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Management Summary
Conclusion
In conclusion, all 35 companies in the scope of this report have made important steps towards implementation of the selected themes this year. Concerning Natural Capital and Living Wage, incremental progress can be reported. Most notably, this report shows the inclusion of the Sustainable Development Goals (SDGs) in corporate public information. All companies should proceed to develop a holistic view on all three themes, using the SDGs as a guiding framework.
In the third consecutive year that natural capital is addressed by VBDO, our findings show that all companies make reference to natural capital in their annual report or other public information. Companies report well on their impact on natural capital and are increasingly adding their impacts in the supply chain to this assessment. In addition, almost all companies take specific action to conserve natural capital. They contribute to the clean-up of oceans, source sustainably, implement green roofs or are becoming 100% circular. This year, companies were also assessed on whether they disclose their dependencies on ecosystem services, such as water and air purification and habitats for species. Many companies specify dependencies for their own operations, while the dependency of the supply chain is rarely mentioned. Companies also regularly miss the systemic nature of natural capital risks. Lastly, Dutch stock-listed companies can improve their sustainability performance on natural capital with concrete, measurable and time-bound targets.
In 2018, the ongoing trend of adoption of the living wage concept resumes. More than half of the assessed companies make reference to living wage in their public information. Eight companies have made formal commitments to apply living wages in their own operations. Two companies have done an assessment on living wage for their remuneration structures and made corrections according to the results. However, paying living wages in the supply chain and auditing this issue is for most companies a step too far at this point in time. VBDO sees an encouraging trend with regards to the formation of special working groups on living wage. Especially the financial sector is eager to engage on living wage with companies in their portfolios.
Above all, we encourage companies to work together on this topic to overcome competitive challenges in the supply chain. The second year that VBDO engages on the Sustainable Development Goals showed the potential of the Goals. In general, the SDGs have become common for companies to report on. Almost every company improved its performance on this theme. This resulted in an almost doubled aggregated average score of companies in scope compared to last year.
Many companies started additional initiatives and partnerships to contribute to the SDGs. Some examples are; formulating a SDG based best in class policy for investments, partnering up with UN organizations to advance universal health care and creating an open-source knowledge hub for the SDGs. Still, companies often do not set targets to contribute to the SDGs material to their business. Companies should see the additional business opportunities the SDGs provide.
Next year, VBDO expects more concrete practices to contribute to specific and relevant SDGs and measurable targets in-line with the criteria defined by the United Nations.
Recommendations
Natural Capital
• Refrain from merely picking a selection of issues. Instead, assess the dependencies of natural capital and the (systemic) risks for the company.
• Conduct an assessment on natural capital for the supply chain that includes dependencies, impacts and (systemic) risks.
• Set concrete, measurable and time-bound targets to conserve natural capital.
• Use scientifically established indicators and tools for KPIs and target-setting.
Living Wage
• Conduct an assessment on the impact of paying a living wage in the company’s operations.
• Integrate the concept of living wage in financial decision making, portfolio analysis and engagement conversations with companies.
• Use science-based indicators, such as the Wage Indicator and Asia Floor Wage.
• Incorporate living wage in the Supplier Code of Conduct. Perform audits on payment of living wages in the supply chain and establish whistleblower practices to enforce compliance.
• Collaborate with other companies in the sector, to address (competitive) challenges together and for joint advocacy.
Sustainable Development Goals
• Establish practices that are specifically set up to reach the SDGs that have been identified as material to the core business.
• Integrate the SDGs in investment decisions, e.g. by using them as an indicator for the selection (or exclusion) of companies.
• Set concrete, measurable and time-bound targets in-line with the indicators provided by the United Nations.
• Form partnerships with companies, NGOs, financial institutions and governments to advance the SDGs together.
Commitments
The 35 companies mentioned in this report have made 39 commitments to improve their sustainability performance. Commitments are made regarding enhanced reporting, setting targets or initiating new actions. The commitments, which have been made to VBDO during engagement efforts, can be found in Chapter 4 and Appendix 4.