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Companies sharpen focus on sustainability efforts

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Corporations across the U.S. have raced to bolster their sustainability initiatives around environmental, social and governance-related issues to meet market expectations that are higher than ever before, according to a new report.

But investors, suppliers and even potential recruits have a message for corporate America: We’re not impressed.

Brandlogic’s 2012 Sustainability Leadership Report, published last month, shows a dramatic increase in interest among the 100 companies surveyed in raising corporate sustainability standards and increasing third party monitoring and analysis.

However, data collected by the Wilton, Conn.-based branding consultant for the 2012 report indicate that the market perception of the surveyed companies’ efforts actually decreased on average compared to Brandlogic’s 2011 report.

James Cerruti, senior partner of Brandlogic and the report’s author, said most of the companies’ actual performances have apparently exceeded their respective abilities to communicate the higher standards to consumers, investors and business partners and recent graduates.

“There is a lot more communication around these issues and companies are taking it much more seriously,” Cerruti said. “Many are incorporating messaging around their sustainability into their corporate communications and even into their advertising.”

Given the increased emphasis companies are placing on sustainability and on communicating the changes to the public and to investors, “there was a surprise change year-over-year in that the average perceived performance actually went down,” Cerruti said.

Cerruti said that between 12 and 14 percent of consumers base purchasing decisions on perceived corporate sustainability practices.

On the other hand, he said a whopping 88 percent of institutional investors rate corporate sustainability as being either “extremely important” or “somewhat important” when making investment decisions.

“We know that institutional investors are increasingly factoring these issues into their investment decisions,” Cerruti said. “Many look to sustainability and performance in that area as a kind of proxy for overall leadership in companies today. There’s a whole segment that is called the responsible investing community. They alone represent 15 to 20 percent of investment today.”

When Brandlogic asked about the significance of corporate sustainability practices to the community of institutional investors, “they overwhelmingly said it is extremely or very important to them,” Cerruti said.

Over the last decade, companies have overwhelmingly sharpened their focus on corporate sustainability, Cerruti said.

“Just year-over-year we saw a very substantial increase in the real performances of these 100 companies,” Cerruti said. “Ninety-three out of the 94 companies that we had in the study both years improved their real performance. You see everybody moving up in terms of their commitment to reporting and their commitment to improving their actual performance.”

Top performers based on the results of Brandlogic’s 2012 report include IBM Corp., based in Armonk, General Electric Co., based in Fairfield, Conn., and Danone, whose U.S. unit is headquartered in White Plains.

All three fell into the report’s “leaders” category, which comprises firms that have a strong track record in environmental, social and governmental (ESG) sustainability practices while also demonstrating success in communicating their achievements.

“GE for instance – they really moved up in our study and became a leader this year,” Cerruti said. “They’ve done so from really mastering both the real aspects of sustainability management and the communications around that leadership.”

Heineken, whose U.S. unit is headquartered in White Plains, and PepsiCo, based in Purchase, both fell squarely into the “challengers” category – reserved for companies that have demonstrated a strong commitment to ESG sustainability practices but whose perception lags.

UBS AG, with U.S. offices in New York City and Stamford, Conn., among others, straddled the line between the leaders and the challengers classifications.

Xerox Corp., based in Norwalk, Conn., fell into the “laggards” category, indicating they have demonstrated a relatively low level of commitment to ESG sustainability. However, the report notes that Xerox had the biggest increase to its sustainability reality score – which measures actual steps being taken by companies to boost overall sustainability – of any company included.

Avon Products Inc., which has offices in Rye, fell into the “promoters” category, which comprises companies that are credited with ESG sustainability performance ahead of their actual achievements.

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