Author: Danielle Santos | UC Berkeley School of Law | Research & Project Associate | Posted: July 10, 2019 | Download PDF
How are corporations putting sustainability into practice? Last week at the annual National Business Law Scholars Conference, which drew scholars from across the United States and around the world, Prof. Amelia Miazad’s plenary panel built a bridge between the ivory tower and the private sector by delving into the transformative governance reforms happening at America’s most groundbreaking corporations. The panel featured illuminating perspectives from corporate counsel; Keir Gumbs, Deputy Corporate Secretary and Associate General Counsel, at UberTechnologies; Stefanie Tang, Director of Legal, Corporate Securities at Stitch Fix and member of the SASB Standards Board; Chris Power, Manager of SEC Reporting and Technical Accounting at Salesforce; and Bruce Lymburn, General Counsel of Clifbar.
During the panel, Keir Gumbs, Associate GC of Uber discussed how the corporation’s radical transformation characterized by transparency was “very difficult” to bring about, and required a complete “revamping of Uber’s culture.” Before 2017, former CEO & Co-founder Travis Kalanick’s (culturally appropriative) values, “Toe steppin” and “Always be hustlin”–two of his 14 values– were central to the ridesharing giant’s mission. Under Covington & Burling’s recommendation, Uber’s new CEO Dara Khosrowshahi released eight new cultural norms which effectively replaced Kalanick’s 14 previous values. The eight new norms are intended to be updated as the company evolves. Gumbs explained that this was one of the primary steps to moving from– what Khosrowshahi describes as– “an era of growth at all costs,” “to one of responsible growth…”
Despite progress, one of Uber’s new cultural norms– “Do the right thing. Period.”– is still challenging to implement, said Gumbs. “We wanted to innovate the way people get around, create sustainable transportation and new jobs. But this was unprecedented work. Not a single law existed for the new regime Uber created.” However, navigating uncharted territory has not stopped Uber from its radical transformation. One of the most pressing issues tackled by Uber’s new leadership was its aggressive culture. West and the new CEO Khosrowshahi wanted the goals and ambitions of Uber’s employees to reflect Uber’s new values and norms, and so they asked for insights from teams that interviewed thousands of employees during investigations that occurred after Uber’s tumultuous 2017. “Sustainability for Uber is still in its infancy and so we really have to think about who are we as a company and what matters to us to create metrics and implement them instead of following the lead of other companies and not implementing them,” stressed Gumbs. Additionally, Gumbs expressed that Uber has established a firm culture of transparency regarding safety across the industry and hopes that other companies that are resistant will begin to become more transparent as well. Uber actively looks to establish this norm with others and will lead by example, hoping to benefit the industry. When asked how investors were feeling about the risk of transparency, Gumbs confirmed, “There is tough information in those reports. But with 17 million trips a day- and unfortunate happenings that can occur with so much human interaction- we don’t want investors to be surprised.” Gumbs explained that Uber receives valued input from investors and urges them to encourage other companies in the space to follow Uber’s radical transparency. In response to a question regarding whether Uber has actually changed, Gumbs responded, “We invite investors to be the judge.”
Other panelists also shared inspiring insights into how their corporations are putting sustainability into practice. Chris Power, Manager of the SEC Reporting and Technical Accounting at Salesforce, explained how their founder and co-CEO Mark Benioff, “hoped to have a positive impact beyond shareholder theory,” and founded the enterprise cloud computing company on a 1-1-1 model of integrated corporate philanthropy which dedicates 1% of Salesforce’s equity, 1% of employee time, and 1% of product to communities around the world.
As a result, Salesforce has provided more than 40,000+ nonprofits, educational institutions, and philanthropic organizations with their technology, donated $260 million in grants, and contributed more than 4 million hours of employee volunteering. Power stressed that Salesforce is fortunate to have a clear tone from the top, which allows employees to embed their values into our core business strategy. This helps to drive long-term value creation. “The starting point is top-down support and investors saw programs being promoted in different ways,” said Power. “Investors asked, ‘where’s the one-stop-shop for all of this?’ We needed a section in our 10-K so investors could review. Collaboration is really important.” Power also discussed Salesforce’s virtual power purchase agreements and commitment to 100% renewable energy. “We’ve tried to partner with wind farm developers and source our renewable energy credits in a way that creates additional renewable energy on the grid,” explained Power.
