senseelementstolookforina sociallyresponsible corporate
accountingapproach:
Transparency. The assumptions,data, scope andotheraspectsof the measurementsystem shouldbe
relativelytransparent. It’sunderstandable thatacompany mightnot wantto disclose how an
assessmentwas calculated,especiallywhen resultsaren’tguaranteed. However,it’sbettertobe
transparent,even giventhe uncertainties. Systemscanbe refinedandoutcomesimprovedovertime.
But the entire undertakingcouldlose meaning if noone canunderstandwhat,exactly,isbeing
measuredandhow. Thiscould leadto speculationthatthe companyhassomethingtohide, defeating
the purpose of conductingan assessment.
Comprehensiveness. The approach shouldbe reasonablycomprehensive. If the metricsorscope is too
limited,itcouldbe perceivedas“Greenwashing,”orcherrypicking. Aswitha lack of transparency,this
couldbe more damagingtoa company’sreputationthan if ithadnot addressedsustainabilityatall. The
measurementorranking systemneedn’tbe sobroad,however, thatthe companycan’t focuson
improvementinanygiven area. One strategyisto identify afew near-termobjectivesanda longerterm
strategicgoal for each major area beingassessed. Forexample, forgreenhouse gasreduction,one could
measure the percentof energyuse reducedeachyearwith incremental percentreductiontargets,anda
longertermgoal to double the use of lowercarbonrenewable energywithinadecade.

3. ScientificCredibility. Thisaspectispretty simple. Forresultstobe credible,metricsandmeasurement
approachesandgoalsshouldbe basedon soundscience and onacceptedscientificandtechnical
practices. Science iscontinuallyevolving,sowe canexpectthatassessment approacheswillalso
improve overtime. Andthe bestwayto spursuch advancementin ourscientificunderstandingisto
employthe bestavailableinformation,dataandscience toour currentprocessesandmeasurements.
Collaborative. Ideally,the approachwould emergefromaprocessthat engagedothersinitscreation –
whetherthismeansagroup of committedcompanies workingtogether,ora companyor industry
workinginpartnershipwith others,perhaps the academiccommunity, membersof the public,
shareholders, governmentagencies,orothers. Collaboration makessense,since differentindividuals
and organizations bringdifferentperspectivesandexpertise tothe table. Andone can’t expecta
company – althoughitisan expertconcerning itsownbusiness - tobe an expertinenvironmental or
social science. Plus,bringingin others –includingneutral thirdparties - canlendcredibilityand
transparencyto the processand results. Andengagingothersgivesthemastake inthe outcome,
helpingtobuildpositive relationshipswithimportantconstituencieslikeshareholders,customersand
the general public.
In summary,the numberof sociallyresponsible measurementsystems alreadyoutthere isagood sign
that more and more people are recognizingthe linkbetweencorporate responsibility andasustainable
and healthy businessenvironment. Consumersandinvestorscan selectfromamongvarious approaches
to informtheirinvestmentandpurchasingchoices. Businessesalsohave more optionstohelpthem
assessandtrack environmental andsocial performance. Hopefully,thisinformation willencourage and
inspire companiesandinvestors alike tonavigate those choiceswithgreaterunderstanding,enthusiasm
and confidence.
The authoris NationalProgramDirector of the SmartWay TransportPartnership,a USEPA public-private
partnership aimed atreducing the environmentalfootprintof goodsmovement,whilereducing fueluse
and saving businesses money. SmartWay wasdeveloped in collaboration with theAmerican Trucking
Association,BusinessforSocialResponsibility and 15 Charterbusinesspartners. Thisyear (2014), US EPA
and SmartWay’s 3,000 partners acrossthe United Statesand Canada celebratetheprogram’s10th
anniversary. SmartWay’s benchmarking and assessmenttoolshelp businessesmeasure and improvethe
efficiency of their freighttransportation. They provideconsistency and transparency forcarbon
accounting of goodsmovementwith clearly defined,scientifically credible metrics and measurements.
SmartWay also helpspartnersmakemoreinformed technical,modal, and operationaland carrier
selection choices with readily accessible data and information,factsheets,casestudies,technicalpapers,
webinars,training seminars,outreach and technicalassistance. Seewww.epa.gov/smartway
This article reflects theauthor’sown opinionsand notthoseof theUSEPA.