Since it was founded in 1971 by a group of west coast mountaineers looking for a place to buy reliable and affordable gear, MEC has vowed to do business differently by building a co-op with democratic principles, as an alternative to private ownership. The company says its grassroots foundation still exists, which is to “make things happen, deal fairly, find strength in community, and inspire adventure.”

Nearly 50 years later, the Vancouver-based company has grown to 22 stores across Canada and strengthened its sustainability efforts through responsible product sourcing, a commitment to shrink its environmental footprint and the championing of social causes.

MEC was the first Canadian retailer to publicly disclose its list of factories and their locations, is a longstanding Bluesign member (ensuring the use of sustainable ingredients and production in the textile industry), and traces its down and wool to ensure that animal welfare standards are being met. The company has also recognized and worked to correct some of its own flaws over the years, including low representation of people of colour in promotional materials.

MEC’s past environmental, social and governance (ESG) performance landed the co-op in the top spot on the Corporate Knights 2020 Best 50 Corporate Citizens in Canada ranking, based on data from the company’s public disclosures for the period from Feb. 26, 2018, to Feb. 24, 2019, which is its 2018/19 fiscal year. (The data doesn’t reflect impacts from COVID-19.) MEC’s overall score of 85.2% was a significant increase from its 2019 ranking, when it placed 17th, with an overall score of 66%.

“MEC has a very compelling, powerful social purpose,” says Coro Strandberg, a sustainability strategist and president of Vancouver’s Strandberg Consulting. “It doesn’t surprise me that a social-purpose company would become a global sustainability leader.”

MEC’s top marks in the ranking come largely in three areas: clean revenue, CEO-to-average-worker pay ratio and gender diversity on its board and executive leadership team. The company’s clean revenue score – a measure of revenue from all goods and services that have clear environmental and, in some cases, social benefits – was 100%. MEC had the highest clean revenue percentage in this year’s ranking in comparison to its retail industry peers.
For the 2018/19 fiscal year, the MEC Label produced 80 fair-trade-certified products, and more than 1,100 products were made with environmentally preferred materials (including organically grown or recycled content, responsibly sourced down and Bluesign-approved textiles). In fact, 88% of MEC Label clothes and sleeping bags were Bluesign approved, and the company is striving to hit 100%.

MEC also scored well for its ratio of CEO-to-average-worker pay, which, according to its disclosures for the 2018/19 fiscal year, was 15:1. (The smaller the ratio, the smaller the gap between CEO and employee earnings; by comparison, Zara’s parent company, Inditex, has a ratio of 357:1.) MEC says the calculation is based on regular wages, overtime, vacation pay and bonuses for all MEC employees, both hourly and salaried staff, in the 2018 pay calendar year.
It also increased its ranking based on the number of women in executive roles. MEC maintains a 50% ratio of women on its executive management team, which is the highest score in its industry in Canada, according to data sourced by Corporate Knights, and the fifth highest in the world within its industry.

In 2018, former MEC CEO David Labistour acknowledged in an open letter that the company was underrepresenting people of colour in its marketing and advertising and vowed to do better.

CEO Phil Arrata, who took the top job in July 2019 after serving on MEC’s board from 2015 to 2018, wasn’t available for an interview for this article. In an email through a company spokesperson, Arrata said MEC “is dedicated to being inclusive” among its more than 2,700 employees and its customers. “We want to make sure that everyone feels welcome at our stores, distribution centres and home office,” Arrata stated. “I am very proud of the many MEC staffers who have been integral to the development of the initiatives we have in place right now.”

Arrata also renewed the Outdoor Industry CEO Diversity Pledge, to hire and support a diverse workforce and leadership team, among other promises. In January, MEC made changes to its workforce, saying it would convert about 950 casual, non-permanent roles into full- or part-time jobs with benefits to reduce staff turnover and improve customer service.

The changes are part of a restructuring to restore the co-op’s financial health. “While MEC is not profit-driven in the same way as the retailers we compete against, we still must be profitable to ensure we deliver great service to our members, elevate employee experiences and continue to contribute to the communities where we live, work and play,” Arrata wrote in an open letter in January.

