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Supplementary report by Labour members
Introduction
1.1
The role of the corporation in modern society is
changing. Today’s corporations are larger, own more assets and are more
influential than at any time since the corporate form was founded. The
influence of corporations now extends well beyond economics and wealth creation
and includes significant social, cultural, environmental and political impacts.
The pervasive growth of business and international trade make the external
impacts of corporations greater than ever, and with this has come costs as well
as benefits to society.
1.2
It is also significant then that at a time when
corporate influence is so great, that a number of critical environmental and
social conditions are emerging as significant threats. Climate change, reduction
of biodiversity, intensifying resource constraints, changing population
demographics, international population growth, intergenerational poverty and
social exclusion are but some of the more pressing issues. Each one of these
issues either directly or indirectly affects Australian business.
1.3
Corporations are not to blame for these growing environmental
and social challenges, but as significant and critical contributors to our
prosperity and development, they must be part of any effective response. Knowing
what we now know about these impacts, corporations and those working within
them are uniquely placed to have a direct influence on how these issues are now
managed.
1.4
The Labor members consider that corporate
responsibility is fundamentally an issue of sustainability. Corporate
responsibility is not primarily about charity or company philanthropy. The World
Business Council on Sustainable Development provides a useful definition:
"Corporate [social] responsibility is the commitment of
business to contribute to sustainable development, working with employees,
their families, the local community and society at large to improve their
quality of life."[470]
1.5
In this vein, Labor firmly believes that business must
be part of the solution in dealing with emerging sustainability challenges. Positive
social and environmental outcomes are no longer the sole domain of government
or community groups, and business along with the various stakeholders in
business activities are becoming aware of this fact. As recently stated by Lord
Browne, BP Group Chief Executive, in a speech at the Massachusetts Institute of
Technology:
Good, successful business is part of society, and exists to meet
society’s needs. That is the purpose of business at the highest level.[471]
1.6
It is from this perspective that understanding and
taking ownership of the environmental and social impacts of business is becoming
a critical aspect of responsible corporate activity.
1.7
Furthermore, in business and government today there is
an awareness of the need not to stifle economic growth with regulation that can
overly constrain entrepreneurial, innovative and growth oriented forces of
business. Put simply, it is not considered good economic policy to overly
constrain business. This has led to a lessening of government constraints on
business activities in a number of areas.
1.8
At the same time that markets and business activities are
further de-regulated, there is a growing gap and urgency in ensuring social and
environmental outcomes are achieved. This is a gap in which business and finance
sector leaders must assume greater responsibilities. This is no easy task and
the pressures of achieving profitability and growth in the short term cannot be
underestimated for businesses. None-the-less, business leaders must introduce a
systematic approach to managing and improving the consequential social and
environmental outcomes of their business operations. If we are to continue
achieving economic growth and want to ensure that this growth is sustainable, business
will be called on to better integrate sustainable behaviours into its
operations.
1.9
The question as to how this balancing act of
maintaining growth in the short to medium term and adequately investing in long
term growth can be managed is one that requires a more active and engaged
response from the business and government sectors. Labor initiated the current
parliamentary inquiry into corporate responsibility to develop responses to
this question.
Background to the Inquiry
1.10
Labor initiated the Inquiry into Corporate
Responsibility for three reasons:
- Parts of the business community in Australia
were actively engaged in the re-emerging debate about the role and
responsibilities of the corporation in society but government was not.
- Progress by Australian business on the whole
regarding integration of corporate responsibility approaches appeared
fragmented and lagged behind that of comparable international economies and
trading partners.
- Widespread progress by Australian businesses in
the integration of sustainable business practices is expected to lead to greater
social and environmental benefits, equip those businesses to better manage impending
non-financial business threats, and prepare them to seize emerging market
opportunities.
1.11
The evidence from many distinguished members of the
Australian business, legal and non-government sectors is that they consider
their duties to a company's best interests should encompass consideration of
stakeholder needs. To give effect to this view and to catch up to the practices
of many of our trading partners, more directors should be taking an engaged,
long term perspective on their business operations and impacts.
1.12
While recognising that a number of Australian companies
have renewed their approach to sustainable, responsible business, evidence to
the committee indicates that these companies number in the minority. This leads
Labor members to the view that more needs to be done to encourage, support and
set direction for companies on sustainability and corporate responsibility
issues.
1.13
It is the view of the Labor members that in order to
increase the number of corporate, non-government and government organisations that
deeply integrate sustainable and responsible activities over the medium term (five
to ten years), government must play a more engaged and strategic role now.
1.14
The Labor members believe the main committee
recommendations do not promote an adequately coherent and coordinated direction
from government to accelerate the take- up of sustainable and responsible
approaches in Australia.
Accordingly the Labor members have prepared a supplementary report on the
Inquiry.
Strategic direction and engagement
from government
1.15
In contributing to the future of corporate
responsibility, the Labor members recognise the importance of not mandating
particular responses by companies and not developing 'one size fits all'
regulation. Rather, the objective of government should be to resource companies
and provide useful support for business change. It should also help to prepare
Australian business for developments that are likely to form de facto mandatory
standards in the area of corporate responsibility performance and reporting.
1.16
As indicated by the recent emergence of the Business
Roundtable on Climate Change in Australia,
non-financial threats, such as climate change, are already altering our business
environment and our way of life. As sought by the Roundtable members, clear
direction and policy responses from government on sustainability threats such
as that posed by climate change, are exactly the kinds of response that
responsible business wants from government.
1.17
Labor therefore suggests a framework for strategic direction and engagement
from government with the primary objective of encouraging more companies to
integrate sustainable, responsible business practices into their operations
over the medium term. This framework requires six key objectives to advance corporate
responsibility responses. The six key objectives are:
- Better coordinate government initiatives
-
Demonstration of sustainable, responsible behaviours
by government agencies
-
Monitor consideration of legitimate
environmental and social impacts by directors and trustees
-
Support and resource business
-
Improve business sustainability reporting
-
Better engage the investment sector
1.18
The report below outlines a number of measures and
initiatives to support achievement of the key objectives. Developing a full
range of measures will require further consultation with the business sector
and Labor will continue to do this.
Better coordinate government initiatives
1.19
The Labor committee members believe that in playing a more
strategic role, government must provide clear policy direction and ensure that
programs related to corporate responsibility are delivered to business in a coordinated
and consistent way. It is relatively ineffective for government to develop and
deliver policy on corporate responsibility from multiple non-business oriented
government departments.
1.20
Additionally, given that many of the initiatives within
the framework of corporate responsibility fall within a model of achieving
economic, social and environmental sustainability, it is critical for
government and the business sector that clear direction is set on the
sustainability challenges and risks that face Australia.
1.21
In order to deliver a government approach that is
appropriately strategic and coordinated, recommendations are made in the
following areas:
-
Coordinate management of government corporate
responsibility programmes into a Corporate Responsibility and Sustainability Unit
in a business oriented government department, for example Treasury or the
Department of Industry, Tourism and Resources.
