Examples of Long-Term Thinking

Companies that are leading the way in reducing their environmental impact.
  • Transcript


Question: Are companies beginning to think in more long-term way? 

Robert Eccles: A great example to look at is Ricoh, the copier company in Japan. Now, they’re not practicing integrated reporting, they may in the future, I can’t speak for what they’re going to do, but I have met with the executives of Ricoh, I have written a case on Ricoh that we’ll be teaching in our advanced management program here, and Ricoh has developed a, what they call extra long term strategy, a 40-year strategy, where they have publicly committed to reducing their environmental impact, so its broadly defined, it’s carbon, it’s water, it’s, you know, other emissions. They have committed to reducing their, the environmental impact to one-eighth of what it is today, including growth. So this is including anticipated growth in the future, and they have done a very careful internal analysis and came up with what they call their no regret policy, which was they would be happy that they made this decision, even if not forced to do so by regulations or by stakeholder pressure, they convinced themselves through very careful analysis that this was the correct thing to do for the company, that it was the correct thing to do for society, because they are very concerned. Obviously if Ricoh is the only company that commits to an extra long term plan, then that’s not going to change the world, but I think they’re a leading example. 

So then the question becomes, how is the market reacting? Well, I’ve talked to people on the sell side, I’ve talked to people on the buy side, they recognize what Ricoh is doing, they would admit that it isn’t being factored into their stock price today, they suggest that over the long term, as these issues, environmental and so forth, become more important, that this will be to an advantage of the company. 

But it’s the problem that you’ve talked about with Peter, the sell-side oriented, six months, maybe at the outside, buy-side, year or two years and this tension between a two-year timeframe and a 40-year timeframe is hard to reconcile. To Ricoh’s credit, they are still doing the right thing. You can clearly say their stock price isn’t being punished by it, but I think if you have more companies like Ricoh taking responsibility for a longer term view and then ultimately practicing integrated reporting, and taking a more multiple stakeholder point of view, then I suspect that you’ll start to see changes in the shareholder community. Not all shareholders have the short-term orientation. There’s ones that you can point to, largely the big pension funds, CalPERS, APG, Norwegian Pension Funds, they’ve been very supportive of integrated reporting, they’ve been supportive of sustainable strategies and as they start to focus their investments in companies that have this kind of commitment, I think you’ll start to see a benefit in terms of shareholder return.

Recorded on April 19, 2010