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Report: Time for next stage of sustainable business

Activist investor group urges companies to track their use of energy and resources as closely as it does its hiring and cash flow.

BOSTON--Corporate America needs to track its use of energy and resources as closely as it does its hiring and cash flow if it wants to keep pace with social concern about climate change and other sustainability issues, an activist U.S. investor group argues in a new report.

Population growth and a rising standard of living across the world will bring opportunities--but also risks of higher energy costs, scarcer water, and other possible consequences of climate change, the Ceres coalition of socially concerned investors, companies and public interest groups said.

Over the next decade, investors and consumers will expect more comprehensive disclosure from businesses about what climate-related risks they face and what they are doing about them, said the Boston-based group, whose members oversee some $400 billion in assets.

"It's time for a new generation of best practices, new expectations of what sustainability is," said Mindy Lubber, president of the group.

Leading U.S. businesses ranging from top conglomerate General Electric to No. 3 railroad CSX to the world's largest retailer, Wal-Mart Stores have already gone public about their efforts to make their products and operations more environmentally friendly.

"The next step is moving into a comprehensive set of practices, from the board room to the copy room," Lubber said. "Companies need to take sustainability into account, just as they would other major risks and opportunities in the marketplace."

"Environmental and social issues are core to business performance in the 21st century," Anne Stausboll, chief executive officer of the California Public Employees Retirement System, the biggest U.S. public pension fund and a Ceres member, said in a statement. "We are looking for companies that are managing these risks and developing opportunities."

In an 84-page report, the group spells out 20 practices it believes investors and consumers will come to expect from companies by 2020. The report is called "The 21st Century Corporation: The Ceres Roadmap for Sustainability" and is set for release on Thursday.

The practices it urges range from tying executive pay to progress on sustainability, to providing greater detail on the environmental impact of products, to setting firm targets on improving energy efficiency, such as cutting greenhouse gas emissions 25 percent from 2005 levels by 2020.

The credit crunch and financial scandals of the past two years have shown investors that businesses can make choices that are far riskier than their executives may consider them to be. That has made some more attuned to the dangers that climate change may pose to business, Lubber said.

Ceres' report also cites some examples of what it considers the new decade's standards in corporate sustainability. Among them are a McDonald's drive to install energy efficiency control systems at its restaurants and Wal-Mart's adoption of a sustainability index intended to help shoppers pick environmentally sensitive products.

Further evidence of corporate America's changing thinking on climate change came last year, when companies including Apple and utility PG&E broke ranks with the U.S. Chamber of Commerce, one of the nation's top business lobbying groups, over its opposition to pending U.S. legislation intended to reduce carbon dioxide emissions and limit climate change.

Correction, March 12, 1:02 p.m. PST: This story originally gave an incorrect figure for the assets overseen by Ceres members. Ceres says its members oversee some $400 billion in assets.