PROXY MEMORANDUM
To:
Emerson Electric Co. Shareholders
Subject:
2016 Proxy Statement – Item No. 4: Stockholder Proposal on Sustainability
Reporting
Date:
January 19, 2016
Contact:
Pat Zerega, Sr. Director of Shareholder Advocacy, pzerega@mercyinvestments.org
Mercy Investment Services, Inc. recommends a vote “FOR” Proxy Item No. 4, Stockholder Proposal
on Sustainability Reporting. The proposal was filed by Mercy and will be voted on at the February 2,
2016 Annual Meeting of Emerson Electric Co. (Emerson).
Resolved
Shareholders request Emerson Electric issue a sustainability report describing the company’s present
policies, performance, and improvement targets related to key environmental, social and governance
(ESG) risks and opportunities. The report should be available on the company website by September
1, 2016, prepared at reasonable cost, omitting proprietary information.
Background
Emerson does not publish a comprehensive sustainability report. An overview of Emerson’s
approach to managing environmental and social issues is contained in the “Corporate Citizenship”
pages of the company’s website; however, it does not provide sufficient data for analysts to
develop a thorough understanding of the company’s ESG-related business risks and opportunities.
The Corporate Citizenship section of the website focuses on the company’s aspirations and
provides anecdotal information.
In 2015, a similar resolution 39.3% of Emerson shareholders supported this resolution.
Strategic Benefits to Emerson
Emerson can identify and manage material business risks and opportunities by measuring,
tracking and reporting ESG data. For example, Emerson plans to expand its operations in
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emerging markets, where proactive management of human capital, labor relations and human
rights – particularly in its supply chain - are important business considerations. In addition,
Emerson plays a significant role in promoting energy efficiency. The company has invested nearly
two-thirds of its research and development budget in energy-efficient products and technologies
and has stated its intention to operate its facilities in a manner that “protects the environment,
meets or exceeds government requirements, and continually reduces energy consumption and
waste.” i However, the company does not disclose data that supports these commitments.
Emerson will keep pace with its primary competitors who already publish detailed
sustainability reports and data. Emerson supplies products and services to customers that
increasingly require their suppliers to provide ESG performance data. Emerson’s primary
competitors (GE, ABB, Schneider Electric) publish detailed sustainability reports and data,
potentially putting Emerson at a competitive disadvantage.
Business Case for Sustainability Reporting
A comprehensive sustainability report includes quantitative and qualitative goals and reports
year-on-year data on many aspects of strategic corporate performance, including:
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Labor issues, including employee health and safety, training and workforce demographics;
Environmental management, including greenhouse gas emissions, water use and waste
management;
Supply chain management, including operational efficiencies and adherence to company
standards.
Sustainability reporting is widely accepted and expected among investors. The CFA Institute
recently conducted a survey of the use of ESG factors among 1,325 portfolio managers and
research analysts. Among the findings:
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63% of respondents said they consider ESG factors in the investment decision making
process to help manage investment risks.
61% said public companies should be required to report at least annually on ESG factors.
44% said they demand ESG data from companies.
38% said ESG is a proxy for management quality. ii
Sustainability is also good for business. In 2015, a meta-study of more than 2,200 academic studies
on the connection between ESG and corporate financial performance (CFP) found that “the
business case for ESG investing is empirically very well founded. Roughly 90% of studies find a
nonnegative ESG–CFP relation. More importantly, the large majority of studies reports positive
findings. [The] positive ESG impact on CFP appears stable over time.” iii
Please vote “FOR” proxy item No. 4.
http://www.emerson.com/en-us/AboutUs/Pages/csr-sustainability.aspx
“ESG Issues in Investing: Investors Debunk the Myths.” CFA Institute, August 2015.
iii Gunnar Friede, Timo Busch & Alexander Bassen (2015) ESG and financial performance: aggregated evidence from more than
2000 empirical studies, Journal of Sustainable Finance & Investment, 5:4, 210-233, DOI: 10.1080/20430795.2015.1118917
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