Top institutional shareholders in Procter & Gamble have defied the company to throw their weight behind a call for it to do more to protect forests as an environmental wave confronts the world’s largest consumer group.
In an unusually big investor rebellion at one of the largest US companies, two-thirds of votes at P&G’s annual meeting were cast in favour of a shareholder proposal critical of how it uses palm oil and forest pulp in products including Bounty paper towels and Charmin toilet paper.
BlackRock, P&G’s second-largest shareholder with a 6.6 per cent stake, is among the investors that took part in the revolt.
Before the meeting, P&G had urged shareholders to vote against the proposal put forward by Green Century Capital Management, an eco-conscious investment firm with $825m of assets under management.
P&G said it had already taken and was continuing to take significant steps to reduce its impact on forests.
The company said its use of materials such as wood pulp and palm oil helped it to meet customer demand. “We continually work to ensure that we are following responsible practices in our supply chains.”
P&G is among the companies that have benefited this year as a result of consumer stockpiling of toilet paper and other household basics ahead of Covid-19 lockdowns.
Shareholder vote in favour of resolution that P&G disclose its impact on forests
In voting in favour of the motion on Tuesday, P&G shareholders called on the company to assess and disclose the impact it has on forests, rather than to immediately halt any activity.
The motion calls on P&G to report “on if and how it can increase the scale, pace and rigour of its efforts to eliminate deforestation and the degradation of intact forests in its supply chains”.
The commentary accompanying the proposed shareholder resolution was explicitly critical of the company’s efforts. Green Century said P&G was a heavy user of commodities that it said were a leading cause of deforestation and also had other detrimental environmental effects including biodiversity loss, soil erosion and disrupted rainfall patterns.
The motion alleged that some of P&G’s suppliers have been “tied to illegal deforestation”. It added that companies that fail to adequately mitigate deforestation “are vulnerable to material financial risk” since they faced regulatory action and enforcement.
The vote at P&G is the latest sign that global investor pressure is growing on corporate America to step up efforts to protect the environment.
Explaining its rationale, BlackRock said on Tuesday that P&G “could further improve its responsible forestry disclosures”. The world’s biggest asset manager added: “We determined that there is room for P&G to improve the frequency and depth of disclosure.”
A record number of environmental and social shareholder proposals on ballots at US companies have this year won majority support from investors. BlackRock is among several institutional asset managers to have supported investor petitions on issues ranging from climate change to disclosures on political spending.
While such votes are non-binding, investor proposals that garner majority support from shareholders can prompt directors to take action.
Green Century said some of P&G’s rivals had implemented stronger deforestation policies. It noted that Kimberly-Clark had committed to halve its sourcing from natural forests and that Unilever had committed to “zero-net deforestation” in its supply chains.
P&G said it required that all of the virgin wood pulp it sources is certified through the Forest Stewardship Council and other third-parties. The company recently laid down a target to increase its use of FSC-certified wood pulp to at least 75 per cent across brands in its family care division by 2025.
A separate motion calling for diversity disclosure — asking for goals, metrics and trends related to Procter & Gamble’s promotion, recruitment and retention of protected classes of employees — garnered a 37 per cent vote in support of the shareholder resolution put forward by the non-profit advocacy group As You Sow.
P&G said: “We continue to engage with shareholders and other stakeholders, including the proponents, to discuss our practices, review opportunities to improve, and test our thinking and strategy.”