-
Establish a National Sustainability Council to define
national sustainability objectives.
Coordinated management of
government corporate responsibility programmes
1.22
The main committee report referred to evidence that recognised
that the current delivery of government corporate responsibility programs
occurs in a seemingly uncoordinated fashion amongst a number of government
departments. In this regard the Labor members reiterate two quotes from the
main report. The Insurance Australia Group submitted:
Currently, a limited number of government agencies have specific
agendas to drive some [corporate
responsibility] and related activities. In the Commonwealth, examples include
the Department of Environment and Heritage, the Department of Family and
Community Services and the Australian Greenhouse Office, which all deliver a
variety of programs aimed at providing
incentives for corporate responsibility activity.[472]
1.23
A similar comment was made by the Australian Centre for
Corporate Social Responsibility:
The Australian Government may have numerous ways in which it
encourages corporate social responsibility, but a lack of coherence and focus
of initiatives and policies makes this difficult to ascertain.[473]
1.24
The Labor
committee members consider that this fragmented approach from government is
inadequate for effective policy formulation and delivery. The Labor
committee members believe that an approach such as that taken in the United
Kingdom, which has consolidated the
government's sustainability initiatives within the Department of Trade and
Industry, would be more effective.
1.25
The initiatives outlined in Labor's Supplementary Report,
those identified in the main committee report and existing Australian Government
programmes would benefit in their development and delivery if consolidated,
coordinated and delivered from a cohesive Corporate Responsibility Unit, in a
single, business-oriented government department.
1.26
The Labor members note the recommendation in the main committee
report regarding a whole-of-government approach, but believe that integration
of the policy development and government delivery of corporate responsibility
initiatives would best occur within a single department. This is an important
part of combining the social (Department
of Families, Community Services and Indigenous Affairs (FaCSIA)) and
environmental (Department of the Environment and Heritage (DEH) and Australian
Greenhouse Office) aspects of policy development as they relate to corporate
responsibility with any emerging initiatives in the area of industry and
resources as these inevitably develop.
1.27
It is in the interests of business that corporate
responsibility initiatives are considered as part of business policy making,
and this should occur within a business-oriented government department.
Recommendation 1
The Labor committee members recommend that the Australian Government's
various corporate responsibility programs be consolidated in a single, Corporate
Responsibility Unit within a business-oriented Australian Government
department, for example either the Treasury of the Department of Industry,
Tourism and Resources.
A National Sustainability Council
1.28
In the Labor committee members' view, one aspect that
was lacking from the corporate responsibility inquiry discussions was any
clearly enunciated sustainability targets for Australia.
Several submitters also suggested that there should be targets for the level of
sustainability reporting, but an official from the Department of the
Environment and Heritage indicated that despite lagging other comparable
countries the Government has no specific targets.[474]
1.29
It is also necessary to develop policy initiatives and
consult closely with the business sector in a regular and open manner. This
must occur in a way that enables business and government to openly discuss,
identify and contribute to thought leadership in sustainability policy and the
formulation of government policy responses. It is the view of the Labor members
that a body which draws together business, government and external expertise
can best perform these roles.
1.30
In March 2006, the Leader of the Opposition, the Honorable
Kim C. Beazley MP, committed a future Labor government to establishing a
National Sustainability Council (NSC). One purpose of the NSC would be to
recommend Australian sustainability targets to government and then monitor Australia’s
performance against these targets. The Council could also be responsible for
approval of suitable research projects into sustainability and corporate
responsibility in Australia.[475]
Recommendation 2
The Labor committee
members recommend that the Australian Government establish a National
Sustainability Council the roles of which would include:
- the recommendation
of public and private, voluntary Australian sustainability targets and;
-
monitoring
performance levels against these targets.
Sustainable, responsible government activities
1.31
In order for government to play a strategic leadership
role in advancing corporate responsibility, there is a need to strengthen the
sustainability performance and reporting framework within government. To date,
performance on sustainability objectives has not been demonstrated as a
priority of the Howard Government.
1.32
Government agencies are significant users of resources
and have a significant impact on the market by virtue of their procurement
activities. If governments expect the corporate and non-government sectors to
take sustainability objectives more seriously, they must first show leadership.
1.33
The Labor members make an additional recommendation:
that mandatory
sustainability reporting be performed by government agencies against
sustainability targets.
Governments’ sustainability
practices and performance
1.34
The committee regularly heard that the government
should be taking a more active leadership role in order to set a strong example
for corporate Australia
with its own sustainable and responsible activities. This sentiment is
reflected in comments such as the following from the Australian Centre for
Corporate Social Responsibility:
The Australian Federal Government provides endorsement for one
aspect of corporate social responsibility through the Prime Minster’s Community
Business Partnership Awards, and facilitates information about other aspects of
corporate social responsibility through the OECD national contact point and
some initiatives within the [Department of the Environment and Heritage].
However, these efforts, though laudable, are not sufficient. Further, the Government
sends conflicting signals to business about CSR when it supports these
activities while at the same time voting against the appointment of a United
Nations Special Representative on human rights. The Government must do more to
support CSR, and apply a consistent approach.[476]
1.35
During the inquiry the committee explored with DEH officials
the sustainability performance of government departments. Several aspects were
discussed including procurement practices and environmental management systems.
Government sustainability reporting
1.36
The main committee report found that despite the
improved operational performance of the two departments, DEH and FaCSIA, that
have voluntarily undertaken sustainability reporting, the rate within
government departments is significantly lower than corporate Australia:
3 per cent compared to 23 per cent. DEH officials explained that departments
are not influenced by the market to undertake sustainability reporting in the
way that corporations are. However, despite this reality, the fact that so few
government departments choose to prepare sustainability reports provides a very
weak leadership signal to corporate Australia.
As an official from DEH acknowledged this diminishes the position of government
departments in advocating sustainability reporting:
...if we cannot demonstrate that we are acting in a way that is
aligned with the position we are taking in the public policy debate our role as
policy developers, program developers, program implementers and advocates is
weakened—and that is something that is acknowledged.[477]
1.37
The Labor members recognise that public sector agencies
are still working towards an appropriate, standardised reporting framework, and
one that takes account of the multiple disclosures that government departments
already make. However, the need not to rush into standardised full
sustainability reporting ought be balanced against the need for government
agencies to increase their level of reporting and display a leadership role to
corporate Australia on reporting practices.
1.38
Rather than recommend mandatory full sustainability
reporting by all government agencies, the Labor committee members recommend
that the government make agency reporting against the sustainability targets
set by the National Sustainability Council a mandatory requirement.
Recommendation 3
The Labor committee
members recommend that the Australian Government make reporting against
sustainability targets mandatory for Australian government agencies. This
reporting should include:
- Performance
against sustainability targets set by the National Sustainability Council
regarding water, energy, waste, vehicles, general procurement and any other
applicable targets; and
-
Progress
achieved on meeting the targets if they are not met and strategies to enable
the meeting of targets in future.
