The team seeks guidance from multiple sources
Foot Locker has been ramping up its ESG disclosure over the past several years as investors increasingly focus on the topic of corporate sustainability. A company representative says Foot Locker focuses on four so-called pillars when disclosing ESG-related information:
There are several ways Foot Locker figures out which types of ESG information to disclose. There are several organizations such as SASB, CDP and TCFD, as well as proxy advisers ISS and Glass Lewis, all of which provide ESG guidelines. Also, large institutional investors such as BlackRock have begun to weigh in on guidelines regarding ESG disclosure by companies in which they are shareholders. This is a critical voice in the governance of many US companies, because BlackRock owns substantial shares of many companies through its index funds and can use that voice to lobby them and possibly sway other shareholders.
Investor feedback provides Foot Locker with much of the information the company uses to determine the ESG factors on which it focuses. ‘We have a robust shareholder engagement process,’ says a company representative. ‘It’s a 12-month process for the IR team. Our lead independent director and general counsel meet individually with our shareholders, as well as proxy advisory firms, and discuss topics such as board refreshment and composition, the board evaluation process, boardroom and company culture, executive compensation and ESG topics. They respond to shareholder concerns.’
The company representative says Foot Locker’s chairman instructed the company’s C-suite to engage on ESG to assist in gathering the information to best inform investors about its ESG efforts. The type of information disclosed is different on a company-by-company basis because of differing logistics, business models and sectors.
For example, an energy company might focus on subjects such as water consumption, mineral consumption and toxic waste. That wouldn’t make sense for a company like Foot Locker, which is a sportswear and footwear retailer.
Most companies are putting ESG disclosure on their websites because that is where investors generally think to look for ESG-related materials, according to Foot Locker’s company representative. Also, ESG disclosure can be updated in real time on company websites as opposed to proxy statements, which are sent annually.
If included in the proxy statement, ESG would be included in the governance section or as a stand-alone section. ‘In 2019 we included our ESG disclosure under the corporate governance section of our proxy statement. We will also begin including ESG disclosure on our corporate website,’ a company spokesperson says.
ESG disclosure will increase in importance moving forward, adds the company representative: ‘ESG has become increasingly important to shareholders. While important progress to enhance our commitment to ESG disclosure has already been made, we are on a journey. SASB and other frameworks provide clear standards for reporting sustainability information across a wide range of issues. Our goal is to make progress each year.’