STMicroelectronics has reacted positively to losing its DJSI listing

STMicroelectronics is a company on a mission. With its recent fall from the Dow Jones Sustainability Indexes – after 12 consecutive years on the prestigious listing – the European chip maker is determined to reaffirm its sustainability credentials.

Although ST maintained its position on nine other sustainability indexes, the loss of DJSI status was clearly a wake-up call. With more companies focusing on comprehensive disclosure, ST realised that it needed to demonstrate through decisive action the integration of sustainability priorities into its core business strategy to propel itself above the rising bar.

The results of the company’s efforts are impressive. ST’s two-year materiality and strategic planning process has delivered a set of 22 key issues, each the subject of a separate chapter in its sustainability report. The report also provides a convincing description of the time, energy and resources put towards strategic alignment. For example, ST elaborates on how targets and objectives related to each material issue were vetted with the relevant vice-president so as to solidify roles and responsibilities and ensure support and success in implementation.

ST is solid in its clear and concise presentation of material topics. The company not only applies the GRI sustainability reporting guidelines at an ‘A’ application level, but it also uses the report to fulfil its requirement under the UN Global Compact to file an annual communication on progress.

Interestingly, ST cross-references GRI and ISO 26000 throughout and includes icons next to data to alert readers of what indicator or principle is being addressed. Topics themselves are illustrated with global case studies and contextual information, as well as stakeholder voices. These quotes, unfortunately, uniformly skew to the laudatory or, at best, mildly challenging. As ST gains confidence with the inclusion of stakeholder perspectives, perhaps there will be more critical and insightful commentary that can spur the company to transformational sustainability.

Material spotlight

One of the most fascinating and complex issues that ST includes in the report relates to preventing conflict minerals from entering the company’s supply chain. Tantalum, tin, tungsten, and gold – collectively referred to as 3TG – are sometimes sourced in conflict zones, with their purchase fuelling armed conflict. ST carefully lays out its role in screening and monitoring its supply chain, educating the reader on the complexity of this system. For example, engaging in one feedback exercise with a supplier can result in data originating “from as many as eight separate tiers of the supply chain”.

ST also brings the drivers for conflict mineral tracking and disclosure to the forefront. In his letter introducing the report, the chief executive highlights how crucial a clean supply chain is for ST’s customers. Currently, nearly half of all customers’ social and ethical requests and requirements relate to this issue.

Another topic that ST is working hard to address is the huge gender gap in the company’s management and executive ranks. For the first time in its history, ST has elected a female board member, a move in the right direction. Current gender statistics show women in senior and executive management at about 10% – a paltry figure. Accordingly, ST has set an objective to raise women’s representation in management to 15% by 2015, a significant jump given the starting point. Hopefully, these will be but the first of ST’s efforts over the coming years.

Integrating sustainability

Tucked into various sections of the report, under topics as disparate as conserving water and protecting intellectual property, ST has begun to enumerate the financial ramifications of performance on its material issues.

Some discussions include cost and savings information, while others speak to the man-hours necessary to bring products to market. For example, ST calculates a total of €34m in savings garnered from the implementation of strong occupational safety and health systems since 2002, and identifies up to €460m in annual economic impact generated by the company in the Rhône-Alpes Region.

With these forays into valuation, ST is positioning its sustainability efforts as key to long-term business success. Intentionally or not, ST’s report hits on many of the proposed components of integrated reporting: forward-looking vision, discussion of value creation, quantification, context, materiality, and stakeholder responsiveness. As official standards for integrated reporting gain in substance and standing, ST will be well placed to reclaim its mantle of sustainability leadership with regard to both performance and disclosure.

Aleksandra Dobkowski-Joy is a principal at Framework LLC.