Monitor consideration of legitimate environmental and social impacts by
directors and trustees
1.39
Numerous submitters to the Inquiry stated directors'
duties are sufficiently broad to consider the legitimate interests of company
stakeholders as well as shareholders. A number of submitters went further to
say that it was clearly a requirement for directors to consider legitimate
stakeholder interests in the carriage of their duties as directors in Australia.[478]
The Labor members note and accept this evidence.
1.40
The Labor members also noted evidence regarding the
duties of investment managers and superannuation trustees and their capacity to
have regard for environmental and social impacts of their mainstream investment
decisions.
1.41
It is with consideration of these issues that additional
recommendations are made in the following areas:
- Government to monitor directors' response to
their own interpretation of their duties; and
-
the Australian Prudential Regulation Authority
(APRA) to clarify the scope of the sole purpose test with regard to
non-financial risk considerations in all investment decisions.
Directors’ duties
1.42
During the Inquiry, company directors and other
business representatives clearly stated that responsible directors and
executives should have due regard to the impacts of their business operations
on stakeholders including communities and the environment. The Labor members
endorse this view.
1.43
Much of the discussion about directors' duties in the
Inquiry resulted from public comments by the executives of James Hardie Industries
and their perception of the scope of directors’ duties.[479] These comments portrayed a limited
and constrained view of the scope for company directors to consider the
interests of stakeholders other than shareholders.
1.44
The interpretation of directors' duties offered by James
Hardie executives prompted significant
public debate and evidence to the committee. Most of this evidence included a
clear rejection of the notion that directors' duties under Australian law
prevent directors from taking into account and addressing the social and
environmental impacts of their business as long as this consideration is undertaken
in the interests of the corporation.
1.45
This has in effect been an emphatic endorsement of the 'enlightened
self interest' interpretation of directors' duties which is outlined in the
main committee report. While this committee cannot make a definitive
determination as to the legal parameters of existing directors' duties in
practice, Labor welcomes the 'enlightened self interest' interpretation of
directors' duties put forward by a range of business and legal witnesses. We
hope such an interpretation is representative of the understanding and
practical exercise of directors' duties in future.
1.46
Labor members also note that business leaders and
business lawyers, having stated their position on the scope of directors'
duties have a responsibility to put this interpretation into action in coming
years. If there was to be a recurrence of the view from the business sector
that directors duties prevented attention to legitimate stakeholder interests,
government would be forced to immediately review the articulation of directors'
duties and ensure that no such misunderstanding were possible.
1.47
Therefore it is the view of Labor members, given the
evidence to the committee regarding directors' duties and in the absence of any
clear, recent court interpretation of directors' duties with regard to
stakeholder interests, that there is no need to vary those duties in the short
term. Director duties are already broad enough and include an obligation to
consider stakeholder and non-financial risk issues when acting in the best
interests of the company.
Recommendation 4
The Labor committee members
do not recommend any alternative to the current formulation of directors'
duties. However, if legal barriers to the consideration of legitimate
environmental and social issues by directors are subsequently raised, either by
judicial interpretation or in practice, this matter would require
reconsideration by government.
Sole purpose test
1.48
The main committee report refers to evidence of the
Financial Services Institute of Australasia (Finsia) regarding the sole purpose
test with respect to Sustainable Responsible Investments (SRI), and makes Recommendation
2 with regard to APRA guidance on the scope of the sole purpose test.
1.49
There was some debate during the Inquiry about whether
the sole purpose test for investment trustees and fund managers was broad
enough to allow them to consider non-financial risks, or so called Environment,
Social and Governance risks (ESG) in investment decisions. Evidence from Finsia to the Inquiry was that
the sole purpose test is broad enough to allow consideration of non-financial
risk issues in investment decisions as long as the strategy is employed as
means to maximise the retirement funds of members, and not pursued as an end in
itself.[480]
1.50
While the evidence from Finsia identifies that fund
managers and trustees may consider SRI type investments as part of this
strategy, it does not suggest that fund managers and trustees may only exercise
this approach via SRI funds. As such the recommendation of the main committee
which focuses on only SRI funds, fails to grasp the issue relating to ESG based
investment decisions.
1.51
If the sole purpose test is broad enough to allow
consideration of ESG risks, it ought to permit considerations of these risks in
the context of all mainstream investment decisions considered appropriate by
the trustee or fund manager. Consideration of non-financial risk is
fundamentally relevant to execution of the fiduciary duty.
1.52
Linking the sole purpose test solely with the
allocation of funds to SRIs represents a fundamental misunderstanding of the
need for investment managers to consider sustainability factors in all investment decisions.
1.53
Labor members believe an alternative formulation of Recommendation
2 from the main committee report is necessary. APRA should provide
clarification to superannuation trustees that they may consider environmental, social
and governance factors as potential risks to investment returns which are
consistent with the making of all investment decisions under the sole purpose
test. Clarification of this in detailed guidelines on the sole purpose test by
APRA is warranted.
Recommendation 5
The Labor committee
members recommend that the Australian Prudential and Regulation Authority issue
detailed guidelines on the sole purpose test to clarify the ability of superannuation
trustees and fund managers to evaluate non-financial risk and return in all
investment decisions.
Support and resource business
1.54
An effective strategic leadership role requires that
government focus on its own organisational strengths to advance corporate
responsibility in Australia.
Strengths of government include policy development, research and design and resourcing
of programmes. For this reason, government should focus on these roles in
facilitating greater uptake of sustainable business.
1.55
The Labor members advocate for the improvement of sustainability
performance and reporting via the provision of support mechanisms and resources
to businesses. The Labor members note a number of constructive recommendations
from the main committee, including the establishment of the Australian
Corporate Responsibility Network, which should provide an effective mechanism
to complement and coordinate where necessary, the efforts of businesses to
execute on their corporate responsibility and sustainability strategies.
1.56
Beyond the main committee recommendations, the Labor
members note that several witnesses to the Inquiry identified the importance of
allowing for innovation and individual responses to the question of how best to
integrate corporate responsibility approaches. Labor members accept this
feedback and make recommendations that will build capacity of corporate staff
and encourage the development of individual responses. Accordingly, the Labor
committee members make several additional recommendations in the following
areas:
- Provide capacity building tools to companies;
- Remove government barriers to responsible corporate
behaviour; and
-
Endorse and provide guidance on international
initiatives.
Capacity building tools for companies
1.57
Evidence to the committee indicated that the Global
Reporting Initiative is considered by many in business to be a significant undertaking
and that getting started on implementing corporate responsibility frameworks
and reporting within a business was a difficult step.
1.58
The Labor members recognise it can be difficult for
companies when starting to integrate sustainable practices and suggest there
should be a clear and relatively manageable interim step for companies to take.
1.59
The committee noted the importance of the Credit Union
CSR Toolkit developed by the Credit Union Foundation Australia (CUFA). This
tool is an accessible and cost effective instrument to allow credit unions to
more effectively plan and report on their CSR activities. It can also be used
by other small to medium enterprises.
