When it comes to embracing the concept of the triple bottom line, Australian companies have a long way to go. From In The Black.
Australia could try harder. That is the message from recent reports into the corporate and social responsibility (CSR) reporting of Australia’s top companies. A mere 23 per cent of the top 100 companies in Australia have some sort of CSR report, according to an international study into corporate responsibility by accountancy firm KPMG.
Similarly, a recent study on triple bottom line reporting commissioned by CPA Australia from the school of business at the University of Sydney, found that only 25 out of Australia’s top 500 companies (the majority from the top 50 companies) publish discrete reports on the subject.
And of those that report, the news isn’t good. The reports were ‘overwhelmingly biased towards positive information, with negative information either being ignored or at best couched in positive terms,’ according to the University of Sydney report.
Sterling Habbitts, head of sustainability practice in Australia for KPMG says: ‘For us the most significant thing coming out is Australia’s still relatively behind a lot of the well developed countries.’ He speculates one reason for our lukewarm embrace of social and ethical practices could be that there hasn’t been much regulatory interest in the area.
In the UK, pressure from NGOs as well as government moves to introduce legislation have driven companies. At one point the then > environment minister Michael Meacher threatened to name and shame non-reporters. UK companies had quite an incentive to report, and report well.
In Australia, says Habbitts, there may be links between federal policies and the lack of reporting. ‘The kind of debates that are going on in Australia wouldn’t even exist in some of these other countries,’ he says, ‘because it wouldn’t even be acceptable to open the debate about whether or not you could log virgin rainforest.’
He says there is a link between companies reporting and the fact the federal government has not signed the Kyoto Protocol. ‘The federal government’s reluctance to really move on the climate change issue and certainly to engage in international emissions trading through the Kyoto Protocol means that there has been a lot less pressure on companies here in Australia.’
Locally, however, corporate social responsibility reporting is moving onto the political agenda. In March 2005 the corporations and markets advisory committee was asked by secretary to the treasurer Chris Pearce to examine whether company directors should add corporate and social responsibility and the interests of stakeholders other than shareholders to their duties under the Corporations Act 2001.
The debate is a direct result of the James Hardie case. Additionally, there is a global shift to wider concepts of corporate accountability.
As the Victorian attorney-general Rob Hulls said: ‘I believe the nation’s law-makers have a responsibility to the general community to hold to account companies who are deliberately avoiding their social and ethical obligations.’
Reading CSR reports (as distinct from producing or acting upon them) is a trend that’s growing globally. About half the people questioned in a recent survey of 1000 people in each of 21 countries had either looked at or read a CSR report, according to GlobeScan of Canada.
It found Australia rated first for people having read a report – 24 per cent, while 16 per cent had looked at a report and another 11 per cent had heard about them.
One person who has noticed this trend is Robyn Leeson, executive manager of ICLEI, an organisation devoted to sustainability in local government. She says: ‘People do kick the tyres on these reports more now than they used to.’
As an oil company, Shell knows it is in the spotlight and that people read its report. Shell CEO Jeroen van der Veer says that reader surveys confirm the report is read.
‘We see that role continuing as we redouble our efforts to make the Shell report an honest and open account of our sustainability performance,’ he says, ‘and as we take the steps needed to improve our environmental, social and business performance.’
It seems few Australian companies outside the resources, utilities or materials/chemicals sector are trying to build any trust with their stakeholder groups. The ones that do it well include Telstra, Westpac and newcomers to sustainable reporting Insurance Australia Group (IAG) and VicSuper. The reporting of these two newcomers impresses KPMG’s Habbitts. ‘What really comes through in those reports,’ he says, ‘is the link back to the business advantages for addressing these issues.
‘In practice we have seen this with our clients who are in a better business. A better-managed business is a more successful business and therefore there is an economic advantage for doing this.’
The quality of IAG’s sustainability practices and reporting was recently recognised in the United Nations Association of Australia World Environment Day Awards.
Utility company AGL has some thorny environmental issues to handle. Last year it moved the subject of sustainability from its annual report to a discrete document dedicated solely to the area in an effort to demonstrate its commitment. The company also had PricewaterhouseCoopers audit the report. AGL says this was done in part to provide independent advice to stakeholders and establish an audited base from which to develop performance improvement targets.
‘As we wanted to be confident that we had our approach and data sets right,’ the company says, ‘we engaged PWC to review this work.’
As a forest products company, Carter Holt Harvey also faces difficult issues. For the past five years it has reported on CSR. ‘We see this type of reporting as important for two reasons,’ the company says. ‘One is about transparency; we have a number of stakeholders from customers through to local community members who are interested. The second is about business improvement. The more we understand and benchmark against these measures, the better we’re able to improve our own performance.’
The problem with all these reports, says The University of Sydney’s Janice Loftus, is they lack comparability. ‘Because there is no requirement there is nothing to audit against,’ she says.
‘[But] it sends a signal to the user that they can be more confident about the reliability of the information.’
In Australia Loftus’ team found that 54 per cent of the companies that report on sustainability had some form of audit or assurance statement – not necessarily by an accountant. Loftus notes that one auditor’s statement said it was an audit of the information reported. ‘But then what about the information that was not reported?’ she asks. ‘If there are omissions, the omission of information may be misleading but you are only auditing what is included.
‘The omission of information can be as misleading as the inclusion of incorrect information,’ she says.
KPMG’s Habbitts believes the culture of reporting should be about transparency. ‘The companies that really achieve good results with their reports,’ he says, ‘are those companies that strive to be transparent and open and honest about their issues.’
Habbitts says that some clients understandably have a reluctance and conservatism about disclosing their so-called dirty issues. But due to the action of pressure groups, employees and journalists, some may inevitably be forced to talk about these issues. ‘They need to start to talk about it,’ he says, ‘and put their position across.’