The project identified 116 companies producing a sustainability report (or sections of an annual report or website), of which 53% were in the mining or manufacturing sector. It found that foreign-owned companies were considerably more likely to produce a sustainability report than companies that are Australian owned.
One of its key findings was that, "There appears to be a worldwide trend towards greater inclusion of social data within reports, and towards use of sustainability reports instead of environment-only reports... The value of verification has not been recognised in most industry sectors in Australia."
If you speak to proponents of SR they will tell you that Australian industry is slowly waking up to a reality that European countries have known about for the past decade. That SR not only provides an opportunity for an organisation to find out more about its risks and opportunities, but gives them the mandate to pursue outcomes that provide value in non-traditional ways.
Like the Hong Kong Shanghai Banking Corporation's Investing in Nature partnership, where employees have the opportunity to join Earthwatch conservation projects on five continents.
Or to take a more local example, the programs offered to Alcoa employees that have contributed to a low turnover rate and more than 80% of employees Australia-wide working for the company for more than 10 years.
Oleg Morozow, South Australian Manager SA and Principal External Affairs Advisor for Ecos Consulting, says, "The term sustainability reporting has become a bit of a cliché. There's very little focus on what SR can actually do. That is, thinking and planning over the longer term, integrating and using sustainability as a vehicle for change."
Those more critical of SR suggest that it cannot yet be positively linked to business performance and that the costs of reporting and difficulty in measuring the benefits cannot be justified to stakeholders.
"Reporting itself doesn't create business value but combined with an overall sustainability framework approach will assist performance improvements," says Dan Atkins, director of Sustainable Business Practices and member of the South Australian Premier's Round Table on Sustainability. "It comes back to the old phrase 'what gets measured gets done'."
He refers to a balanced score card approach that many leading companies have used to determine the most important business drivers that includes more than traditional financial measures - drivers such as reputation, efficiency and product innovation.
Melanie Stutsel from the Minerals Council of Australia (MCA) outlines a multitude of performance drivers in adopting SR. She suggests that higher financial returns, greater investor confidence and employee satisfaction and ability to operate in the global market are some reported advantages.
For instance, a study conducted by Graves and Waddock analysed the corporate social performance and corporate financial performance of 22 companies, 11 of which were classed as 'built to last' (BTL) companies, visionary companies whose goals extended beyond just maximising profit.
The study found that BTL companies:
(Weiser and Zadek, 2000, 'Conversations with Disbelievers'.)
Companies involved in the Commonwealth government report in all industry sectors most often cited "reputation enhancement" as the key benefit of producing a sustainability report. The next most frequently cited benefits were: "gain confidence of investors, insurers and financial institutions", "operational and management improvements" and "improved management of risks".
Increasingly, it is consumers that are driving change as they become more aware of the pressures operating on our environment and demand goods and services that have less environmental impact. This focus shift has created new commercial opportunities for industry.
A good example is the advertisement that appeared in the Australian Financial Review on Thursday 16 March, placed by a community group to address shareholders of Gunns (timber products company) about toxin levels in creeks that supply water to surrounding communities and carry run-off from Gunns forestry operations. The announcement was signed by the chair of the community group and the Mayor of the region.
Paths to change
There are a plethora of energy rating and triple bottom line reporting tools available, including ISO14001, the standard that has been adapted by many companies as a means of reporting on sustainability outcomes.
Yianni Mentis, skills coordinator for the Department of Energy, Utilities and Sustainability (DEUS) says, "It [SR] needs to be comprehensive enough but it also needs to be in plain English. It should be used by businesses as a SWOT analysis - what are strengths and weaknesses, and where are the opportunities for improvements...warts and all."
He cites peer group leaders such as Westpac in the banking sector who have developed a comprehensive environmental program and a transparent reporting model.
More than 40 large organisations in Australia, such as Amcor, BHP and the City of Melbourne, are using the Global Reporting Initiative (GRI).
The GRI is an independent institution whose mission is to develop and disseminate globally applicable sustainability reporting guidelines.
"The GRI is a very comprehensive framework but companies need to adapt it, not use it as an exhaustive list." says Dan Atkins.
Many of the programs developed by state and federal government have targeted energy efficiency improvements, using climate change as the primary driver for adoption of these programs.
They are only now beginning to make regulatory changes that require energy efficient practices of some of Australia's bigger energy users, such as changes to the Minimum Energy Performance Standards of non-residential buildings, Water Saving Action Plans and the new National Framework for Energy Efficiency.
However, just as Australia represents less than two per cent in the global problem of harmful emissions unlike big players such as India and China, the introduction of energy efficient practices is only a small part of a sustainable industry.