1.60
The committee also noted the Arcturus
corporate responsibility risk assessment and behavioural inventory assessment
tool developed by the Caux Round Table (CRT), and supported its further
examination. With forty-nine assessment
criteria, Arcturus is said to
be sufficiently flexible to apply to companies across the diverse Australian
market. It could be a low cost mechanism to encourage first time participants to
engage in the voluntary adoption of good governance and corporate
responsibility practices and to benchmark their performance against sector or
industry-wide benchmarks.
1.61
Labor believes that either the CUFA initiative or CRT's
Arcturus, could be used as a
capacity building tool with widespread application. In the case of the CUFA
initiative, it could be used as a model for use in other sectors. There may also
be other tools already in use that were not brought to the committee's
attention.
1.62
Labor supports the development of a flexible sector-specific
tool to enable different industries to plan and adopt corporate responsibility
activities. Such a tool should be low cost and compatible with international
initiatives such as the GRI Framework. Labor believes that the government should
play a coordinating role to set up a standard framework and then to assist
various sectors to modify the framework to suit their own needs. Any framework
should be developed with a view to meeting the needs of financial analysts so
that the sustainability information produced can be easily used by financial
markets.
Recommendation 6
The Labor committee members recommend that the Australian Government,
in consultation with industry and using an existing tool as a model if appropriate,
develop a widely applicable corporate responsibility capacity building tool to
provide an interim step for companies wanting to integrate corporate
responsibility activities into their operations.
Remove government barriers to
responsible corporate behaviour
1.63
The main committee report recognises that submitters raised
various financial incentives and regulation that either encourage or discourage
corporate responsibility. The committee report provides the example of the
capital gains tax arrangements applying to the sale of shares and mentions the
fringe benefits tax on fleet vehicles. Other disincentives cited in evidence include
the:
-
tax treatment of providing child care[481]
-
insurance and OH&S issues for corporate
volunteering[482]
-
tax treatment of superannuation which encourages
those nearing retirement age not to extend their life of work[483]
-
tax treatment of plant maintenance versus new
capital investment[484]
-
subsidies that encourage the use of fossil fuels[485]
1.64
Submitters also referred to new incentives including:
-
Promoting research and development into
innovative corporate responsibility partnerships[486]
-
a carbon tax or an emissions trading scheme[487]
-
a fee on plastic bags[488] and
-
container deposit legislation[489]
1.65
Several submitters suggested a review of existing government
regulations as well as tax and spending policies, with the aim of enabling and
encouraging greater social investment and investigation of their environmental
and social consequences.[490]
1.66
Labor members believe that a thorough investigation of policy
arrangements is necessary and recommend that an audit of policies and
regulations affecting sustainability and corporate responsibility activities by
business be conducted.
1.67
The Labor members also support an investigation of
possible regulatory relief for companies that display committed performance on
sustainability targets and corporate responsibility. This suggestion was raised
in evidence to the committee and referred to in the main committee report.
Recommendation 7
The Labor committee
members recommend that the Australian Government undertake an audit of
government regulations and financial arrangements that encourage or discourage sustainable
business practices.
Endorse and provide guidance on international
initiatives
1.68
The Labor committee members support the committee's
recommendations regarding the Global Reporting Initiative and the UN Principles
for Responsible Investment and the Global Compact. The Labor members would also
like to pay particular attention to the OECD Guidelines on Multinational
Enterprises and the OECD Anti-Bribery Convention.
OECD multinational enterprises
guidelines
1.69
The Labor committee members support the OECD Guidelines
for Multinational Enterprises. Although this policy instrument has, until
recently, not been used in Australia,
the example cited in the main committee report of the mediated outcome involving
Global Solutions Limited Australia, demonstrates its potential effectiveness if
it were to be used more frequently.
1.70
As referred to in the main committee report, the 'specific
instance mechanism' under the OECD Guidelines is one that allows corporations
and stakeholder groups an avenue for mediated resolution of disputes relating
to a multinational company's performance under the OECD guidelines. This is a
process that can be constructive for both multi-national enterprises and
stakeholder groups.
1.71
The Labor committee members reiterate the evidence of the
Treasury referred to in the main committee report: "...governments adhering to the OECD
guidelines are committed [...] to promoting the guidelines..."[491] In the Labor committee members'
view, the fact that the 'specific instance' review has only been successfully
used once in Australia, demonstrates that the government's promotion of these
guidelines has been of limited effect. The specific instance mechanism is a
constructive model for engagement between stakeholders and companies and should
be utilised by these groups whenever necessary.
Recommendation 8
The Labor committee
members recommend that the Australian Government more actively promote the OECD
Multinational Enterprises Guidelines to Australian corporations.
OECD Anti-Bribery Convention
1.72
The main committee report identified that the
proportion of corporate codes of conduct on bribery and corruption in Australia
was much lower than the United States
and the United Kingdom.
For example the Centre for Australian Ethical Research recently found that only
51 of the top 100 companies in Australia
had policies in place to prohibit the payment and receipt of bribes, which compares
with 92 per cent in the UK,
80 per cent in the US
and 91 per cent in Europe.[492]
1.73
This may indicate a lower level of awareness of the effects
that supporting corruption and the payment of bribes in particular can cause
for societies, including undermining democracy and the rule of law, distorting
markets, impeding international trade and the facilitation of organised crime.[493]
1.74
Australian companies have obligations under Australian
law regarding the giving and receiving of bribes. Australia's
Bribery
of Foreign Public Officials Act
1999 enacts many of our obligations under the OECD Anti-Bribery Convention.
However the OECD has expressed a number
of concerns regarding Australia's
implementation of the Anti-Bribery Convention. The Howard Government's approach
has left gaps in Australia's
Criminal Code which in turn lowers the behaviour benchmark for Australian
companies operating internationally. The option to classify a payment to a foreign official as a facilitation
payment is one such example that the OECD points to in its January 2006
recommendations to Australia.
1.75
The Labor members are of the view that it is desirable
for more Australian companies operating overseas to develop their own codes of
conduct on corruption and bribery. Greater promotion of Australia's
obligations under the UN Convention Against Corruption, and the OECD
Anti-Bribery Convention would help in this regard.
1.76
The Labor members note recent public comments by the
Minister for Justice and Customs, Mr Chris Ellison MP, regarding bribery of
overseas officials, and encourage the government to continue this overdue promotion
of Anti-Bribery laws.
Recommendation 9
The Labor committee members recommend that the Australian Government
widely promote the terms and Australia's obligations under the UN Convention
Against Corruption and the OECD Anti-Bribery Convention, and encourage more
Australian companies to develop their own codes of conduct against bribery and
corruption.
Improve business sustainability reporting
1.77
The Labor members believe that adequate and appropriate
reporting on sustainability issues and non-financial risk is a key element of
improving sustainability performance.
1.78
Given that there are currently serious deficiencies in
the quality of material non-financial information being provided to investors, encouraging
improved sustainability reporting should be a key government objective.