Groundbreaking sustainability does not come without its hurdles, however. Power described the complicated structures that legal and finance teams haven’t seen, “It’s uncharted territory for us and we’ve had to learn new things to enable the sustainability team to do something quite impactful.” When asked why some areas of the report are detailed and why some are not, Power responded, “It’s a process. We made public commitments. We want good governance controls. We made public statements on SASB. But, it’s hard to get through all topics in one go–the realities of being a company with a high growth rate is that it’s very expensive and an operational burden.” Power explained how the environmental team has had a good system for tracking their carbon footprint by using a third-party review but not an audit of key metrics driving them closer to 100% renewable energy. “Do we spend time executing the program or reviewing?” asked Power. “The education process has to happen.” With respect to the pay gap, Power said his team needs to demonstrate the value of reviewing to the HR team and that they also need to add an expert layer and are using the environmental side to get this started. Power emphasized that Salesforce is not trying to hit every framework perfectly, but rather define what is important to them and project that to create meaningful, long-lasting value in unprecedented ways.
Stefanie Tang Director of Legal, Corporate Securities at Stitch Fix and member of the SASB Standards Board, who previously worked at Clorox, discussed the role of SASB in the constantly changing, uncharted territory of corporate sustainability. Tang explained that SASB is a nonprofit, non-government standards-setting organization. She explained that GRI is intended to address the interests of a broad set of stakeholders, and less focused on financially material metrics, and that SASB and GRI are complementary to each other. Often, “different organizations may seem to be competing with each other, but SASB can be situated neatly into the GRI framework,” explained Tang. Sustainability topics such as human capital management are important, Tang continued, also because “Millenials care a lot about sustainability, culture, diversity and they are a large part of the workforce–this is something that companies need to take into account.” Using the tech and mining industries as examples, Tang highlighted that, “across sectors and industries, corporations have different human capital management issues. In tech, diversity and culture issues may be more likely to be material and in mining, health and worker safety issues may be a greater focus–SASB helps identify those industry-specific issues.”
With respect to her experience at Clorox, Tang explained how after the acquisition of Burt’s Bees, sustainability became more of a focus due to these brand “halos”. Clorox issues an “integrated annual report, with financial metrics side by side with sustainability metrics,” such as diversity, water usage, other environmental topics, etc. Tang also highlighted that the reporting structure, with the sustainability team reporting to the general counsel, made it easier for the legal and sustainability teams to collaborate on these disclosures.
Finally, Bruce Lymburn, General Counsel of Clifbar provided interesting insights into how the still-private company–which is not subject to the same regulations as the other public corporations–has put sustainability into practice. Lymburn described Clifbar as having been created by entrepreneurs with charitable values who viewed the company itself as an engine of good. Clifbar from the start committed to supporting charity and the environment through the business. Started in 1986 in Berkeley, CA by Gary Erickson in a garage, Erickson wanted to take some risk off the table. Lymburn discussed how Clifbar weighed its options; “Do I do an IPO? Sell to private equity–usually a short exit strategy?”, Clifbar questioned. Eventually, the private company decided to sell part of the company to employees with a liquidity event through ESOP–a Federal regulated pension share that skewed the benefit for employees in the middle income, not the top earners. The program is free and employees receive a stock grant every year into a retirement account. “Ownership culture! But a real one!” enthused Lymburn. Although this “win all around” has had issues Clifbar has had to reckon with, such as a young workforce that may retire all at once, “It has been very successful for actual stakeholders–not just in theory,” said Lymburn. Clifbar’s commitment to sustainability as a private company serves as a leader in its industry which other startups may follow as an example.
Thank you to our panelists for enabling us to enhance our “field research” in corporate governance and sustainability.
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