Vested interests and poor leadership on major sustainability issues hinder Australia’s corporate responsibility progress

Coal dominates Australia’s corporate landscape and some say the industry saved the nation from the jaws of recession. The world’s biggest exporter of coal was the only major developed economy to avoid prolonged contraction during the global financial crisis, thanks to booming exports of coking and thermal coal topping A$55bn (£34bn) in 2008-9.

The good times are likely to keep on rolling as China and other emerging Asian economies continue on their high-trajectory growth paths. Latest government forecasts peg mining and petroleum export growth at 54% over the next two years, with those sectors likely to comprise more than 80% of the country’s commodity export earnings next year.

Yet the very industries that kept recession at bay threaten Australia’s long-term prosperity. The federal government’s Department of Climate Change in March predicted carbon emissions would grow 24% by 2020 from a 2000 base-year without an initiative to make companies pay for burning fossil fuels. Coal and liquefied natural gas exports are expected to drive emissions 1.8% higher a year this decade.

Policy confusion

The problem is exacerbated by the government’s confusing policy stance. Data released in March by the Australian Conservation Foundation revealed the government spends A$11bn (£7bn) more on subsidies that encourage greenhouse pollution than it does on programmes to tackle climate change.

The strength of the extractive sector lobby is hampering the development of corporate responsibility.

The ousting of former Australian prime minister Kevin Rudd in 2010 followed his attempt to introduce a new tax on the profits of the mining industry. Such is the industry’s power, it was rumoured to have had a hand in Rudd’s removal shortly thereafter. It may well have had more to with Rudd’s unpopularity with his colleagues, but certainly his taking on the mining companies made him some powerful enemies.

While noting improvement in the management of corporate social and environmental impacts, organisations behind the facilitation of corporate responsibility see ample room for improvement.

Sarah Davidson of the Responsible Business Practice at the independent not-for-profit St James Ethics Centre notes some progress in corporate responsibility – on issues such as  governance, business ethics and risk management. But uncertainty over the roles and responsibilities of government, business leaders, industry and civil society are limiting progress.

“We have seen a sustainability leadership vacuum in Australia, particularly in addressing critical areas such as climate change,” she says.

Dr Wayne Visser, a senior associate at the University of Cambridge Programme for Industry and a visiting professor at Melbourne’s La Trobe University, believes Europe and the US can learn a thing or two from Australian business, such as best practice in stakeholder engagement. But, he concludes: “Overall I would say Europe leads Australia on CR, especially on climate change, where unfortunately Australia seems to be very regressive.”

Some admit sustainability advocates face an uphill struggle in a country where farmers, miners and industrialists face few resource constraints.

Craig Roussac, sustainability manager at property group Investa, says the development of sustainable business practice in Australia is hampered by a “frontier mentality”.

He says: “It was only two generations ago we were clearing the land. Australia is of course predominantly inhabited by Europeans, but the context here is very different from Europe – people are far less constrained here, which means they are less inclined to innovate.”

Pockets of best practice

Dr Leeora Black, managing director of the Australian Centre for Corporate Social Responsibility, notes pockets of excellence, “on a par with anything you’d find in any other developed country in the world”.

“Australian business is ever more diverse and outward-looking,” Black says. “With that comes more complex stakeholder environments and therefore more complexity in the management of social and environmental issues and more competency in the management of those issues.”

But others say Australian companies must move beyond managing risk and towards a sustainable outcome for the economy as a whole.

Suzanne Young, an associate professor and director of corporate responsibility at La Trobe University, says the sole focus on risk – especially from companies in the country’s dominant resources sector – restricts the management of social and environmental business impacts.

“Companies and institutional investors focus on governance risks mainly and have done an excellent job in ensuring governance is best practice,” she says. But they lack a dialogue or engagement with stakeholders in looking at longer term social and environmental risk, Young argues.

“Companies need to address these issues through community development approaches and indigenous programmes. The shareholder focus is strong.”

References:

Socio-economic statistics obtained from recent publications from the CIA Factbook and the Human Development Index.

Corporate responsibility data obtained from a February 2011 Ethical Corporation survey. The results should be regarded as a basic indication of trends in Australia and not as scientific research.

Guideline and standards statistics obtained during February 2011 from official website of each initiative. 



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