"I think climate change is a critical global issue and for many companies, particularly in the energy and natural resource sector, it is of paramount importance. Overall, however, industry needs to respond to a crisis of confidence," says Oleg Morozow.
There are many other business drivers that are driving SR, according to Dan Atkins, such as relationships with the community, stakeholder engagement, resource efficiency and innovation of products.
He says, however, "Climate change is a good awareness raiser in terms of getting people to think about a carbon constrained future and the impact of their business as well as risks and opportunities."
There are a number of industry bodies and representative associations around Australia that have developed SR frameworks for their constituents. One such scheme is that developed by the Minerals Council of Australia that came into operation in 2005, building on earlier programs that date back to 1996.
Commitment to Enduring Value - the Australian Minerals Industry Framework for Sustainable Development is compulsory for full membership of the MCA.
Commitment to Enduring Value brings with it a number of obligations, including a requirement to publicly report site level performance in sustainable development, on a minimum annual basis, with reporting metrics self-selected from the GRI, the GRI Mining and Metals Sector Supplement or self-developed indicators.
There are currently 35 signatories to Enduring Value, covering more than 85% of annual minerals production in Australia. Each of these companies has either produced or is in the process of producing a report on their sustainable development performance.
According to Melanie Stutsel, recent research has shown that a large and growing percentage of most companies' total market value comprises intangible assets, such as the kind that are measured through SR - such as reputation, brand, equity, strategic alliances, knowledge and the like.
"A recent study by Interbrand concluded that a full one-quarter of the world's total financial wealth is tied up in intangible assets," she says.
Manufacturing profile: Michell
Michell, the largest exporter and processor of wool in Australia, has reduced its impact on the environment through a series of initiatives for reducing its total water consumption, reducing its mains water use, cleaning up its wastewater and reusing wool waste.
Until recently, the company sent approximately 15,000 tonnes of waste grease, topsoil and vegetable matter to landfill each year, and discharged excess solids, grease and salt from wool waste to sewer.
The actions undertaken by the company have saved money through: reducing waste and increasing efficiency; ensuring compliance with its Trade Waste Agreement with SA Water; contributing to enhancing Michell's reputation as a company that values environmental sustainability.
The company works closely with the City of Salisbury and this led to the implementation of the Parafield Urban Stormwater Initiative (PUSI) where 90% of the Michell water input is now recovered urban stormwater sourced from this project.
"One of the main drivers for Michell was its stakeholders, long-term relationships with the local community are important," says Michell's environmental consultant Richard Fassbender.
With this project the other critical issue was water security. The company could envisage a time when water restrictions would apply to industry, as in other parts of Australia, and wool scouring is a water-intensive process. In regard to being the fourth biggest user of mains water in Adelaide, Fassbender says, "This was regularly reported in The Advertiser, a sort of shame file for large water users. This has now turned to positive press. The PUSI is well known throughout Adelaide and beyond."
The company's client base also recognises these sustainability efforts. Part of the change has involved instilling a company culture of 'environmental waste means economic waste' from senior management to shop-floor level; and taking a realistic approach to engaging stakeholders and the 'whole of system' approach to problem-solving.
The Alcoa experience
Earlier this year Alcoa Australia released a report that outlines the environmental goals for the Yennora site in Sydney and details of its community consultation network (CCN) set up in 2005.
While it has always conducted community consultation, this latest exercise has seen more interest from the local people, a process that Environment Manager at Yennora, Mark Davies describes as "a brilliant exercise".
"We know what local people think of us. Being open and transparent has been very valuable. We are openly looking for advice from them on how we can improve and often it's simple things like the aesthetics of our facility."
This consultative group is made up of local residents, local government, environment groups and the Environment Protection Authority.
With Alcoa named as one of the three most sustainable companies in the world by Corporate Knights and Innovest Strategic Value Advisors in 2005, the division at Yennora had a big reputation to uphold in its ambition to become the "best neighbour in Western Sydney". The company takes the approach that for environmental gains to become truly sustainable it has to think about what they mean for the local community and economy.
"We've been reporting on sustainability for a while now and every time we spend capital we do an environmental review process," says Davies.
"We have a metrics reporting tool which is designed for each location to input their usage on a range of environmental measures such as emissions, water use, etc. The other system is a self-assessment process - based on ISO14001 - that also includes management of air, water, waste, land management and chemical storage for instance."
The plan for Yennora commits the site to achieve a 20% improvement in water use per tonne of aluminium sold from the site.
Davies says, "We've voluntary undertaken all our sustainability reporting... I think if you're not recording your power and water usage as a minimum, then you're probably not managing the business as you should."
