Layne Christensen Sustainability Report 2011
|Company||Layne Christensen Company|
|Filer||Walden Asset Management|
|Sector||Oil and Gas|
|Subject(s)||Climate Change; Greenhouse Gas Emissions; Sustainability Reporting|
|Resolved Clause Summary||Sustainability report including greenhouse gas strategies|
Internationally recognized index leader Dow Jones defines sustainable business as "encouraging long lasting social well being in communities where [companies] operate, interacting with different stakeholders (e.g., clients, suppliers, employees, government, local communities, and non-governmental organizations), and responding to their specific and evolving needs, thereby securing a long-term 'license to operate,' superior customer and employee loyalty, and ultimately superior financial returns."
We believe reporting on significant environmental, social and governance (ESG) factors makes a company more responsive to the global business environment, characterized by finite natural resources, changing legislation, and heightened public expectations for corporate accountability. Reporting 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 constructive feedback.
Companies such as Bloomberg provide information on ESG performance that investors including Goldman Sachs and Morgan Stanley utilize to assist in investment decisions.
The Carbon Disclosure Project (CDP), representing 534 institutional investors globally with $64 trillion in assets, requests greater disclosure from companies on their climate change management programs. The 2010 company response rate to the CDP for the S&P 500 was more than 70% and at least 82% for the FTSE Global Equity Index Series.
Company disclosure of sustainability factors is on the rise. According to a 2008 KPMG report on sustainability reporting, 79% of the 250 Global Fortune companies produce reports compared to 52% in 2005. Of the 100 top U.S. companies by revenue, 73% produced reports compared to 32% in 2005.
In contrast, Layne Christensen does not report details on its sustainability efforts and has declined to participate in the CDP. Transparency on climate change abatement goals is one of the most financially significant environmental issues currently facing investors.
Moreover, last year this resolution received majority investor support, fully 60% of votes cast, the highest vote ever for a resolution on sustainability reporting. Yet the board has not moved forward in response to this shareholder mandate.
Given Layne Christensen's business focus is providing water-related services and products, we believe that evaluation of the company's exposure to water scarcity can help manage risks. Water scarcity risk assessments can, when well managed, create opportunities for improvement and innovation. JPMorgan Chase expects more companies will face increasing investor pressure to provide detailed statements on water-related risks.
Shareholders request that the Board issue a sustainability report describing the company's ESG performance, including a discussion on water risk and GHG reduction targets and goals. The report should be prepared at reasonable cost, omitting proprietary information, by November 1, 2011.
We recommend that the report include a company-wide review of policies, practices, and metrics related to ESG performance and that Layne Christensen commit to continuous improvement in reporting. We encourage using the Global Reporting Initiative's (GRI) Sustainability Reporting Guidelines (G3). The GRI (www.globalreporting.org) is a globally accepted reporting framework considered the gold standard of reporting. The G3 provide a flexible reporting system that promotes incremental improvement over time.