Report Finds ESG a Proxy Priority, Fashion B Corps Tell Otherwise

A new report outlines the ESG issues fashion should consider in 2023.

In recent years, shareholders’ access to the corporate proxy has been rolled back in regard to corporate responsibility. Recent changes were made to avoid duplicativeness in issues that have been “substantially implemented” by companies, per the U.S. Securities and Exchange Commission.

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Three dozen experts detailed the top ESG proposals this proxy season in the report, which is titled “Proxy Preview 2023.” It is a recurring collaboration between As You Sow (which also produces reports on the apparel industry), the Sustainable Investments Institute, or Si2, and Proxy Impact. This year’s report catalogued more than 542 shareholder resolutions filed on environmental, social and governance issues, giving insight into today’s shareholder expectations.

In its 19th edition, the latest report found that ESG proposals were up 60 percent compared to last year (with investors voting on more than 316 proposals in 2022). Proposals spanned climate change, corporate political influence, human rights, decent work, environmental management, diversity at work, anti-ESG (including adverse lobbying efforts), board oversight, health and sustainable governance, among others.

Investors face even more climate-related shareholder resolutions than last year, with a total of 122, up from 110 last year and just 79 in 2021. The rise in climate proposals is due to the “urgency of the problem,” in the words of Michael Passoff, who is the founder and chief executive officer of Proxy Impact, from a webinar held Wednesday. (Passoff mentioned the latest United Nations climate report as evidence of rising threats.)

While “fashion is not a central focus of Proxy Preview,” Heidi Welsh, executive director of Si2 and coauthor of “Proxy Preview 2023,” said in an email to WWD, “I’d say the main intersections would be waste and also supply chain labor concerns. There are new angles on domestic labor organizing that also may be relevant.” Interestingly, and not unrelated to fashion or cosmetics, animal welfare proposals (PETA, as one specific callout) were filed “more this year than before,” she added.

Welsh said there is a “big jump in proposals around reproductive health,” given the overturn of Roe v. Wade last year. Human rights, at home and abroad, remain strong trends. “Fair pay” and treatment regarding diversity, equity and inclusion efforts remained imperative. “Investors want more information on [DE&I], more disclosures on climate change and more on how companies are influencing policy,” summarized Welsh.

It matters as companies look to fine-tune reporting efforts ahead of mandatory change. For one, the SEC aims to make a mandatory climate disclosure rule. But even while ESG efforts are said to guide industries like fashion, investors may not be in it for the long haul as some companies can attest.

After 11 years in business, North Carolina cycling apparel brand Kitsbow revealed its closure in a LinkedIn statement Tuesday. The company, a B Corp and proud model of Made in the U.S. fashion, will remain in operation for at least another two weeks to finish remaining orders, marking down its inventory by 20 percent. Some 41 staff members are losing their jobs. Unique in its field, Kitsbow offers “one piece” flow production for cycling and other sports. Since 2021, Kitsbow apparel has been produced in the state. Retail formats like its “Ride House” location — equipped with a visitors’ center, café, bike shop and changing rooms — served the surrounding community.

“The leaders at Kitsbow are deeply proud of what this team has done in the last 15 months as a benefit corporation,” said David Billstrom, founder of Kitsbow, in the post. Rattling off figures such as a 10 percent increase in sales from 2021 to 2022 (and 25,000 made-to-order products), and the production of 63,000 masks amid the pandemic, he underscored, “The team proved that one-piece flow meant good margins even while paying a living wage.”

Fair pay speaks to the reigning proxy trends. A former venture capitalist, Billstrom offered his take on how ESG or impact investing can sometimes be shortsighted or contradictory.

“There are some ‘pure’ and experienced impact investors, but most are interested in making a difference while minimizing risk and maximizing return. Given that non-impact companies struggle to manage risk and max return, how the heck does an impact company do it?” he said.

Billstrom mentioned an expense line related to workplace-transferable employee training ($600,000 in 2021 and $400,000 in 2022) that ultimately toppled the company without the ability to secure additional funds.

Despite making a considerable investment in the rural town’s workforce, he underscored: “Few ‘impact investors’ want to help fund that kind of burn.”

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