1.79
The Labor members accept that there is a steady process
to be followed by companies as they build the capacity to identify, report on
and act on sustainability information within a business. Rather than requiring
all companies to perform detailed sustainability reporting in the short term,
it is therefore necessary to allow companies to follow this process at their
own pace.
1.80
It is also important that all large companies start on
the process of collecting and using information on the sustainability
performance of their businesses. As such, the Labor members consider that a
minimum of non-financial risk or sustainability reporting should eventually be
performed by every company that is a 'large' company under the Corporations Act 2001. This
recommendation is discussed further below.
1.81
Beyond any mandatory minimum requirement, it is also
important that for listed companies, the level and depth of non-financial risk
assessment and disclosure by companies increase over the medium term.
1.82
Additional recommendations to those in the main report are
made in the following areas to improve sustainability reporting by business:
-
Ensure a flexible, mandatory minimum of
sustainability reporting by all large and listed companies;
-
Set targets for rates of detailed sustainability
reporting by listed companies; and
-
ASIC to monitor the quality and usefulness of
sustainability disclosures by listed companies under the Operating and
Financial Review.
1.83
Before detailing these specific areas where the Labor
members believe the main committee report should have gone further, some
general comments are made on sustainability reporting.
The need for non-financial
reporting
1.84
Evidence to the committee clearly identified a need to
increase the quality and quantity of reporting on non-financial risks, with
some submitters identifying areas for mandatory reporting by companies. For
example AMP Capital Investors identified a need for companies to report the
main trends and factors they were likely to address in future development, as
well as information about non-compliance with the law, occupational health and
safety performance, greenhouse gas emissions and political donations.[494]
1.85
The Association of Certified Chartered Accountants (ACCA)
noted the global trend toward increased management commentary or narrative
reporting, including discussion of business risks including climate change,
human rights, supply chain management and bribery and corruption.[495] ACCA also noted the current move to
modify international accounting standards to include such reporting
obligations. Given these trends Labor members are of the view that the capacity
to interpret, prepare organisational data and report on sustainability
challenges and non-financial risks is of critical importance to Australian
business.
Forward looking information
1.86
Sustainability reports will often have a forward
looking aspect as well as outlining past company performance. The indicators
used in sustainability reporting are often referred to as "lead
indictors" as compared with the "lag indicator" contained in
quarterly financial reports. For this reason some companies and observers
suggest that reporting against sustainability indicators provides a better picture
than financial results of how a company will perform in the future. In its
recent report on sustainability reporting, the Centre for Australian Ethical
Research gave the following example:
An executive of one of Australia’s largest companies stated
recently, in an article directed at CFOs, that a company's financial results
are "lag indicators", reflecting what the company has done over the
past reporting period, while the items generally reported under
"sustainability" are the "leading indicators" of how well
the company is dealing with its future risks. "I'd like to see the
language change so that CFOs think differently about what is a lead indicator
and what is a lag indicator. Anyone relying purely on a 12-month financial
report is making a judgement without fully considering the quality of the company's
management. Sustainability reporting is more complex, and so if it is done successfully,
it shows how well the company is being run."[496]
1.87
The GRI Guidelines for example encourage reporting
organisations to highlight future trends by presenting:
...information for all performance indicators in a manner that
enables users to understand current and future trends. At a minimum, reporting organisations
should present data for the current reporting period (e.g., one year) and at
least two previous periods, as well as future targets where they have been
established.[497]
1.88
Labor notes evidence received by the committee about
the potential risks to directors of litigation from making forward looking
statements about the company's prospects.[498]
While recognising that some directors may have these concerns, the Labor
members also note that there is not a history of litigation in Australia
against company directors in relation to corporate disclosures. There is
certainly an obligation to report in good faith under directors duties but
there is no clear liability for being incorrect, so long as disclosures are
made in good faith.
1.89
None-the-less, considering the evidence received by the
committee and concerns about the prospect of directors being exposed to
litigation, the Labor members take the view that if there proved to be a
material risk resulting from the provision of forward looking, non-financial
information to the market, the parliament would rightly enact appropriate protection
from liability for company directors. This is a situation that should be
monitored by the parliament and business groups to ensure that no undue
pressure or misinterpretation of the duties of company directors develops to deter
directors from making adequate disclosures under the Corporations Act 2001 or other mechanisms.
A mandatory minimum of reporting on
non-financial risk
1.90
The Labor committee members support Recommendation 10
in the main committee report, concerning the identification and disclosure of the
material non-financial aspects of the risk profile of large listed companies by
disclosure of their top five sustainability risks, and providing information on
the strategies to manage such risks.
1.91
However in the view of Labor committee members it is
appropriate and in the public interest for this recommendation to apply beyond
large listed public companies. The principle that disclosure requirements
should apply more broadly was shared by submitters such as the Commercial Law
Association and the Australian Conservation Foundation.[499] It should apply to all large
companies operating in Australia
whose activities have significant environmental or social impacts, regardless
of their corporate categorisation. That is it should apply to all large listed
public, unlisted public, and private companies.
1.92
As this broader recommendation is beyond the purview of
the Australian Stock Exchange (ASX), it is more appropriate to be introduced as
an amendment to the Corporations Act 2001.
However, in keeping with the flexibility provided by the ASX Council
Recommendations it should be introduced using the 'if not, why not' reporting
mechanism. Suitable arrangements should be made to ensure that disclosures made
by unlisted companies are made publicly available.
1.93
Furthermore, a transitional company size threshold
should be set. This would ensure a focus on those companies with typically the
greatest financial and resource capacity, and potentially those with the
greatest social and environmental impacts.
1.94
The Labor members note the current dialogue between the
business sector and government regarding appropriate thresholds for the
definition of 'large company' under the Corporations Act. It is the view of the
Labor members that current thresholds identifying companies as large under the
Corporations Act may be too low for this to be the threshold for this proposed
reporting requirement. However an increase in the thresholds would address this
situation. Labor will monitor developments in this area.
1.95
For listed companies, it may be appropriate for this
requirement to be addressed within section 299A of the Corporations Act 2001, while for non-listed large companies, a further
provision would be necessary. It may also be necessary to provide guidance to
non-listed companies on the range of non-financial or sustainability issues
they should consider, such as water use, waste, emissions, on an if-not, why
not basis. Guidance from the Treasury would be necessary on the most
appropriate way to create this provision in the Corporations Act 2001.
Recommendation 10
The Labor committee
members recommend an amendment to the Corporations
Act 2001 to require all public and private companies, operating in Australia and above a specified size threshold, to
publicly disclose their top five sustainability risks and their strategies to
manage such risks. This provision should be subject to an 'if not, why not'
flexibility mechanism modelled on that contained in the Australian Stock
Exchange Corporate Governance Council's Principles of Good Corporate
Governance.
Sustainability reporting targets
1.96
Beyond the proposed flexible, mandatory minimum disclosure
of sustainability risks for all large companies, the Labor members believe it
is desirable to increase the rate of detailed sustainability reporting by large
companies and especially large listed companies.
