Around a quarter of votes cast at Nike’s recent AGM backed a shareholder proposal seeking a look into the company’s ability – or inability – to meet its sustainability goals.
The proposal was filed by the Trium Sustainable Innovators fund of UK-based ESG fund firm Trium Capital. Specifically, it asks Nike’s board to prepare a public report including:
- ‘An analysis of [the company’s] failure to meet its self-imposed quantitative sustainability targets for [fiscal years 2015-2020], now discontinued, and whether reinstating them is advisable
- ‘An analysis of [the company’s] corporate governance around sustainability, examining the mechanisms in place to define, communicate and execute its sustainability strategy within the broader business strategy
- ‘A discussion of the potential additional measures [the company] could implement to ensure it achieves its sustainability objectives irrespective of consumer preference and marketplace demand.’
The resolution was backed by 26.7 percent of votes cast, a figure that although not a majority is widely regarded as significant by governance experts.
The proponent argued that Nike has created a ‘robust’ sustainability agenda but fallen short of reaching most of its targets, thereby eroding confidence in its commitment and communication reliability.
‘Trium Sustainable Innovators’ investment in Nike is based on the expectation that it can achieve profitable growth in the long term,’ the firm wrote. ‘We recognize differing investor views on achieving this. While we acknowledge the fashion industry’s negative environmental impact and associated financial risks, we respect differing perspectives. However, inconsistent strategy communication and execution serve neither investor group well.’
Trium Sustainable Innovators pointed to examples of what it said were Nike’s failures to reach its goals. Among these, it said the company set a target of cutting its average product carbon footprint by 10 percent between fiscal years 2015 and 2020 but made no progress. It also pointed to targets related to energy use and chemistry.
‘Nike’s explanations for these failures appear to absolve itself of responsibility, attributing them to ‘consumer preference’ and ‘marketplace demand’. This overlooks the company’s influence on demand through pricing, supply volumes and product visibility on its direct sales channels,’ Trium Sustainable Innovators wrote. ‘We are disappointed by the firm’s track record and lack of perseverance in reaching its self-imposed sustainability objectives.’
Board opposition
Nike’s board had urged shareholders to vote against the resolution, writing in the proxy statement that:
- ‘The company already publicly reports its year-over-year progress toward achieving its purpose-related targets as well as its processes for developing, monitoring and executing on those targets in the company’s annual impact report
- ‘The proposal would divert company time and resources to the preparation of a report that would ultimately not provide additional value to the company’s shareholders.’
The board wrote that Nike has since 2005 published five-year targets that ‘represent multi-year commitments to drive meaningful impact, meet stakeholder expectations and align with the company’s strategic and business priorities’ and has adopted a set of 29 targets for fiscal year 2020 to fiscal year 2025.
‘The company recognizes that success in this space is not linear, but that accountability means sharing both [its] achievements and its learnings from its setbacks… [T]he company’s impact report is currently designed to provide stakeholders with the key information the proposal seeks,’ the board added.
A request for comment from Nike was not returned immediately.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
