CSR – a good investment?

CSR is sometimes seen as a marketing or strategic investment for brand. True but does it actually contribute financially to shareholder stewardship? Is CSR a good investment?

S&P released a positive outperform rating on Cameco on Dec 29, 2016.

I have added my recently published white paper that assesses Cameco on Corporate Social Responsibility and the Global Reporting Initiative. This information is not a recommendation – it is an attempt to better understand if a commitment to CSR is a contributing factor to financial performance….your thoughts?…let’s start the discussion.

Cameco : A White paper on CSR

 

Cameco is a Canadian company that has branded itself as top international uranium
mining and Nuclear Energy Production Company. After the nuclear disaster of Fukishima, the commodity price of plummeted. In May, 2007, the stock price hit a record high of $(C) 55.43. Uranium commodity prices were high as was global demand fuelled by China’s decision to build nuclear power plants. Nuclear disasters quickly changed global demand.

The price of uranium dropped from $140 to $20 per pound in second quarter 2016. (UxC, 2016).

In response, Cameco invested in becoming the sustainable uranium company. The
strategy was to drive sustainability through the entire organization, the communities it which it operated and its entire global supply chain. Cameco first defined its core values: People, Safety and Environmental Integrity and Excellence (Cameco, 2016). To demonstrate its progress, Cameco chose to self-assess for the Global Reporting Initiative standards. Its first Sustainability Report was published in 2010.

Cameco began the journey in 2008. Their first CSR award was received in 2008 when Saskatchewan recognized Cameco for their commitment and success in development and employment of our First Nations. (Cim, 2016). With this first success, they went on to commit to the Global Reporting Initiative (GRI) and produced their first sustainability report in 2010. The report showed that Cameco was having little success on the sustainability front. The company scored high on governance and ethics. The assessment of its environmental track record was far from satisfactory. Employee safety was a highlight and it continued to improve. It recognized as a positive indicator in the 2012 Sustainability Report. Between 2010 and 2012, none of the all environmental measurements improved. Cameco’s Sustainability Report of 2014 saw continued
success in employee safety. The 2014 Report marked the first sign of improvement in its
environmental track record. Both Greenhouse gas emissions (GHG) and water usage dropped for the first time from the level that was reported in the 2012 Report. These improvements decreased operational costs and helped maintain Cameco’s financial position when the commodity price and demand remained low (Cameco, 2016). This significantly impacted revenues.

The Economic measurement of the Global Reporting Initiative demonstrated in all economic areas; direct and indirect, local hiring and spending and infrastructure and service investments; Cameco continued its commitment to deliver in these areas.. Yet even though the total amount of investment dropped, it did stay consistent as a percentage of total revenue. On the environmental measurements, Cameco continues to falter. Greenhouse Gases (GHG) increase as to water usage. Waste decreased slightly. The area of concern is that non-monetary injunctions increased to three incidents in 2015. These were the result of incorrect labeling but considering the hazardous nature of its product, this is an area for immediate improvement. The Labour measurement remained strong in 2015. The company continued to enjoy a low turnover rate. Collective bargaining protects the majority of their employees and injury rates remain low. Cameco is proud of their employee safety record and even in challenging financial times, they have remained committed to safety.
Cameco continues to focus its Human Rights pillar for GRI on its relations with its First Nations. Currently Cameco has no reported human rights violations and it is recognized for working in partnership with the First Nations’ people in the communities within which they operate. The major weakness with this section of the report is that there are many other communities and people of diversity within Cameco and at this time, no information is available on their work with other groups.
Society is the next grouping within the Global reporting Initiative. In the areas of land use, grievances, operations for decommissioning, community engagement, policy and
competition law compliance, all areas were positive. With respect to legal fines, though there was no fine in 2014, there was a significant ($659,646) for non-compliance in 2013. Now this issue may have pre-dated Cameco’s commitment to become a leader in sustainability but that information was not readily available.
In the second to last area, Product, Cameco had an increased number of labeling non compliance. The definition of non-compliance is:
Labeling non-compliance – The types of information that must be correctly presented on our product labels are:
radioactive category; subsidiary hazard(s) – when applicable; proper shipping name; UN number – a number issued by the United Nations which is used to quickly identify dangerous substances for emergency response, handling and storage during transport; VRI code (international vehicle registration code – when applicable); name of consignor/consignee; type and weight of package; placards
(Cameco,2016)
Although there no fines levied, there were two warnings. Again, this is radioactive material – it is nuclear energy – so an increase in non-compliance in labeling is a concern.
The final area reported by Cameco in their sustainability report, is the Cameco indicators. Radiation dose per employee increased to .83 which was similar to the levels which pre-dated Cameco’s commitment to sustainability.

The second indicator is in the area of governance. Cameco is recognized externally for its governance. Corporate Knights recognized Cameco as a global leader. It recognized Cameco in its Top 100 Global Sustainability Index. (Corporate Knights, 2016)
Cameco is a leader in the extractive segment. It mines and produces radioactive uranium
and nuclear energy. As a firm it is on track to become sustainable. It is recognized by external firms for its good governance. It has an excellent track record in safety and its relations with First Nations. It has consistently invested and developed the communities in which it operated. On the environment front, Cameco needs to improve. It has not made much progress in reducing its water or energy usage in the past four years. This needs to be a focus area for Cameco going forward.

The Global Reporting Initiative standard is a worthy goal for Cameco but it needs to have its report externally audited to ensure transparency. Many areas are confusing. It claims a stellar record with employee safety but on the other hand there was a significant increase in employees exposed to radiation in 2014. In many ways, Cameco is moving forward and that is what is important. Cameco is an industry leader within the uranium extractive sector. As it commits to sustainability, the world is better positioned for a sustainable future.
References
2016 Global 100 results | Corporate Knights. (n.d.). Retrieved October 22, 2016, from
http://www.corporateknights.com/magazines/2016-global-100-issue/2016-global-100-results 14533333/
CSR Awards – cim.org. (n.d.). Retrieved October 22, 2016, from http://www.cim.org/en/CIMSubSites/CentreForExcellence/Tools-and-resources/CSRawards.aspx
Global Reporting Initiative, (n.d) Retrieved October 20, 2016. From http://www.globalreporting.org/
Home – Cameco. (n.d.). Retrieved October 22, 2016, from https://www.cameco.com/
UxC: Historical Ux Price Charts. (n.d.). Retrieved October 22, 2016, from https://www.uxc.com/p/prices/UxCPriceChart.aspx?chart=spot-u3o8-full

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