IR and finance executives don’t appreciate our repurposing of “materiality” as it creates ambiguity.
By Wesley Gee
Last week in Whistler, over 300 of Canada’s leading Investor Relations (IR) practitioners were welcomed to the Canadian Investor Relations Institute (CIRI) 26th annual conference.
As an experienced Corporate Social Responsibility (CSR) advisor and now an investor relations grasshopper at one of Canada’s top design and communications firms, it was refreshing to witness IR’s cautious curiosity about CSR, and the growing appreciation of what shifting from shareholder to stakeholder perspectives may bring to their space – both at head office and in the markets.
Making the Case: Introducing CSR to Investor Relations
While this year’s CIRI conference happened in a mountainous paradise that could tempt even bow-tied city slickers to hop on a snowboard, attendees were able to take their focus off the view to engage in two days of candid dialogue.
With an overarching agenda of “we can’t control the economy, but we can control how we react to it,” top communications and IR executives discussed such issues as how to engage with (and matter to) Board members, how to manage major challenges including shareholder activism, and how to make the business case for CSR/ESG reporting.
The CSR reporting panel that I moderated featured a reporting company (Newalta), research organization (Sustainalytics), and long time CSR advisor (Jennifer Woofter). Since we had an aware, but generally inexperienced, audience, we focused on articulating the business case for CSR reporting, while providing an overview of evolving standards (e.g., G4) and initiatives (e.g., SASB), and offering clear links between financial and non-financial reporting, along with the application of ‘materiality’.
Here’s a heads-up for other CSR advisors aiming to work with IR and finance executives: many don’t appreciate our repurposing of “materiality” as it creates ambiguity, so be prepared to define it in both financial and sustainability contexts while having an alternative phrase for materiality in your back pocket (i.e., stakeholder priorities).
Theory vs. Application
What stood out for me over the course of the conference was that panel discussions tended to quickly dispense with theory and move on to current events. Not surprising, perhaps, as there was always someone at the podium who could provide some interesting real world perspective, and often had a refreshing blend of transparency and humility.
The closing session featured a fireside chat with senior IR executives from TELUS, Agrium and Canadian Pacific Railway whose companies had all been significantly affected by very public, and very aggressive, shareholder proposals.
Giving their peers a from-the-trenches look at the unpredictable nature of IR, they discussed how despite the careful planning of executive and board leadership, small groups of issue-focused shareholders can take control of a meeting, and even set the course for a company (which may involve reforming executive and board leadership teams), to meet their “greater good”; and how IR executives need to advise and report to their board with resolve – based on facts, rather than on emotions.
Shareholder Action: De-risking the Annual General Meeting
Long-term risk management is one of the biggest motivators for companies to enter the CSR space, and a company’s Annual General Meeting (AGM) can be the venue to get a glimpse into the major issues impacting the company and the degree to which it is handling them in a responsible way. Typically, the most successful AGMs for a company are the ones that have the fewest surprises – the more uneventful the better – as they can present a company that is in control and correctly managing the issues that matter most to its business and stakeholders.
Occasionally, shareholders can throw out a mix of issues like throwing spaghetti at a wall, and although most quickly drop, some of them stick.
While CSR can include a multitude of issues, and often gets credited or labeled for recent business shifts, it has clearly influenced a new generation of transparency (i.e. “showing your warts”), driven greater ownership across value chains, and brought forth a generally adopted common philosophy that “what appeases stakeholders will please shareholders.”
Based on my impressions from the conference and as an advisor to companies in several sectors, I’m cautiously hopeful that with less emphasis on (and alienation linked to) ambiguous phrases including materiality and CSR – and more emphasis on engaging and investing in what matters most – businesses can plan for and move in a direction that is mindful of its long term prosperity.
About the Author:
Wesley Gee is Director of Sustainability at The Works Design Communications Ltd, and supports the ongoing improvement of its clients’ sustainability strategies, multi-stakeholder engagement, reporting and communication.