ESG engagement case study by Black Creek Investment Management – Stericycle Inc.
Picked for the Alliance Trust portfolio by Black Creek Investment Management as at 11 January 2023
Area of engagement
Stericycle is a business in an absolutely essential but emissions-intense industry of waste management. It is the largest provider of medical waste disposal and data destruction in the US, with a growing presence in 17 other countries. Stericycle’s reach, and the incredibly important nature of its work, make improving its sustainability credentials a high priority for its overall competitiveness.
The company is currently undergoing a multi-year business transformation, having invested in technology to improve processes, increase efficiencies and enhance customer service. Black Creek believes that it has helped to ensure that a commitment to greener practices is also top of this list.
Black Creek has engaged with Stericycle on ESG issues eight times since initiating its position in Q3 2021. While Black Creek believes emissions management and environmental regulation are the most material ESG topics facing Stericycle, other topics that it has also discussed or suggested improvement upon include target setting, employee safety and retention, ESG reporting initiatives, interacting with ESG rating agencies, third-party assurance, organisational culture, compensation, digitisation, board composition, ESG decision-making, and human capital disclosure and management. The company representatives with whom Black Creek has engaged include Stericycle’s CEO, CFO, Chair, Directors, Head of ESG, Chief Transformation Officer, and IR.
Black Creek believes its engagement history with Stericycle demonstrates its ongoing commitment to diligently understanding and encouraging the sustainability efforts of its holdings, as well as the relatively straightforward access to high-level representatives of its portfolio companies afforded to Black Creek by its concentrated, long-term investment approach.
Outcome
While Black Creek cannot claim any degree of impact as a result of its engagements with Stericycle, it upholds ongoing, in-depth conversations about ESG risks and opportunities, seeing an improvement in many of the areas touched upon. Stericycle has undergone a cultural and technological transformation, prioritising ESG while being influenced by regulation, customer demand, and engaging with stakeholders like Black Creek. Over the course of its relationship with Stericycle, specific topics upon which it’s engaged and seen subsequent improvement include:
Environmental
- Continued fleet optimisation efforts (dual-modal trucks, optimising route density, alternative fuels)
- Continued operational improvements of incinerators and autoclaves (real-time incinerator monitoring, emissions capture investments, improving service life, retrofitting)
- Continued measurement and verification efforts to establish an audited baseline against which to measure emissions reduction and set an SBTi-approved target
Social
- Increased proportion of diversity in hiring
- Increased emphasis on employee engagement, satisfaction and retention efforts
Governance
- Top-down cultural improvement – increased emphasis on ESG
- Establishment of an ESG steering committee
- Compensation changes to better align financial and ESG goals
Other
- Increased emphasis on third-party verification in sustainability reporting (incinerators are emissions-compliant across all jurisdictions by at least 40%)
- Hired consultants to help bridge the gap between goals and operations with respect to DEI and emissions management
- Remaining on track to issue ESG targets in 2023
Overall, Stericycle is aggressively pursuing ESG improvement. Black Creek continues to stress the importance of these measures and is monitoring the company’s progress going forward. While there is still improvement to be made, Black Creek remains confident in Stericycle’s leadership and continues to support the company’s cultural and technological transformation with respect to ESG. Black Creek will continue to monitor, offer suggestions and conduct due diligence in support of its ultimate goal of long-term value creation.
This information is for informational purposes only and should not be considered investment advice. Past performance is not a reliable indicator of future returns. The views expressed are the opinion of the Manager and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as at May 2023 and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
TWIM is the authorised Alternative Investment Fund Manager of Alliance Trust PLC. TWIM is authorised and regulated by the Financial Conduct Authority. Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office: River Court, 5 West Victoria Dock Road, Dundee DD1 3JT. Alliance Trust PLC is not authorised and regulated by the Financial Conduct Authority and gives no financial or investment advice.
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