Recent media commentary(1) and research papers reflecting on sustainability reporting over 2012 suggests a decline in interest in sustainability across Australia’s top companies. But what are some of the factors that may be behind this trend?
Is sustainability an issue for my business?
There are some very pragmatic considerations that stand between a large company that has little or no sustainability measures in place, and a sustainability focus which is linked to the strategy of a business and publicly reported outcomes.
Those considerations include understanding the company’s market and competitive pressures, the products or services they provide, the nature of their operations, and the expectations of investors, customers and suppliers around sustainability measures. The first task therefore is an assessment of business risks and opportunities: asking the question, “how would my business benefit from sustainability management and reporting?”
Certainly such an assessment is a first step on a sustainability journey, and would lift a company from being regarded as a laggard and reduce the risk of possible adverse public attention.
Improving sustainability reporting
Over 2013 the Australian Council for Superannuation Investors (ACSI) has stated that it will focus on improving sustainability reporting practices in listed Australian companies. This follows the release of its research paper “Corporate reporting in Australia: disclosure of sustainability risks among S&P/ASX 200 companies”(2) which outlined mixed results. The paper revealed that 85% of companies provided some form of public sustainability risk reporting and there was an increase in those providing “detailed” or “comprehensive” sustainability reports: up to 36% in 2013 from 23% in 2012. However, 45% either did not report or only conducted ‘Basic Reporting’. This result has been widely reported as a worrying trend(3) and calls have been made for those companies – named in the ACSI paper – to make significant improvements. ACSI’s CEO Ann Byrne stated, “The overall rate at which change is occurring is ….very disappointing. If the number of companies reporting to a ‘Comprehensive’ level continues to increase by the same annual rate it has in 2013, it will be almost 20 years before all ASX 200 companies are disclosing ESG risks at this level.”
Leadership backing is critical
The annual “State of CSR” report from the Australian Centre for Corporate Social Responsibility (ACCSR) noted reduced budgets for CSR/sustainability and continued to point to a gap in organisational support and understanding of the issue. The report described CSR leadership as “missing in action in Australia and New Zealand” and that those in sustainability roles doubt the quality of senior decision making and the level of organisational support in their own organisations, preferring instead to cite other companies as leaders(4).
The ACSI paper also noted a high correlation between companies with poor sustainability reporting and corporate investors voting against board-endorsed decisions, suggesting a mismatch between the expectations of investors and boards. In reflecting on the importance of sustainability to the investment community, the ACSI paper states, “.. environmental, social and governance (ESG) risks have a material effect on the long-term viability of companies. Therefore thorough disclosure of information regarding their performance in these areas, broadly referred to as sustainability risks, is integral to quality investment decision-making.”
Looking further at ACSI’s observations, Australia’s largest and most high profile companies are those providing comprehensive reports. 23 companies have completed reports to this standard over four or more years. The research paper also finds that 43 companies (80% of which are in ASX 100) are using the Global Reporting Initiative (GRI) framework which requires analysis of performance across indicators in three key aspects of business activity: economic, social and environmental. Clearly, the GRI framework is thorough and detailed. In Energetics’ own Sustainability Report we assessed sustainability across 21 GRI performance indicators. Although we are a small firm, we nonetheless derived a complete picture of sustainability drivers that are working for our business, and those that we need to improve.
Taking the first steps to understand sustainability will deliver business value
A successful approach to measuring sustainability performance begins with an assessment of the value of this information to your specific organisation – understanding the risks and the business opportunities which your current approach may or may not be addressing. This assessment can form the basis for the next stages of information gathering, measurement, performance tracking and public reporting specifically appropriate for your business.
Energetics can help demystify corporate social responsibility and reporting standards, and develop sustainability strategies that can enhance a company’s performance through both good and challenging business conditions.
1) Collins, Richard: “Sustainability at the crossroads”, WME magazine, March 2013.
2) ACSI: Research paper “Corporate reporting in Australia: disclosure of sustainability risks among S&P/ASX 200 companies”, May 2013.
3) Kendall, Ross: “Companies shirk ESG reporting say investors”, Ethical Investor, 21 May 2013.
4) Australian Centre for Corporate Social Responsibility (ACCSR): “State of CSR in Australia and New Zealand Annual Review 2012/2013”, http://www.accsr.com.au/html/stateofcsr.html.