The company’s challenge going forward will be to sustain its ESG performance amid an extremely difficult financial situation. MEC said it lost $11.5 million for the year ended Feb. 24, 2019, on sales of $462.4 million. The results included $8.5 million in restructuring and reorganization costs. The previous year, it saw a profit of $11.7 million on sales of $454.8 million. In April, the company said the economic impact of COVID-19, which forced the retailer to temporarily close its brick-and-mortar locations, “is severe” and sales “have experienced a drastic decline.”

How MEC emerges from the coronavirus shutdowns, including its ESG actions and commitments, will determine its future growth.

Brenda Bouw is a freelance writer and editor, as well as an author and ghostwriter based in Vancouver. 

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This consensus is starting to crumble as the evidence mounts that considering sustainability issues is not a drain on earnings – and, in fact, improves performance. “The impression among business leaders is that ESG just hasn’t gone mainstream in the investment community,” said the Harvard Business Review last year. “That perception is outdated.”

Investors are increasingly aware of the importance of the climate crisis, water shortages, health and safety in the supply chain, modern slavery, and corruption to their bottom lines. Volkswagen’s Dieselgate and Boeing’s 737 Max scandal are just two incidents that reveal that ESG issues are not only material to a company’s financial performance – they can have a huge effect on it.

Indeed, armed with increasing amounts of high-quality data, investors are becoming ever more assertive in calling for companies to deal with ESG issues. Even the U.S. Business Roundtable, which did much to champion the supremacy of shareholder rights, has changed its position to declare that the purpose of a corporation is not just to serve shareholders but “to create value for all our stakeholders,” including customers, employees and local communities.

The performance of this year’s Global 100 (G100) companies bears out this analysis; since its inception in 2005, up to Dec. 31, 2019, the “index” has outperformed the MSCI ACWI (All Country World Index), returning 7.3% on an annualized basis against the ACWI’s 7.0%.

At the same time, the G100 outperforms on a number of ESG criteria, including average CEO pay ratio (76:1 against 302:1), the number of women on their boards (30% vs 24%) and female executives (20% vs 17%), as well as whether they link executive compensation to targets related to the UN Sustainable Development Goals (SDGs).

Another key area in the list where sustainability and financial performance collide is the carbon-productivity measure of revenue per tonne of CO2 emitted. Carbon productivity is becoming increasingly important as a business issue, and here the G100 members have a clear advantage, earning $384,077/tonne against the ACWI’s $173,600 on a weighted basis. It is also notable that the proportion of the G100’s revenues that derive from “clean” sources has risen to 37%, from 26% last year.

The ultimate measure of sustainability is the ability to endure and thrive in the long term, and here it is striking that the average age of G100 companies – at 83 years – is almost double that of the 49 years for companies in the ACWI.

The ranking was topped by Danish renewable energy provider Ørsted, followed by its compatriot – and last year’s top-ranked company – Chr. Hansen, a biosciences company. In fact, the Danes occupy three of the top six places, rounded out by biotechnology firm Novozymes, in sixth spot (its enzymes enable higher crop yields, renewable fuels and more). You’ve got to wonder what’s in the water in Denmark.
Third was another Nordic company, Finland’s Neste, an oil refiner that is switching from refining crude oil to using cooking waste and other materials as a feedstock. Fourth was U.S. technology conglomerate Cisco, which rose 10 places from 14th, thanks to more than $25 billion in clean revenues from products with environmental core attributes. American software group Autodesk, which came fifth, rose 43 places from its 2019 ranking, now that it uses 99% renewable energy to run its cloud platforms – platforms that help build green buildings, reduce materials in manufacturing life cycles and support better designs for the circular economy.

These were among the European companies that make up almost half (49) of this year’s G100. The U.S. and Canada accounted for 29, while 18 companies in the ranking are from Asia. Latin America boasts just three members of the list, all from Brazil, and South Africa’s Standard Bank was the only representative of the African continent.

The companies included in the G100 represent a wide range of sectors, from aerospace and apparel to wireless telecoms groups and wholesale power companies. The largest sector was financial services, with 18 representatives, including 12 banks, suggesting that investors and lenders are more advanced in their understanding of how taking sustainability issues into account can help their business performance.