1.97
The
committee heard from officials from the Department of the Environment and
Heritage that despite the low rate of sustainability reporting in Australia (around half the OECD average)
the Government has:
No specific targets. There is a comparison with other countries
and by implication there is an indication that we are not at a level as high as
those in many of those other countries. But there is no specific target...
...I think there is a general sense that the take-up of
reporting and the quality of reporting in Australia
is not at the level that we would like to see...[500]
1.98
The Labor committee members believe that without a
clear government and business agreement regarding expectations for the level of
sustainability reporting it is not unsurprising that the rate in Australia is low.
1.99
The Labor committee members are concerned that it is
expected to take until 2035 for all of the top 500 companies to
be preparing sustainability information, as suggested in the main committee report. In
the Labor members' view this is disappointingly slow. If Australia
is to take advantage of future financial opportunities that will increasingly
flow from improved social and environmental performance, the rate of engagement
and disclosure in this area needs to be higher.
1.100
The Labor members would like to see the
rate of reporting in Australia's
largest companies increase dramatically over the next five to ten years. The Labor committee members have
already recommended the development of a capacity building framework which
should make it easier for companies to plan and undertake sustainability
reporting for the first time.
1.101
The Labor committee members would expect that the rate
of detailed sustainability reporting in Australia
will improve dramatically with these initiatives. Labor members support a
phased approach similar to that suggested by Corporate ResponseAbility.[501] Labor members believe a realistic
timeframe, but one that should be negotiated and agreed with business
representatives is:
-
90 per cent of ASX 100 companies by 2010;
-
90 per cent of ASX 200 companies by 2012;
-
90 per cent of ASX 300 companies by 2014; and
-
90 per cent of ASX 500 companies by 2016.
1.102
The Labor committee members believe that
with the level of support and resourcing being proposed in Labor’s
recommendations, and with the transitional period indicated, these targets should
be achievable. Corporations will also have a reasonable period of time to integrate
principles of corporate responsibility into their core operations. If by these
timeframes sustainability reporting is not reaching, or is not near these
levels, the Labor committee members believe that other policy alternatives
including the question of mandatory sustainability reporting should be
considered.
Recommendation 11
The Labor committee
members recommend that the Australian Government make a clear policy statement
setting out stepped targets with clear timelines for the uptake of detailed
sustainability reporting in Australia.
Utilising the Operations and
Financial Review
1.103
There are various existing regulatory and market-based
arrangements that were recognised in the main committee report as having the
potential to accommodate non-financial disclosures including the 'Additional
general requirements for listed public companies' in the annual directors'
report, which is set out in section 299A of the Corporations Act 2001. This is sometimes called the Operations and
Financial Review or OFR.
1.104
The main committee report recognised the significant
potential of the OFR to promote material non-financial disclosures. The Labor
members note that it may be appropriate for listed companies to use this
section to disclose their top five sustainability risks and their strategies to
mitigate them.
1.105
The Labor committee members believe the non-financial disclosures
that result from the OFR should be closely monitored to ensure the disclosures
are meeting the evolving needs of shareholders and the wider capital market to
assess and value material non-financial performance and risk management
strategies. In its role as disclosure regulator, the Australian Securities and
Investment Commission (ASIC) is the appropriate organisation to undertake such
monitoring.
1.106
Labor committee members note that the OFR only applies
to listed public companies, and that disclosures made under section 299A may in
future exceed the minimum mandatory requirement to disclose the company’s top
five sustainability risks.
1.107
The Labor members also note and agree with the main
committee's report for auditors to review the non-financial disclosures in the
OFR and to make recommendations to the company board about the adequacy of
these disclosures. But given that OFR disclosures are still developing as a
framework for non-financial disclosures and that Labor members have recommended
a flexible, mandatory minimum disclosure of the top five sustainability risks
under the corporations law, it is
appropriate for ASIC to play an oversight role on the adequacy and usefulness
of disclosures made therein.
1.108
The Labor members make a recommendation to that effect,
complementary to the recommendation in the main report regarding the role of
company auditors and the oversight of disclosures under the OFR.
Recommendation 12
The Labor committee
members recommend that on an annual basis the Australian Securities and
Investment Commission:
-
review
the extent to which companies are making non-financial disclosures in their
report on Operations and Financial Review;
-
make recommendations
to the Australian Government regarding the adequacy of the disclosures to meet
the evolving needs of shareholders, and the wider capital market to assess and
value material non-financial performance, risk profile and risk management
strategies; and
-
present a
copy of the review and recommendations to parliament.
Better engage the investment sector
1.109
Labor has consistently taken the view that active engagement
by institutional investors and fund managers in the governance of investee
companies is a critical mechanism for ensuring good oversight and governance of
those companies. This is because the modern reality is that intermediaries now
control the ownership rights of most shareholders and if a passive approach to exercising
these is taken, companies can lose touch with the expectations and interests of
their individual owners and the public. Following a passive investment approach
is clearly contrary to the broader objective of ensuring greater consideration
of stakeholder needs.
1.110
This view on the role of fiduciaries was very
effectively articulated by Justice Neville
Owen in Chapter 6.3 of the HIH Royal
Commission report:
Shareholder apathy can play a part in undesirable corporate governance.
If shareholders as owners are unwilling or unable to exercise their powers or
make themselves heard, directors and management will lack guidance or
constraint from those whose interests they are supposed to serve. Shareholders
have an interest in seeing that a board is properly constituted and in holding
it to account for the company’s performance.
There is an opportunity for institutions and especially managed
funds to take a lead.[502]
1.111
In consideration of non-financial risks in investment
decisions, there is a clear need for the investment sector to more actively
seek useful non-financial reporting information from investee companies. If
there is to be significant progress in the area of sustainable business
performance, the requirements of investors, ‘pulling through’ the non-financial
data they require will be a critically important driver of change.
1.112
The committee heard evidence of the progress being made
internationally from Amanda McCluskey
from Portfolio Partners;
Internationally, we have seen the formation of the enhanced
analytics initiative. This is an initiative with a number of UK
and European based fund managers that have committed to allocate five per cent
of their brokerage to brokers who produce research that adds value over the
long term, especially on areas relating to sustainability. [...] That has seen
the formation of ESG units in brokerage houses including Goldman
Sachs, Credit Suisse First Boston and UBS
Warburg. These are not your typical fringe green, fluffy type names. These are
mainstream investment banks that have employed people specifically to look at
sustainability issues and how they impact on company performance.[503]
1.113
To the Labor members, this approach from fund managers
and the brokerage houses that serve them appears to be an innovative response
to the challenge of ensuring useful non-financial data is available, and is one
that is instructive for Australian companies.
1.114
Regarding progress in Australia,
the Labor members wish to recognise the submission of Finsia to the Inquiry regarding
the integration of Environmental, Social and Governance (ESG) considerations
into investment decisions. This type of research fills an important gap in the
policy making landscape in Australia
on how to encourage and enable investors to actively assess non-financial risk.
Extension of this research programme would provide a further constructive
contribution to the development of non-financial reporting and analysis in Australia.
