ACTU Investors forum Sydney 2011

Risk and governance priorities in an uncertain environment

Jo-anne Schofield, Catalyst Australia Inc.

www.catalyst.org.au

Catalyst ‘Full disclosure’ series:

1. How corporations tell their story2. Human rights at work3. Who’s in charge of the corporation?

www.catalyst.org.au

Banarra Consulting & CFMEU Mining and EnergyLabour Practices in Sustainability Reporting

www.banarra.org.au

Sources

Establishing brand

Collapse in public trust

Lavish spending to manage reputation.

Strong local take-up UN PRI

Global CEOs

•96% want sustainability to be fully integrated into core business

•88% support integration through the supply chain

Global Reporting Initiative (GRI) & OECD Trade Union Checklist - UN Global Compact - UN Principles for

Responsible Investment - SA8000 Labor practices standard - ISO 14001 environmental certification standard - ISO 2600 guidance on social responsibility - Carbon

disclosure project - Extractive Industries Transparency Initiative.

Plus National systems, eg Australian Corporate Responsibility Index

ESG risk management tools

37% of Australian firms produce a stand alone report about environmental and social activities.

Less than half (42%) gain external assurance

Voluntary corporate self-engagement with ethics– “misguided and naïve”…. Australian Wheat Board - self assessing while paying bribes to the regime in Iraq.

Justine Nolan 2008

Depends on disclosure

Governance failures in the GFC took place in “some of the most sophisticated banks operating in some of the most

developed governance environments in the world” (World Bank)

Lack of disclosure was a major issue.

One in four older workers in the US burned through all of his or her retirement savings between Dec 2007 and June

2009.

Corporate ethics as a social risk

Our globalised marketplace requires a stronger ethical orientation ….. [An ] expanded risk paradigm must include

… issues in the environment, social and governance realms.”

The Global Compact: Global Sustainability in the 21st Century, January 2009

Compliance is not just ticking boxes….It’s a “commitment to an ethical framework for decision making…”

…the investing community [should] foster more than a tick the box process

Hon Prof Neville Owen, ACSI Conference March 2011

Expanding the risk paradigm

Unions and workers are vital stakeholders in the sustainability reporting process but are generally not

engaged in this process in the Australian context

There is a high potential to include stakeholders under the GRI, but few Australian companies in a recent sample

consulted widely. Only 2 of 10 companies included unions in their list of stakeholder groups

Banarra Consulting 2011

Stakeholder engagement

Banarra Review Lack of engagement with workers = low compliance with benchmarks around decent work, collectively bargaining and other key GRI indicators.

•5 of 10 companies reported on bargaining rights

•2 of 10 reported workforce representation on health and safety committees

Australian firms are not keeping pace with global movement to GRI in relation to labour standards.

Unseen risks?

Supply chain •GRI guidelines overlook several important ILO standard•Only one of 10 companies reported against the GRI indicator on supplier human rights.•Nokia / Apple / Australian Meat and Livestock Corp.

Gender diversity•Surging public policy interest in this area – new ASX guidelines drive change. •Catalyst research: Independence without diversity.

Unseen risks

What gives? Tax paid by Australian firms – with Australian School of Taxation, UNSW – August 2011

Serious about sustainability? with Centre for Corporate Governance, UTS – September 2011

How green is my company? (late 2011)

Future issues for Catalyst

“The risks and uncertainties shared by all require a shared response…. Overly zealous or misplaced risk

management can stifle innovation and creativity … but we can … take a long, hard look at what kinds of risk are best managed at an individual, government or business

level.John Quiggin, The risk society: social democracy in an uncertain world, 2007

“The risks and uncertainties shared by all require a shared response…. Overly zealous or misplaced risk

management can stifle innovation and creativity … but we can … take a long, hard look at what kinds of risk are best managed at an individual, government or business

level.John Quiggin, The risk society: social democracy in an uncertain world, 2007