Recent federal inquiries and discussions at the Australian Stock Exchange are raising the profile of corporate social responsibility in Australia.
By Andrew Beatty
Australia has recently experienced an upsurge of interest in corporate social responsibility. Many of the biggest Australian corporations (including banks such as Westpac, mining houses such as BHP Billiton and construction and development companies like Lend Lease) are already at the global forefront of corporate responsibility in their industry sectors. An increasing number of companies are publishing sustainability reports and, of those that are publishing, many are using the Global Reporting Initiative’s (GRI) new G3 Guidelines as a template.
With one of the world’s largest per capita pension fund sectors, and therefore highest rates of share ownership (in part brought about by the compulsory 9 percent superannuation levy on all employers), most Australians and the institutions that manage their superannuation funds are interested in the performance of the companies that they own: informed shareholders want to know not just what dividends they are likely to be paid but also how they are derived.
As many of Australia’s biggest companies now derive much of their income from offshore operations, this makes the application of corporate social responsibility policies all the more important, particularly in those markets that are less well-regulated in areas of corporate governance, social and environmental matters, and where the potential for public relations and legal mishaps are greater.
There have been two recent, wide-ranging federal government inquiries into corporate social responsibility. The Parliamentary Joint Committee on Corporations and Financial Services released a report in June 2006 and the Corporations and Markets Advisory Committee produced a very detailed report, helpfully surveying corporate responsibility trends around the world in December 2006 (see Resources Box). Both have considered submissions from environmental and other nongovernmental organizations pressing for changes to the Australian Corporations Act—the principal legislation monitoring company operations in Australia—so as to require companies and their directors to take into account the interests of persons (and circumstances) other than just shareholders. Both inquiries have resisted recommending such law reform, at least for the moment.
At present, the Australian Stock Exchange is also examining possible changes to its corporate governance rules so as to require listed entities to report risk factors, including nonfinancial risk factors, to current and prospective investors.
Although for the moment it seems unlikely that directors will be required, by the Corporations Act at least, to have regard to social, environmental or “transparency” issues above and beyond what specific legislation already demands, the likelihood is that the pressure for change in this area—including from the notoriously risk-averse institutional investment sector—will eventually find form in legal requirements, accounting standards and listing rules.
People doing business in Australia or with Australian companies operating overseas should be aware of these changes and should expect more activity in the area of corporate social responsibility in the near term.
- Australian Corporations Act
- Corporations and Market Advisory Committee
- The Parlimentary Joint Committee on Corporations and Financial Services
Andrew Beatty is a Partner and coordinator of the Global CSR Practice in the Sydney office of Baker & McKenzie. He can be reached at email@example.com.