New Standards, But We've Been Here Before
They're Live!, The Money's On Your Side, And Let's Talk About That ROI.
This is the fourth edition of Honey Drops, a curated view of what’s been happening around the Corporate Sustainability world each week.
As The Ocelli Group takes its name from the bee's ocelli, those remarkable eyes that guide its flight via the sun, I felt it a natural extension for this Corporate Sustainability newsletter to incorporate their nectar’s alchemy: Honey.
Feel free to forward on to anyone who would benefit from a drop on their toast or a stir in their tea.
3 Thoughts From Me
***HOT OFF THE PRESSES***
During the Age of Clickbaited Attention in which we live, isn’t it wonderful to see the non-exclaimed, underplayed headline appear yesterday on the Federal Government’s Australian Accounting Standards Board website:
“Australian Sustainability Reporting Standards AASB S1 and AASB S2 are now available on the AASB Digital Standards Portal“
And with this, we’re off to the economy-wide, ASIC-enforced mandatory climate reporting races:
“Following their approval on 20 September 2024, the AASB has published a voluntary AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information and mandatory AASB S2 Climate-related Disclosures. Certain entities are required by the Corporations Act 2001 to apply AASB S2 for annual periods beginning on or after 1 January 2025.”
You can find the Standards for AASB S1 here, and for AASB S2 here.
Happy reading!
Many of you have already signed up for Wednesday’s webinar on the negative commercial impacts of Greenhushing, where we will discuss why companies should be rewarded for joining the national climate transition.
For those who haven’t, here's the link to register, which you can share with your team or network. We will be providing data and insights into the commercial landscape, the direct revenue impacts customer sentiment is having on businesses and how best to position your company as the aforementioned new mandatory climate reporting legislation comes into effect.
Credit: Recover™ fiber
Adoption Journeys For Australian Sustainability Teams to Build Upon
We do love a regulation, policy or procedure here in Australia (just have a scroll of the link in the sub-header). This has led me to cast an eye back on other landmark measures to see what worked, what flopped, what was well-intentioned but ineffective, and how each sector or profession came out the other side to now see it as the cost of doing business:
The Australian Consumer Law
a. What worked: The ACL significantly increased consumer protections by providing clear guidelines for businesses on fair trading practices, product safety, and consumer guarantees. This has levelled the playing field so that companies operating ethically aren’t losing out to otherwise-inclined companies.
b. What didn’t: The complexity of the legislation has on occasion led to uncertainty and disputes, meaning that despite strong enforcement provisions, there have been challenges holding all players to account.
Modern Slavery Act
a. What worked: Companies were pushed to create enhanced supply chain transparency by closely examining their suppliers and identifying potential areas of risk, which has led to improvements in both ethical sourcing and labor practices, as well as the quality of life for their suppliers. The knock-on effect of this for companies has been improvements in the brand image and reputation of companies who provide transparent reporting and proactive measures, often using third parties audits such as Sedex Members Ethical Trade Audit (SMETA), B Corp certification and Fairtrade International.
b. What didn’t: As is a theme within regulatory systems, the Modern Slavery Act has resulted in some organisations electing to superficially comply by meeting minimum reporting requirements without any real intention of creating material changes to their supply chains. There are still many issues to be addressed, but the journey is well underway.
ASX Corporate Governance Principles and Recommendations
a. What worked: While not a regulatory mechanism, these eight Principles have led to improved board effectiveness by encouraging publicly-traded companies to adopt best practices in corporate governance. This has resulted in more effective and accountable boards, which has led to greater investor confidence in the Australian economy, improved access to capital and enhanced value for shareholders, including for your Super fund.
b. What Didn't Work: The "Tick-the-box" mentality of some organisations has led to a compliance-driven, reactionary approach rather than a genuine commitment to good governance. This is starting to burst at the seams as AI, Cybersecurity and Climate move into the top five threats facing companies and Boards are having to play catch-up.
I find these three examples to be helpful when thinking about climate reporting, as each mandated organisation will be required to disclose their Sustainability report to ASIC, explaining their governance, strategy, risk management and metrics and targets. This reporting will also impact each of the above existing frameworks, as companies provide transparency to their consumers, their supply chains as well as into their Boards’ oversight of each.
Unfortunately for those of the ‘compliance-only’ school, there’s a finite period of time before climate reporting joins these three as the cost of doing business, meaning a lack of action will soon become one of the biggest risks companies (commercial) and their Directors (personal) face.
2 Quotes From Others
“We found a positive relationship between ESG and financial performance for 58% of the “corporate” studies focused on operational metrics such as ROE, ROA, or stock price with 13% showing neutral impact, 21% mixed results (the same study finding a positive, neutral or negative results) and only 8% showing a negative relationship.”
**I highly recommend reading the six conclusions highlighted in the report
“At Woodside’s 2024 AGM, a majority (58%) of shareholders voted against the company’s Climate Transition Action Plan (CTAP). This is the largest vote ever against a company climate plan, superseding the previous record of 49%, which was set by Woodside last time it put its climate plan to shareholders.
This research considers how Woodside can deliver a credible strategy for managing climate risk and securing shareholder value. It finds that ceasing development of its high-cost, high-emissions, pre-FID greenfields gas projects offers Woodside a significant opportunity to enhance shareholder value and reduce exposure to climate risk. A capital allocation framework that returns free cash flow to investors currently offers more value and less risk than fossil fuel production growth.”
Source: ‘What’s next for Woodside?’ - Australasian Centre for Corporate Responsibility (ACCR), August 2024
1 Thing For You To Ponder
The evolution of energy has been at the front of my mind this week as the UK closed its last remaining coal-fired power plant, 142 years after the first one in the world was opened by Thomas Edison in London, prior to taking his technology to New York. It’s quite phenomenal to consider the exponential transformation of society accelerated by this innovation. Even more so to realise power generation can exist for a country the size of the UK without needing to use coal.
While all our focus is now on electrifying the grid and decarbonising the economy, it’s worth reflecting on this chapter of ingenuity, as we turn the page and begin the next with equal zeal to create positive impacts on a local, national and global scale.
What will you write?
Until next week,
Dan