P&G investors, heirs pressure bounty maker over deforestation

Bloomberg

 

Environmentalists scored a win against a corporate giant last year when Procter & Gamble Co. shareholders backed a proposal asking the maker of Charmin toilet paper and Bounty paper towel to report on its efforts to address deforestation.

This year, the Natural Resources Defense Council, Sierra Club and several dozen descendants of P&G’s founding families are lobbying shareholders to vote against longtime director Angela Braly.

Ahead of the company’s annual meeting Tuesday, the groups say they are targeting Ms. Braly because, as head of the board’s governance and public responsibility committee, she is responsible for addressing climate issues. She is also a director at Exxon Mobil Corp., which has faced pressure to accelerate emissions reductions as its oil-and-gas rivals shift to renewable energy.

Shareholders at big companies have typically rejected efforts by special-interest groups to prod management to do more on social issues, from gender rights to climate change. That trend is starting to change as large asset managers such as BlackRock Inc. and Vanguard Group have started to challenge companies on proxy votes.

Ms. Braly, former chief executive of health insurer WellPoint Inc., has served on P&G’s board since 2009 and was re-elected to Exxon’s board earlier this year amid objections from the same environmental groups and BlackRock. Rarely do directors lose their seats in such votes, particularly when opponents aren’t pushing an alternate candidate; still, the percentage of negative vote can signal shareholder discontent.

The environmental groups argue that P&G is contributing to destruction of the Canadian boreal forest, from which the company sources some of its paper products. The woodlands cover 35% of Canada’s land mass and aid the earth’s environmental balance by producing oxygen and storing carbon.

P&G says its practices are sustainable and that it takes steps to ensure forests aren’t destroyed in the sourcing of its products. It says it replaces twice as many trees as it cuts down. Ms. Braly declined to comment through P&G, which said in a statement that it is “proud of our diverse set of active, capable, and diligent board members, including Ms. Braly."

Backing the efforts of environmental groups in the P&G vote are several generations of family members descended from P&G founders William Procter and James Gamble, who started the Cincinnati-based company more than 180 years ago.

“None of us expected the proposal to pass last year. We thought if you get 30%, it’s a win," said Justine Epstein, 29 years old, who says she is a sixth-generation descendant of James Gamble. Ms. Epstein, along with her brother Jules Feeney, 26, plan to vote against Ms. Braly at Tuesday’s meeting, which will be held virtually.

In contrast to the 2020 proposal, proxy advisory firms Glass Lewis and Institutional Shareholder Services have recommended investors re-elect Ms. Braly to P&G’s board. BlackRock declined to comment on its voting plans this year.

BlackRock, the world’s largest asset manager, opposed Ms. Braly’s re-election, along with that of another director, to Exxon’s board earlier this year. The firm cited “insufficient progress" on climate-related steps and financial disclosures.

Roughly two-thirds of P&G shareholders, including BlackRock, Vanguard and State Street Corp., voted last year to ask the company to publish a paper on its efforts to halt deforestation. P&G urged investors to vote against the measure, proposed by the Green Century Equity Fund, which pushes for companies to adopt sustainable practices through advocacy and its investments.

In the report produced following the vote, P&G said it has strengthened its policy on sourcing wood pulp and is shifting toward recycled material for packaging.

Environmental groups say P&G should rely more on recycled material for the products themselves. The company has said tissue and toilet paper made from recycled material don’t meet consumer expectations and that there isn’t enough recycled fiber available to substantially supply consumer paper products.

“We recognize the key role we must play through our procurement and manufacturing practices to ensure the sustainability of the world’s forest resources," the company said in its report.

Environmental groups say P&G hasn’t done enough to reduce its dependency on Canada’s boreal forest or shift sourcing to recycled materials.

Thomas Peterson, shareholder advocate for the Green Century Equity Fund, said last year’s vote demonstrated dissatisfaction with P&G’s sourcing practices. He declined to say how the fund plans to vote on P&G directors.

Social and environmental issues are gaining traction in shareholder votes as fund managers are more willing to exert power in visible ways, and as other investors to follow suit.

Public-company shareholders have filed 90 climate-related shareholder proposals this year, up from 58 a year ago, according to proxy adviser ISS. Most were withdrawn after negotiations, leaving 26 proposals on ballots, compared with 10 in all of 2020. A record 11 climate-related proposals received support from a majority of voters this year, compared with five last year and none in 2019, ISS said.

In May, 99% of Bunge Ltd. shareholders voted for a proposal asking the agricultural trading giant to report on efforts to curb deforestation.

The Securities and Exchange Commission last month sent letters to dozens of public companies asking them to provide more information to investors about how climate change might affect their financial earnings or business operations.

Growing support is a sign that investors have higher expectations around transparency beyond purely financial matters, said Enver Fitch, ISS head of environmental and social proxy research. “Concurrently, a growing number of mainstream investors adopt the view that environmental and social issues are material to shareholder value," he said.

 

This story has been published from a wire agency feed without modifications to the text


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