How does Netflix Prioritize Their Environmental, Social, and Governance Responsibilities?
Netflix, the streaming giant, released its first-ever Environment, Social, and Governance (ESG) report earlier this month. As an organization hyper-focused on enabling good governance practices, we are thrilled that Netflix is taking its responsibilities to the environment, its people, and their governance seriously.
ESG reports are tools for the public as well as possible impact investors to evaluate and keep corporations accountable. These reports allow ethical investors to get a snapshot of how the corporation stacks up against the competition in categories they deem essential. ESG reports are traditionally handled by audit teams, either internally or externally. The findings of the audit give corporations the ability to tout what they have been doing right as well as what they’ll be doing to improve some of the negative findings.
In their whitepaper, ESG in the boardroom: What directors need to know, PwC explains how ESG is often first thought of: “For many, the term “ESG” brings to mind environmental issues like climate change and resource scarcity. These are an element of ESG — and an important one — but the term means much more. It covers social issues like a company’s labor practices, talent management, product safety, and data security. It covers governance matters like board diversity, executive pay, and business ethics.”
Netflix Compared to Their Competition
Censible takes the metrics Netflix shared in its ESG Report and compared them to the industry and their competitors in a “Mindful Investor Summary.” They specifically focus on the following categories: Carbon Footprint, Pollution Prevention, Water Conservation, Data & Privacy Protection, Employee Ownership, Satisfaction, Benefits & Pay, Workplace Health and Safety, Integrity of Corporate Governance, Ethical Practices, and DIversity of Corporate Leadership. By breaking Netflix’s ESG report into these categories and grading each individually, it is much easier to gain an understanding of how Netflix is doing overall. As expected, Netflix is performing better than its competition in some categories and worse in others.
Netflix recognizes its impact on the environment primarily through the energy consumption that takes place when members use their services to watch a program. In the opening of the environmental section of their ESG report, Netflix says, “We support renewable projects that reduce the environmental impact of energy use globally. These projects span 15 U.S. states and 20 countries. We’re working to understand and minimize our environmental impact.” Netflix aims to offset their energy usage with “regional renewable energy certificates” and intends to continue this practice to do their part in reducing their carbon footprint.
Along with the apparent goal of entertaining its users with the content on their streaming service, Netflix also aims to “challenge prejudice and increase empathy and understanding.” To accomplish this, they have set out to build a “diverse workforce where employees — whatever their background — can do the best work of their careers.” Based on their ESG report, it is evident that representing a diverse world is a leading goal of the company.
As a governance technology partner, BoardBookit’s focus is always on the category of Integrity of Corporate Governance. In this category, Censible scores Netflix a 2 out of 5. “Netflix performs poorly among its competitors on corporate governance. This score is determined by the company’s accounting practices, executive pay, board organization, and ownership structure.” In the other two categories that are easily grouped with governance, Ethical Practices, and Diversity of Leadership, Netflix scores a 5 out of 5. Congratulations to Netflix for doing a great job in these categories!
In the Governance section of their report, Netflix shares, “We seek to find the right balance of rights and responsibilities among our shareholders, our board, and our management team. Our goal is to maximize long-term shareholder value most effectively.” They also mention this Stanford Study, Netflix’s Approach to Governance: Genuine Transparency with the Board that covers their “unique approach to information sharing… among the CEO, executive team, and board of directors.” Utilizing regular, structured meetings with board members and senior management, they share their presentations as data on the company’s internal shared systems.
ESG Reports and You
According to Harvard, ESG reports should focus on the risks and opportunities that have the potential to be the most impactful on the company’s long term performance. They “should [also] discuss the company’s approach to risk management, making the connection… between the ESG topics on which they report and the company’s long-term value creation strategy.” Capital Intelligence Associates Inc. reports, “…30% of our clients are invested in ESG strategies, but about 70% of our new clients are investing in ESG. It’s the fastest-growing part of our practice.” The growing popularity and push for global environmental, social, and sustainable investing may encourage mainstream opportunities for companies worldwide.
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