The list includes 28 companies that were not on the Global 100 last year; Canada boasted nine of those entrants, suggesting that the business community here is starting to take the issue more seriously. As well, BYD – China’s biggest electric car maker – is a new entrant, along with Hong Kong’s Vitasoy, evidence that while the world’s largest economy lags behind European and North American nations on key sustainability metrics, ESG issues are starting to gain traction where it will matter most.

Who made this year’s list? The 2020 Global 100 ranking

Return to Global 100 landing page

The post The Global 100 difference appeared first on Corporate Knights.

Instead of looking at individual company stocks this week, we’re comparing two exchange-traded funds (ETFs). ETFs are like mutual funds in that they are a bundle of companies wrapped up in a fund. However, they trade directly on the stock exchange, instead of through a sales network, which makes them less expensive than mutual funds. There are a lot of socially responsible ETFs on the market right now, including two with opposing takes on LGBTQ+ issues.

Inspire Global Hope ETF (BLES) aims to invest in “the most inspiring, biblically aligned large companies ($5 billion+ market cap) from both the U.S. and around the world.”

Companies that work on cancer treatment and provide clean water are some of the ones considered inspiring and biblically-aligned. About 5% of the fund’s total holdings are exposed to “clean revenue” (like Danish wind turbine manufacturer Vestas), meaning that revenue is aligned with the UN’s Sustainable Development Goals (SDGs). BLES also sinks a chunk of your money into companies with decidedly less sustainable goals, like Kinder Morgan, the contentious pipeline maker, and Jacobs Engineering Group, which produces nuclear weapons.

At the core of the BLES fund’s “biblically responsible investing” are negative screens against companies engaged in activities it considers immoral, such as abortion, pornography, and yes, LGBTQ activism. If a company sponsors a gay pride parade or signs a letter in support of gay marriage BLES would immediately exclude it from the fund. In an open letter to the LGBT community, BLES CEO Robert Netzly writes, “We respect investors who desire to invest in pro-active support of LGBT marriage, and we ask for the same respect for our investors who are investing according to their faith-based convictions to invest in support of what they understand as the Bible’s teaching and advocacy for one-man, one-woman marriage.”

Okay, Mr. Netzly Since you respect pro LGBTQ+ investors, let’s look at the InsightShares LGBT Employment Equality ETF (PRID) mandate to “invest in companies that respect, protect and encourage their LGBT employees.” PRID leans heavily on the Human Rights Campaign’s Corporate Equality Index, which provides corporate ratings based on three key LGBTQ pillars: non-discrimination policies across all of a company’s business entities, equitable benefits for LGBTQ workers and their families and an inclusive culture as well as corporate social responsibility. Companies must earn a score of at least 85 on this index to be included in PRID.

I love the idea of investing only in companies with proactive LGBTQ+ policies. Unfortunately PRID doesn’t screen out companies based on other social or environmental issues. Peer into PRID’s holdings and you’ll find eyebrow-raising companies like Exxon Mobil (which I wrote about last month) and American weapons manufacturer Lockheed Martin. Although they may support their LGBTQ+ employees, I can’t in good conscience encourage you to invest your money in these companies.

You can see why the ethical ETF market is rife with greenwash. So many stocks get bundled together to make it easier for everyday investors to buy according to their values, but there are often questionable companies tucked in the mix. Always be sure to take a close look at the full list of holdings before you buy.

From a strictly financial perspective, PRID has outperformed BLES considerably since it launched in January 2018, but I’d like to see a longer time horizon before I’m ready to declare its approach to be the winner. One helpful metric I track for ETFs is how much money investors have put into the fund, called assets under management (AUM). BLES has attracted an impressive $140 million, while PRID has attracted a paltry $2.5 million. Perhaps PRID would be appealing to more investors if it implemented proper ESG (environmental, social and governance) methodology and ditched the nastiest holdings.

Despite having some very controversial companies inside the fund, PRID wins this Fund Face-off by a (rainbow-coloured wig’s) hair.

Beta is a measure of a stock or fund’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock or fund that swings more than the market over time has a beta above 1.0. Lower beta means less risk.

Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing.

The post Fund face-off: Are your investments LGBTQ-friendly? appeared first on Corporate Knights.