The First Statement, FT Video, Governance Directions, Institutional Investor, NIRI, and NACD
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Dear Fellow Supporters of Integrated Reporting,

This e-mail announces the first board “Statement of Significant Audiences and Materiality” (produced by Atlas Copco), a “John Authers’ Note” FT video interview with  Ron O’ Hanley of State street, a piece Governance  Directions by Rosemary Sainty on corporate governance and sustainability, an article in Institutional Investor by Bob Massie on the history of ESG integration by investors, an article in IR Update by Barb Brown and Mike Wallace about increasing investor interest in ESG, and four short pieces on sustainability published by National Associate of Corporate Directors. Common themes through the items cited below are the increasing interest of investors in environmental, social, and governance (ESG) issues, the need for board directors to take these into account in order to properly fulfill their role of ensuring long-term value creation by the company, and the need for better communications by companies on how ESG issues are being managed in the context of their corporate strategy. 
Atlas Copco’s “Statement of Materiality and Significant Audiences”
I can’t tell you how excited I am about this. We now have our FIRST board level “Statement of Significant Audiences and Materiality”!! Many of you asked for an example in your efforts supporting “The Statement of Significant Audiences and Materiality Campaign.” Atlas Copco AB, a Swedish company that is “a world-leading provider of sustainable productivity solutions,” published its “Statement of Materiality and Significant Audiences” on p. 8 of their 2015 annual integrated report. As intended, it is short (1/2 page) and clearly comes from their board of directors.
The annual report also contains a “Materiality Mapping Results” matrix (p. 127).  This was done based on consultation with 200 institutional stakeholders to identify the key sustainability priorities that impact, and are impacted by, the company’s business. The selection of the aspects to be mapped was partly defined by the GRI G4 guidelines, but it also included topics outside of the reporting framework that were raised by stakeholders. On this same page, Atlas Copco also announces an important corporate governance decision regarding materiality determination for reporting: “From 2016, Atlas Copco will no longer apply for inclusion in the RobecoSAM Dow Jones Sustainability Index. Instead, the Group will use a materiality driven approach and the GRI G4 guidelines to disclose environmental, social and governance information to investors." This important decision is in line with Tim Youmans’ and my July 2015 post on MaterialityTacker in that the board is exercising its judgement in choosing to move away from “one-size-fits all” in favor of “entity-specific and audience-dependent” materiality determination, as we have long advocated. More detail on Atlas Copco’s approach to determining the material issues  for their long-term strategy can be found on their website.
This critical step forward in The Statement Campaign was brought to my attention late last week by Mala Chakraborti (, Vice President Corporate Responsibility, who I had the pleasure of meeting with last year to discuss integrated reporting and The Statement idea. My thanks to Mala and her colleagues for their courage and leadership. As we all know, getting an organization to be the first to do something is one of the hardest things in the world to do. Well, Atlas Copco has done so. I think this is as significant a step as the first integrated reports published by Novozymes, Novo Nordisk, and Natura nearly 15 years ago. I hope all of you will share this with other companies to encourage them to issue The Statement as well as with investors and other groups to encourage the same.
John Authers’ Note FT Video
Many of you are familiar with the nice series of videos John Authers, the Financial Times’ Senior Investment Commentator, produces for the his “Long View” and other columns on markets and investments.  One of his most recent videos is “Active passive owners” in which he interviews Ron O’ Hanley, President and CEO of State Street Global Advisors, one of the largest asset managers in the world.  In his video, John poses the question of whether passive index owners like State Street are “passive stewards” who have little influence on the company. Ron provides a counterpoint to this position, saying that passive owners are sources of “permanent capital” and discusses a February 26, 2016 letter he sent to the Chairman of the Board of  the 3,000 companies in which State Street has a passive investment position. In his letter, O’ Hanley calls for “effective independent board leadership” in order to ensure that management is focused on long-term value creation rather than short-term earnings. In the video, Ron also makes the point that “Boards are meant to lead the company, not vice versa. They are meant to lead and oversee management.”
Ron defines “effective independent board leadership” as the board having a management oversight role, with a view beyond the tenure of the current management team. Ron’s video and letter provide a point of view that is completely consistent with the purpose of an annual board “Statement of Significant Audiences and Materiality” in that a board’s determination of significant audiences transcends both issues and current management tenure.
Governance Directions Article
In the Australian journal Governance Directions, Rosemary Sainty (Doctoral Researcher, UTS Business School and Founding Australian Representative to the UN Global Compact), published a recent piece called “Engaging boards of directors at the interface of corporate sustainability and corporate governance.”  She notes that due to a number of trends (e.g., globalization, privatization, and deregulation) “corporate governance practices and the role of boards of directors are becoming critically important considerations with social, economic, environmental and political implications.” Building on a number of studies she provides practical guidance on how boards can integrate sustainability into their various committees, as well as a list of questions that boards should ask themselves on sustainability.
Institutional Investor Article “Welcome to the ESG Revolution”
Early last week I read a very nice piece by Bob Massie “Welcome to the ESG Revolution” in Institutional Investor. Bob was President of Ceres from 1996-2003, was one of the co-founders of the Global Reporting Initiative in 1998, and was the initiator of Ceres’s Investor Network on Climate Risk. He is currently Executive Director of Sustainable Solutions Lab UMass Boston. The article is a very complete and thoughtful historical overview of the history of ESG integration by investors and includes a nice timeline going back to 1970. At the conclusion of his article he asks the essential question: “Is capitalism primarily a cloaked transferal of human and natural capital from public value to private wealth, or, as the world faces more constraints and deeper problems will it finally grown up and rescue both people and the planet with a wisdom commensurate with its power?”
IR Update Article “The ESG Disruption: Don’t Be Left Behind”
IR Update is the journal of the National Investor Relations Institute.  In the March issue, Barb Brown and Mike Wallace of the corporate sustainability and governance consulting firm BrownFlynn wrote an article called “The ESG Disruption: Don’t Be Left Behind.” The article outlines growing investor interest in the material ESG issues facing a company and argues that investor relations professionals and CFOs need to take more responsibility for communicating these issues. Historically, such issues have been the subject of communications by sustainability professionals to stakeholders other than shareholders. At the end of their article they present nine practical recommendations and conclude “Whether you agree or not, the ESG disruption is underway. Don’t be left behind.”
Three Articles from the National Association of Corporate Directors
Mike Wallace also brought to my attention published four short pieces from the National Association of Corporate Directors on three specific topics related to sustainability.
What Boards Should Know About the Paris Agreement” (by Mike Wallace and Barb Brown)
A New Normal in Sustainability” (by Mike Wallace)
At Forest City, Board Engagement Fosters Diversity and Inclusion” (by Bob O’ Brien)
Establishing a Climate-Competent Board” (by Richard C. Ferlauto, Page 71)

Kind regards,


Robert G. Eccles | Professor of Management Practice | Harvard Business School
Phone: 617.495.8585

 Movement: Meaning, Momentum, Motives, and Materiality