1.115
It is clear to the Labor members that at this stage the
value given to and use of non-financial data by traditional market analysts and
fund managers is too low. Labor believes that the National Sustainability
Council referred to in earlier recommendations could successfully auspice further
research or education activities and engage with industry groups such as Finsia
as they perform their own further research. The necessary funding from
government for such research is referred to in the main committee report at Recommendation
23.
1.116
The Labor members also note and support the main
committee’s endorsement of the UN Guidelines on Responsible Investment and
would encourage Australian investment institutions to formally endorse the
principles as well.
Recommendation 13
The Labor committee members
recommend that the National Sustainability Council engage with the investment
sector to identify areas of research, education and reporting needs that would
assist institutional investors and trustees to better identify and assess
non-financial risks and investment opportunities.
Ms Anna Burke MP
Deputy Chair
Mr Chris Bowen MP
Senator
Nick Sherry
Senator
Penny Wong
Appendix 1: Summary of Labor members’
recommendations
Recommendation 1
The Labor committee
members recommend that the Australian Government's various corporate
responsibility programs be consolidated in a single, Corporate Responsibility
Unit within a business oriented Australian Government department, for example
either the Treasury of the Department of Industry, Tourism and Resources.
Recommendation 2
The Labor committee
members recommend that the Australian Government establish a National
Sustainability Council the roles of which would include:
-
The
recommendation of public and private, voluntary Australian sustainability
targets
-
Monitoring
performance levels against these targets
Recommendation 3
The Labor committee
members recommend that the Australian Government make reporting against
sustainability targets mandatory for Australian government agencies. This
reporting should include:
-
Performance
against sustainability targets set by the National Sustainability Council
regarding water, energy, waste, vehicles, general procurement and any other
applicable targets
-
Progress
achieved on meeting the targets if they are not met and strategies to enable
the meeting of targets in future
Recommendation 4
The Labor committee
members do not recommend any alternative to the current formulation of
directors’ duties. However, if legal barriers to the consideration of
legitimate environmental and social issues by directors are subsequently
raised, either by judicial interpretation or in practice, this matter would
require reconsideration by government.
Recommendation 5
The Labor committee
members recommend that the Australian Prudential and Regulation Authority issue
detailed guidelines on the sole purpose test to clarify for superannuation
trustees and fund managers their position in relation to allocating member
funds in all investment decisions.
Recommendation 6
The Labor committee
members recommend that the Australian Government, in consultation with industry
and using an existing tool as a model if appropriate, develop a widely
applicable corporate responsibility capacity building tool to provide an
interim step for companies wanting to integrate corporate responsibility activities
into their operations.
Recommendation 7
The Labor committee
members recommend that the Australian Government undertake an audit of
government regulations and financial arrangements that encourage or discourage
corporate responsibility activities.
Recommendation 8
The Labor committee
members recommend that the Australian Government more actively promote the OECD
Multinational Enterprises Guidelines to Australian corporations.
Recommendation 9
The Labor committee
members recommend that the Australian Government widely promote the terms and
Australia's obligations under the UN Convention Against Corruption and the OECD
Anti-Bribery Convention, and encourage more Australian companies to develop
their own codes of conduct against bribery and corruption.
Recommendation 10
The Labor committee
members recommend an amendment to the Corporations
Act 2001 to require all public and private companies, operating in Australia and above a specified size threshold, to
publicly disclose their top five sustainability risks and their strategies to
manage such risks. This provision should be subject to an 'if not, why not'
flexibility mechanism modelled on that contained in the Australian Stock
Exchange Corporate Governance Council's Principles of Good Corporate Governance.
Recommendation 11
The Labor committee
members recommend that the Australian Government make a clear policy statement
setting out stepped targets with clear timelines for the uptake of detailed
sustainability reporting in Australia.
Recommendation 12
The Labor committee members recommend that on an annual basis, the
Australian Securities and Investment Commission:
-
Review
the extent to which companies are making non-financial disclosures in their
report on Operations and Financial Review
-
Make
recommendations to the Australian Government regarding the adequacy of the
disclosures to meet the evolving needs of shareholders, and the wider capital
market to assess and value material non-financial performance, risk profile and
risk management strategies
-
Present a
copy of the review and recommendations to parliament
Recommendation 13
The Labor committee
members recommend that the National Sustainability Council engage with the
investment sector to identify areas of research, education and reporting needs
that would assist institutional investors and trustees to better identify and
assess non-financial risks and investment opportunities.
Appendix 2: Labor position on main committee
recommendations
Main committee recommendation
|
Labor members' position
|
Recommendation 1
|
|
The committee finds that the Corporations
Act 2001 permits directors to have regard for the interests of
stakeholders other than shareholders, and recommends that amendment to the
directors' duties provisions within the Corporations Act is not required.
|
Agree in principle. See Labor
recommendation 4.
|
Recommendation 2
|
|
That the Australian Prudential
Regulation Authority issue detailed guidelines on the sole purpose test to
clarify for superannuation trustees their position in relation to allocating investments to sustainable
responsible investment fund managers.
|
Disagree. Evidence to the
committee also considered mainstream investment decisions. See Labor
recommendation 5.
|
Recommendation 3
|
|
The committee recommends that
institutional investors in Australia seriously consider becoming signatories to the United Nations
Principles for Responsible Investment.
|
Agree.
|
Recommendation 4
|
|
The committee recommends that
the Future Fund should become a signatory to the United Nations Principles
for Responsible Investment.
|
Agree.
|
Recommendation 5
|
|
The committee recommends that
sustainability reporting in Australia should remain voluntary.
|
Agree in part. All companies
passing the large company test should in time, provide a minimum mandatory
level of reporting on their key sustainability risks. See Labor
recommendation 10.
|
Recommendation 6
|
|
The committee recommends that
the Australian Government, through the Joint Environment Protection and
Heritage Council / Ministerial Council on Energy Policy Working Group
process, seek to rationalise Australia's greenhouse and energy reporting requirements into a national
framework.
|
Agree
|
Recommendation 7
|
|
The committee recommends that
government and industry should liaise on developing a mechanism for setting
sectoral benchmarks for greenhouse and energy performance.
|
Agree in principle. The Labor
members believe the National Sustainability Council should perform this role
and should also set other sustainability targets as necessary. See Labor
recommendation 2.
|
Recommendation 8
|
|
The committee recommends that
each company auditor on an annual basis:
review the extent to which companies are making
non-financial disclosures in their Operating and Financial Reviews; and
make recommendations to the company Board regarding the
adequacy of the disclosures to meet the evolving needs of shareholders, and
the wider capital market in order to assess and value material non financial
performance, risk profile and risk management strategies.
|
Agree in principle. Labor
members believe it is also important for ASIC to play a role in monitoring
non-financial disclosures and especially those included in the OFR. See Labor
recommendation 12.
