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Environmental Governance
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What is Environmental Governance?
Environmental Governance is where sustainability performance and traditional corporate
governance intersect.

Why Environmental Governance Matters
The call for sustainability is resulting in an increase in performance measurement, management,
and reporting. Environmental performance is the most quantifiable aspect of sustainability.

Both public and private firms are now screened, evaluated, and compared to peers by corporate
customers and mainstream investment firms on environmental performance, as well as broader
aspects of sustainability.

Sustainability programs are being increasingly linked to the attraction and retention of financial,
human, customer, and public capital.

Firms who do not engage in environmental governance face reputational risk and scrutiny
about the quality of the firm’s overall corporate governance.

Shareholder Interests
The past several years have seen the creation, rapid expansion and strategic alignment of
hundreds of influential shareholders who are connecting sustainability performance to
corporate governance. These groups are actively comparing and contrasting the sustainability
performance of thousands of companies as they make their investment decisions. They are also
actively calling for greater transparency of corporate sustainability performance and quantified
environmental data.

These shareholders range from public pension plans, to corporate pensions, to traditional Wall
Street institutions, and represent trillions of dollars of investment capital. They are coordinating
their efforts through a number of unique coalitions and initiatives.

arrow View Shareholder Coalitions & Priority Stakeholders

Environmental Reporting Trends
Thousands of companies are responding to the increasing demand for environmental
transparency by publishing corporate social responsibility (CSR) reports, sustainability reports,
environmental reports, enhancing their websites and/or through their annual financial reports.
This disclosure includes regulated information, as well as non-regulated information such as
energy usage, recycling programs and carbon emissions. The result is an ever increasing
amount of environmental performance data that is available in the public domain. The availa-
bility and use of this type of performance data requires companies to insure that consistent
information is being reported through all external communication channels. It also requires an
understanding of the research and decision-making process of the investment community, as
well as the research resources being used by the investment community.

Public Company Implications
A company's inability to voluntarily report sustainability information sends a message to the
market. Companies that do not respond to the markets growing demand for sustainability
information are developing their own reputation in this growing global market. Investors are
increasingly demanding sustainability disclosure through the use of shareholder resolutions,
proxy voting initiatives and coordinated shareholder actions. The absence of sustainability
data not only slows the flow of investment capital seeking sustainable investment opportunities,
it can create significant financial and reputational implications.

Private Company Implications
As public companies measure, manage and report on their own sustainability performance,
they begin to understand the impacts caused by their choice in suppliers. Numerous multi-
national corporations are actively assessing the sustainability performance of their supply chains
and reporting on these activities. Similar to the way ISO 9000 & 14000 rippled through supply
chains, sustainability reporting is becoming an increasing component of supply chain manage-
ment. As such, private companies need to understand the sustainability challenges faced by
their clients and should be prepared to report sustainability in a manner that supports their
clients' needs and interests.

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