Australia’s top companies are failing in key aspects of corporate responsibility (CR) reporting – they lag the world average in acknowledging human rights as a business issue, while less than half recognise climate change as a financial risk in their annual reports.
The findings are contained in KPMG International’s biennial survey of CR and sustainability reporting by nearly 5000 companies worldwide, KPMG Survey of Corporate Responsibility Reporting 2017, published today. The study of the top 100 organisations in each of 49 countries shows a small (2 percent) increase in global reporting levels, but a plateauing of Australian reporting levels since 2015.
[restrict userlevel=”subscriber”]
The 100 Australian entities surveyed (the largest 100 by revenue) comprised 75 companies, 15 public sector organisations and 10 superannuation funds.
On human rights, Australia’s top 100 entities are behind their counterparts overseas, with only 55 percent acknowledging human rights as an issue for their business in their CR reports. This compares to almost nine out of ten (89 percent) CR reporters in the top global group of organisations (G250), and nearly three quarters (72 percent) among the top 100 organisations in equivalent countries (N100).
Of those Australian entities that acknowledge human rights as an issue, 79 percent disclose a human rights policy. This is positive, as a human rights policy is a fundamental building block of corporate action on human rights. However only 40 percent refer to the UN Guiding Principles on Business and Human Rights which indicates that organisations are still coming to terms with how international standards should shape their policies and practices.
Gary Wingrove, KPMG Australia CEO, said: “Publicly reporting on human rights is an indicator that a company has started considering rights related risks. The results from KPMG’s survey suggest that, with some notable exceptions, Australian corporates are behind their global peers. It is important that they move to catch up by assessing and acting upon human rights risks – and then tell their investors, consumers and affected stakeholders about their progress.”
Richard Boele, Partner, KPMG Banarra, Human Rights and Social Impact Services, an expert on the modern slavery issue, added: “Human rights will soon rise up the corporate risk list when legislation is introduced in Australia – modelled on the UK law – over the next few months which will require public disclosure of business efforts to eradicate forced labour and other related practices in their operations and supply chains.”
“Directors should be aware that board approval and a director’s signature are likely to be required for public ‘modern slavery statements’. Boards will need to sufficiently understand their human rights risk and the effectiveness of their current policies and processes in order to confidently report.”
On climate change reporting, there is limited activity in Australia, despite increasing regulatory exhortation.
Adrian King, KPMG Global Leader for Sustainability Reporting and Assurance, said: “Earlier this year, prudential regulator APRA warned that climate change risks must be regarded as a risk management issue for business, as many of these risks are financial in nature and are foreseeable, material and actionable. Only 40 percent of the top 100 companies currently acknowledge climate change as a financial risk in their financial reporting, although this is not inconsistent with global levels.”
However, there are some mitigating factors behind this, Mr King believes.
Adrian King said: “We expect these results are impacted by the timing of reporting in Australia (i.e. June vs December year ends) and that there will be a significant increase in activity and disclosures in relation to climate risk in the next reporting cycle as entities get up to speed with this fast evolving and relatively new framework. Many of the 30 June 2017 annual reports released in the last few weeks are already demonstrating this.”
The report finds that of those 40 percent, a relatively high proportion provide some narrative description of the potential impacts. Very few, however, are currently quantifying the potential impact of those risks in financial terms or modelling it using scenario analysis or other methodologies as the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) recommends.
[/restrict]
