Brian Tunick, nine-time award-winning Wall Street analyst in the Consumer/Retail space, takes a deep dive into a company’s ESG performance in our Investor Spotlight.
Bloomberg estimates that ESG assets under management will exceed $50 trillion by 2025, representing more than a third of the projected $141 trillion in total global assets under management. It is clear that all public companies and their board of directors will be facing increasing pressure and scrutiny from stakeholders to measure, report and act on all sustainability and ESG risks.
Veritiv Corp – Ticker VRTV – Market Cap $1.8BN
Over the past 52 weeks, shares of VRTV climbed 490%, making it one of the best performing stocks in the Russell 2000. Headquartered in Atlanta, Veritiv Corporation operates as a business-to-business provider of value-added packaging products and services, as well as facility solutions, print, and publishing products and services in the United States, Canada, Mexico, and internationally.
Given its stock performance, industry it operates in and some of its initiatives, we are highlighting how ESG is being tracked, managed and implemented by Veritiv Corp’s 6,400 employees.
Let’s take a closer look at the company’s ESG practices.
Environmental
Products: Veritiv manages three Chain of Custody certification programs for responsible forest management. These certifications strengthen supply chain assurance and the connections between sustainable forests, traceability, and responsible sourcing of wood-fiber products. Certified Veritiv print brands include Endurance® Printing Paper, nordic+® Select, and Starbrite® Opaque Select. In 2020, Veritiv generated in excess of $1 billion of sales from products tied to its three Chain of Custody certifications.
Services: The company works with clients to reduce waste in their packaging. Through their network of Packaging Design Centers, Veritiv researches, designs, and develops cost-effective packaging solutions that help minimize environmental impacts. By sourcing materials from leading manufacturers, Veritiv can identify new sustainable products and facilitate a first-to-market advantage. Veritiv also partners with LEED certification consultants, property managers, and property owners in order to streamline the LEED certification process for their customers–allowing them to gain up to 25% of the points needed for LEED certification through Veritiv’s green cleaning services.
Fleet: In 2020 Veritiv reduced total fuel consumption by 20% from prior year, which totals almost 900,000 gallons of fuel conservation. This is due in part to Veritiv’s focus on delivery optimization and our more fuel-efficient vehicles.
Facilities: Veritiv takes a strategic approach to reducing it’s buildings’ impact on the environment–aiming to improve energy efficiency across operations through retrofit projects and the use of efficient equipment and technologies. Veritiv also partners with ENGIE Impact to assess and optimize its energy and water usage in all North American facilities. Some key wins include: Reduced total footprint by more than 1.1 million sq ft, including a reduction of 35 buildings during 2020; 37M kilowatt-hours (kWh) consumed in 2020, 21% reduction from prior year; LED & motion-sensor lighting installed in selected warehouses to reduce energy consumption; 841 pieces of material handling equipment (MHE) (11%) removed from the MHE fleet during 2020 and Reduced energy consumption by 13% from 2019 to 2020 from 2.2kWh/sq ft to 1.87 KwH/sq ft.
Social
Diversity within Supply Chain: Veritiv is committed to sourcing quality products and services for its customers and for its own use. To fulfill that commitment they rely on strong alliances with a wide base of suppliers and contractors who perform at high quality standards. Seeking diversity within its supply base adds value to its supply chain by proactively seeking out small businesses, small disadvantaged businesses, women-owned small businesses, HUBZone small businesses, veteran-owned small businesses, and service disabled veteran-owned small businesses. As seen below, $179mm was sourced from its supplier diversity program in 2020.
Diversity within Veritiv: Veritiv’s strategy regarding diversity, equity, and inclusion is built around three key elements: • Engage: Create experiences that celebrate diverse people and perspectives, including a focus on talent acquisition and employee onboarding • Equip: Create a culture that encourages constant and relevant learning, preparing team members for future growth opportunities by aligning training and development, including leadership development, with diversity and inclusion strategy • Empower: Cultivate team member confidence through a “One Veritiv” perspective that grows diverse and innovative leaders including developing a diverse talent pipeline through mentoring, sponsorship, and coaching. The data below gives a snapshot of where the company stood at the beginning of 2021 and the areas it needs to do better.
Community: As a leading business-to-business distribution solutions company, Veritiv operates in more than 250 communities across North America. Driven by its core values and Veritiv Connects, its community engagement and philanthropy program, they focus their efforts on corporate giving and employee volunteer efforts to help shape the success of these communities. Focus areas: Learning: They value workforce readiness and programs that support talent development and prepare individuals for careers in distribution solutions and beyond. An educated and skilled workforce is essential for their success. Healthy Living: Prosperous, healthy, and sustainable communities are important to Veritiv, to its customers, and to society. Specifically, Veritiv’s team members volunteer with the American Red Cross to aid in relief efforts from hurricanes, tornadoes, wildfires, and other natural disasters. Veritiv partners with Junior Achievement in support of its Learning focus area to provide middle and high school students with the knowledge and skills they need to plan for their futures. Volunteering: Veritiv employees across North America work closely together giving back time and talents whenever possible to local community organizations. In 2020, its teams worked to help food banks, homeless shelters, outreach programs, and Toys for Tots, to name a few.
Governance
Board Oversight: Veritiv is committed to having a diverse Board with deep expertise and the highest standards of commitment and integrity. Highlights of its Corporate Governance Practices: Separate Chairman and CEO; Independent Audit & Finance, Nominating & Governance, and Compensation Committees; Annual director elections; Independent directors meetings without management present; Regular Board and Committee performance evaluations; 25% female directors and 12.5% racially and ethnically diverse directors.
Business Resilience and Continuity: Veritiv has developed a business resilience program that is intended to respond to a wide range of incidents, including those related to the impact of climate change, such as extreme weather events, natural or man-made disasters, significant disruption or shut-down of key facilities, site security threats, epidemics or pandemics, and data breaches as well as other events that may significantly impact its operations, people, financial health or reputation.
Data Security and Privacy: Cybersecurity measures implemented at Veritiv include employee and third-party training, monitoring of networks and systems, patching, maintenance, and backup of systems and data. Veritiv team members have an obligation to ensure that the company’s confidential information and trade secrets are properly protected. Team members are entrusted to maintain the security and confidentiality of the information provided to them by the company, our customers, suppliers, and others.
The ROI on ESG
Revenues: Businesses and consumers today want to buy from corporations that are sustainable and forward looking. Transparency into how a company is impacting all of its stakeholders has never been higher given social media and on-line access to information.
Employee hiring and turnover: Given how tight the current labor is, corporations are literally fighting for employees. Again, social media including job posting and corporate review sites gives potential employees insight into which companies actually share their values and which ones are going through the motions for PR benefits.
Operating expenses: Measuring water, energy and waste use and emissions helps companies focus on ways to reduce cost including looking for innovative solutions in their PP&E capital expenditure plans.
Supply Chain continuity: Capacity shortages wreaked havoc on many industries in 2021. Between manufacturing, labor and transportation, it is clear that having a diverse supply chain will be even more important going forward to insure inflation and product delays can best be managed.
Cost of capital: Banks and insurance companies are both responding to their own stakeholders and using their balance sheet to push for positive ESG policy changes. In a recent report, Mckinsey makes it even more black and white–-better ESG scores translate into a 10% lower cost of capital.
Mutual fund and ETF ownership: Bloomberg estimates that global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management. Companies that can collect and report timely metrics and have higher ESG scores are best positioned to increase their ownership by long-term Institutional investors.
Brian Tunick is a vranda Co-Founder. Find out more about Brian and the rest of the vranda team here.
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