VF Corporation Water Report 2014
|Filer||Boston Common Asset Management, LLC|
|Subject(s)||Supply Chain; Sustainability Reporting; Water Scarcity|
|Resolved Clause Summary||Water risk report including supply chain|
|Status||Withdrawn; Ongoing dialogue|
Water, as a scarce and valuable resource, is increasingly subject to regulation, commoditization, and conflicting ownership assertions. Likewise, global population growth, agricultural and industrial demands, changing climatic patterns, and point source water pollution are exacerbating water scarce conditions.
In 2013 under The Carbon Disclosure Project's (CDP) Water Disclosure Project, 530 institutional investors representing $57 trillion in assets called for greater transparency on corporate water issues from 1,036 companies. Unlike Inditex and H&M, VF Corporation has not responded to the CDP Water information request.
We commend VF Corporation (VF) for adopting Global Compliance Standards that extend social and environmental requirements to independent contracted factories. VF states it considers political, economic, and regulatory risks that could affect suppliers and manufacturers of raw materials and finished products. However, VF does not disclose the impact of its operations and that of contracted manufacturers and suppliers on water resources, local water basins, and local communities. VF operates 29 manufacturing facilities and utilizes approximately 1,900 contractors in 60 countries.
A significant portion of VF’s revenues (25.57%) is derived from the Jeanswear segment that depends on water to irrigate cotton and stitch jeans. While a significant portion of VF’s denim products are manufactured in VF-owned facilities in Mexico, South America, the Caribbean, Europe, and the Middle East, a proportion of Jeanswear products come from contractors in Asia. Climate change events have severely impacted East and Southeast Asia and caused devastating floods in Thailand, while China faces serious water shortages.
The U.S. Securities and Exchange Commission in its 2010 “Commission Guidance Regarding Disclosure Related to Climate Change” states: “Changes in the availability or quality of water, or other natural resources on which the registrant’s business depends… can have material effects on companies” (http://www.sec.gov/rules/interp/2010/33-9106.pdf).
The lack of a water resources management strategy may pose a number of risks to VF Corporation, including:
Higher costs due to water shortages, rising energy prices, and increasingly stringent water regulations
Reputational risks created when communities are harmed by supplier water practices
We believe that VF Corporation’s industry peers address their supply chain water risks and impacts on local water resources. For example, Nike’s online system reports data on production, water use, discharge volumes, and wastewater quality for nearly 400 suppliers.
It is important that VF addresses water related risks both within the watersheds of its facilities and throughout its value chain.
RESOLVED: Shareholders request that VF Corporation issue a report by November 1, 2014 (at reasonable cost and excluding confidential and proprietary information) on the company’s impacts on water resources. This report should describe the company’s supply chain impacts on water quality and quantity, assess the company’s water resource management and water usage reduction strategies against the backdrop of local water basins and communities in countries of operation, and mitigate the impacts of water scarcity on long term shareholder value.