ESCO Technologies Sustainability Report 2014
|Company||ESCO Technologies, Inc.|
|Filer||Walden Asset Management|
|Subject(s)||Greenhouse Gas Emissions; Sustainability Reporting|
|Resolved Clause Summary||Sustainability report including ESG performance and 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 2014, prepared at reasonable cost, omitting proprietary information.
We believe tracking and reporting on ESG business practices makes a company more responsive to a transforming 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 in products and processes, develop company-wide communications, publicize innovative practices, and receive feedback.
The Principles for Responsible Investment (PRI) is a United Nations initiative whose members seek the integration of ESG factors in investment decision making. Members collectively hold over $34 trillion of assets under management and seek information on ESG factors to analyze fully the risks and opportunities associated with existing and potential investments.
Carbon Disclosure Project (CDP), representing over 722 institutional investors globally with more than $87 trillion in assets, calls for disclosure from companies on their Greenhouse Gas emissions and climate change management programs. Over two thirds of the S&P 500 now report to CDP.
Sustainability reporting is on the rise globally. In 2011, there was a 46% increase in the number of organizations worldwide using the Global Reporting Initiative’s (GRI) Guidelines for their ESG reporting according to G&A Institute. Smaller companies are proactively implementing sustainability reporting as they grow and anticipate such reporting requests from investors and customers.
Companies such as 3M, Apple, Intel and Microsoft, among many others, increasingly require their suppliers to track and report on key environmental and social factors. 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. Competitors such as Itron Inc., Oracle Corporation, and Pall Corporation, publish comprehensive sustainability reports.
In contrast, ESCO Technologies does not report on its sustainability efforts nor disclose GHG data. Climate change is one of the most financially significant environmental issues currently facing investors. 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 and may have the potential to pose significant regulatory, legal, reputational and financial risks.
The company recognizes in its 10-k that it is “involved in various stages of investigation and cleanup relating to environmental matters” and that “environmental contamination may be discovered in the future on properties which [were] formerly owned or operated.” However, shareholders currently have no access to substantial information on how the company is managing these business factors and risks or its environmental footprint.
We recommend that the report include a company-wide review of policies, practices and metrics related to ESG performance using the GRI index and checklist as a reference.