|
Recommendation 9
|
|
The committee recommends that:
it is premature
to adopt the Global Reporting Initiative Framework as the voluntary
Australian sustainability reporting framework; and
that the
Australian Government continue to monitor
the acceptance and uptake
of the Global
Reporting Initiative Framework,
both nationally and internationally, with a view to its
suitability as the,
or a basis for a, voluntary Australian
sustainability reporting framework.
|
Agree.
|
Recommendation 10
|
|
The committee recommends that
the Australian Stock Exchange Corporate Governance Council (ASX Council)
provide further guidance to Principle 7 of the ASX Council's Principles of
Good Corporate Governance and Best Practice Recommendations to the effect
that companies should inform investors of the material non-financial aspects
of a company's risk profile by disclosing their top five sustainability
risks; and providing information on the strategies to manage such risks.
|
Disagree. Labor recommends there
be a flexible mandatory minimum reporting requirement under the Corporations Act on a company's top
five sustainability risks. See Labor recommendation 10.
|
Recommendation 11
|
|
The committee recommends that
the ASX Council undertake industry consultation to determine whether there
are areas where companies, investors, and other stakeholders believe further
guidance is necessary in relation to the non-financial disclosure
requirements under the ASX Council's Principles of Good Corporate
Governance and Best Practice Recommendations.
|
Agree.
|
Recommendation 12
|
|
The committee recommends
that the Australian Securities and
Investments Commission revise the Section
1013DA disclosure guidelines to
be relevant to mainstream fund managers rather than simply to the more
limited pool of ethical investment funds.
|
Agree.
|
Recommendation 13
|
|
The committee recommends that
the Australian Government provide seed funding to establish an organisation,
the Australian Corporate Responsibility Network, to be modelled on the United Kingdom initiative Business in the Community.
|
Agree. Support for this type of
organisation should recognise the many initiatives that exist in Australia and provide a mechanism to coordinate and where necessary, compliment
these initiatives.
The Australian Corporate
Responsibility Network could also contribute to and help business to execute
sustainability objectives defined by the National Sustainability Council.
|
Recommendation 14
|
|
The committee recommends that
investors, stakeholders and relevant business associations should encourage
companies to include long term and corporate responsibility performance
measures as part of the remuneration packages of company directors, executive
officers and managers.
|
Agree.
|
Recommendation 15
|
|
The committee recommends that
industry associations and peak bodies proactively promote to their members
the benefits of corporate responsibility, and encourage greater engagement by
their members.
|
Agree. Government or the Australian
Corporate Responsibility Network must be capable of providing best practice
and other information on corporate responsibility to peak organisations
intending to develop their capacity in this area.
|
Recommendation 16
|
|
The committee recommends that
the Australian Stock Exchange, in consultation with companies, institutional
investors and rating agencies, establish and operate a central web-based tool
for the dissemination of sustainability information, based on the London
Stock Exchange's Corporate Responsibility Exchange. The Australian Government
should consider whether seed funding is required to establish such a service.
|
Agree.
|
Recommendation 17
|
|
The committee recommends that
the proposed Australian Corporate Responsibility Network publicise and
promote best practice examples across the spectrum of corporate
responsibility activities and across industry sectors.
|
Agree.
|
Recommendation 18
|
|
The committee recommends that
the not-for-profit sector should endeavour to meet the same standards as the
for-profit sector in considering the interests of stakeholders.
|
Agree.
|
Recommendation 19
|
|
The committee recommends that
the Prime Minister's Community Business Partnership continue to move beyond
its initial focus on philanthropy, towards a broader sustainability
framework.
|
Agree in principle. The current
Business Community partnerships program should develop new categories of award
to recognise the full spectrum of corporate responsibility activities, and
should be incorporated into the corporate responsibility unit within a single
business oriented government department. See Labor recommendation 1.
|
Recommendation 20
|
|
The committee recommends that,
in order to show greater leadership and to encourage more agencies to
disclose their sustainability
performance, the Australian Government establish:
-
voluntary sustainability reporting targets for
government agencies
-
voluntary targets for government agency procurement
in areas such as water, waste, energy, vehicles, equipment and consumables,
and;
-
a requirement for each government agency to disclose
such targets and to detail progress towards achieving these in its annual
report
|
Disagree. Labor believes that
current voluntary programs initiated by the government have not encouraged
departments to take sustainability reporting seriously. This level of
commitment must be increased with a mandatory reporting requirement against
sustainability targets. See Labor recommendation 3.
|
Recommendation 21
|
|
The committee recommends that
the Australian Government's various corporate responsibility programs be
co-ordinated through a whole-of-government approach.
|
Disagree. Labor members believe
that government's corporate responsibility related programmes should be
developed and delivered through a Corporate Responsibility Unit in a single,
business related government department. See Labor recommendation 1.
|
Recommendation 22
|
|
The committee recommends that
the Australian Government,
in consultation with the investment community, develop educational
material;
-
regarding materiality of
non-financial risks, for use by institutional investors and fund managers
and;
-
to promote the United
Nations Principles for Responsible Investment to institutional investors and
fund managers.
|
Agree in principle. Engagement
with the investment community must extend to engagement on emerging
sustainability risks and how to define and value those risks. See Labor
Supplementary Report section – Better engage the investment sector.
|
Recommendation 23
|
|
The committee recommends that
the Australian Government, in consultation with relevant
sections of the
business community, undertake research into quantifying the
benefits of corporate
responsibility and
sustainability reporting.
|
Agree in principle. Labor
recommends that the National Sustainability Council should contribute to and
auspice this research
|
Recommendation 24
|
|
Although recommending that it is
premature to adopt the Global Reporting Initiative Framework, the committee
recommends that in addition to the continued monitoring of its uptake, the
Australian Government provide guidance to the business community, including
the small business community, on how to apply the Global Reporting Initiative
Framework.
|
Agree.
|
Recommendation 25
|
|
The committee recommends that
the Australian Government develop educational material to promote the UN
Global Compact and to encourage Australian companies to become signatories where
it is appropriate for them.
|
Agree.
|
Recommendation 26
|
|
To protect Australia's interests, the committee recommends that where appropriate, the
Australian Government facilitate and coordinate the participation of
Australian corporations in international corporate responsibility
initiatives.
|
Agree.
|
Recommendation 27
|
|
The committee recommends that
the Australian Government in collaboration with relevant not-for-profit
organisations, develop educational materials for not-for-profit organisations
to promote the benefits of corporate responsibility within their own
organisations.
|
Agree.
|
Recommendation 28
|
|
The committee recommends that as
a way of facilitating greater uptake of sustainability reporting, the
Australian Government should examine the feasibility of introducing inflated
write-off arrangements for the year-one costs of initiating sustainability
reports, to assist companies that commence sustainability reporting for the
first time.
|
Agree.
|
Recommendation 29
|
|
The committee recommends that
the Australian Government consider options for providing regulatory relief to
corporations which voluntarily undertake specified corporate responsibility
activities.
|
Agree. Labor recommends a full
audit of regulatory incentives and disincentives to adoption of corporate
responsibility measures. See Labor recommendation 7.
|
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