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ESCO Sustainability Report With GHG Goals

Shareholders request that ESCO Technologies issue a sustainability report describing the company’s environmental, social and governance (ESG) risks and opportunities including greenhouse gas (GHG) emissions reduction targets and goals. The report should be available by year end 2015, prepared at reasonable cost, omitting proprietary information.


We believe tracking and reporting ESG practices makes a company more responsive to a global business environment characterized by finite natural resources, changing legislation, and heightened public expectations for corporate accountability. Reporting also helps companies better integrate and gain strategic value from existing sustainability efforts, identify gaps and opportunities, develop company-wide communications, recruit and retain employees, and receive feedback.
Support for and the practice of sustainability reporting continues to gain momentum:
  • In 2013, KPMG found that of 4,100 global companies seventy-one percent had ESG reports.
  • The United Nations Principles for Responsible Investment has more than 1,200 signatories with over $45 trillion of assets under management.  These members seek ESG information from companies to be able to analyze fully the risks and opportunities associated with existing and potential investments.
  • Carbon Disclosure Project (CDP), representing 767 institutional investors globally with approximately $92 trillion in assets, calls for company disclosure on Greenhouse Gas emissions and climate change management programs. Over two thirds of the S&P 500 now report to CDP.
Currently, ESCO Technologies does not report on its sustainability efforts nor disclose GHG data.  ESCO claimed in the 2014 proxy that it “has a long history of dedication to good corporate citizenship and social responsibility, and has already adopted many of the practices which would be disclosed by” an ESG report.  However, shareholders currently have no information with which to assess the validity and extent of this statement.  We believe that this is a serious gap.
Climate change is one of the most financially significant environmental issues currently facing ESCO’s investors and customers. While ESCO delivers products that promote fuel efficiency and provide energy grid intelligence, information on how ESCO meets goals to manage and reduce its own environmental and climate impacts are not disclosed.
Occupational safety and health, vendor and labor standards, waste and water reduction targets and product related environmental impacts are particularly important ESG considerations in ESCO Technologies sector.  Not managing these properly could pose significant regulatory, legal, reputational and financial risks.
Competitors like Pall Corporation, Itron Inc., and Oracle Corporation offer shareholders important information through comprehensive sustainability reports and by responding to CDP.  Also a key ESCO Technologies’ customer, PG&E began working with suppliers in 2008 to integrate sustainability in its supply chain through its Green Supply Chain Program.  By not reporting, we are concerned that ESCO Technologies may be missing opportunities that larger peers are actively recognizing and lagging its peer group in terms of risk management. 
We recommend that the report include a company-wide review of policies, practices and metrics related to ESG performance. The GRI index could be a helpful checklist for guidance.