A new report has outlined the state of Australian companies’ ethical business practices. How does your organisation compare?
New research has revealed how organisations across Australia and New Zealand are performing when it comes to corporate social responsibility (CSR) – a business strategy often cited as a vital strategy in modern business.
The State of CSR in Australia and New Zealand Annual Review is the largest ongoing research study of CSR capabilities and practices in Australia and New Zealand, identifying and analysing key trends in the ethical business space.
Identifying your organisation
According to the report, organisations engaging a sustainability initiative can affiliate themselves with one of three categories.
Initiators – Initiators tend to be more focused on compliance and managing the negative environmental impacts of their organisations. They are less likely to have a chief sustainability officer (CSO), and are less inclined to use CSR as an innovation driver.
Integrators – Integrators’ focus is geared towards establishing internal systems and processes to build the business case for CSR. They prioritise internal issues, such as promoting diversity and waste reduction initiatives. These organisations are much less likely than innovators to employ a CSO, and are likely to locate their CSR staff within a corporate affairs team.
Just 18% of Aussie companies identified themselves as integrators.
Innovators – These organisations tend to incorporate social and environmental attributes into their products and services, develop new markets by addressing social and environmental needs and focus on global sustainability issues. Innovators are the most likely companies to have employed a CSO, who is situated within the organisational strategy team.
Priorities for the year ahead
According to the report, stakeholder engagement was the biggest priority among the survey’s participants.
“Productive stakeholder relationships are essential to success at all stages of CSR development,” the report said. “Organisations continue to recognise that good stakeholder management ensures greater access to vital resources, value creation opportunities, and prudent risk management.”
For companies in the earlier stages of CSR development, managing regulatory impact was the primary focus, while organisations with a more developed CSR initiative were more focused on global sustainability issues.
It was found that Innovators were “significantly more likely” to prioritise global sustainability issues, such as addressing poverty, economic inequality and human rights issues within their sphere of influence.
“Innovators have a greater appetite to deal with complex social problems,” the report read. “They are part of a trend towards taking a global view on using sustainability challenges to create value and positive socio-economic outcomes for both organisations and their stakeholders.”
CSR management capabilities
Researchers identified four key capabilities in CSR management:
1. Stakeholder engagement
This capability was present where organisations identified themselves as having an understanding of the links between the company and its stakeholders that “contribute to long-term prosperity”. These companies routinely considered stakeholders’ needs in business decisions.
Eighty-three per cent of organisations said that their workforce had this capability.
2. Stakeholder dialogue
Three quarters of those surveyed identified themselves as having high stakeholder dialogue capability, meaning that they approached stakeholders with “empathy, honesty and no manipulative intent” while encouraging equal control over the organisation’s sustainable business practices.
3. Integrating stakeholder values
This capability involved companies having the ability to effectively detect and share relevant information about stakeholders with all parts of the organisation to assist the decision making process. Almost 75% of companies said that their workforce had this capability.
4. Social accountability
Two thirds of participants said that their people believed the organisation was accountable to stakeholders for the company’s social impacts. These companies also effectively reported their social performance – even in times of downturn.
Top ten companies
The report identified Australia’s ten best performing companies in terms of ethical business strategies. The ranking was compiled based on the companies’ key capability scores.
2. BHP Billiton
7. Sydney Water
9. Teachers Mutual Bank
Ian Wood, VP of Community Relations and Sustainability at BHP Bilton said that responding to sustainability challenges is a dynamic and evolving process.
“Ten years ago, we instituted clear mandatory standards and audits against those standards, key performance indicators in the Group Management Committee, personal scorecards and for the businesses… everyone’s bonus is linked to health, safety, environmental and community performance.”
Sustainability is integrated throughout BHP Billiton. It starts at the top, with a Board subcommittee made up of nonexecutive directors.
“Forming a full board subcommittee was a significant step in raising the overall governance and integration, giving it the same status as the risk and audit or remuneration committee,” said Wood.
Insurance Australia Group (IAG)’s sustainability initiative was established following the acquisition of an Indian joint venture, when the board and management team were in the country to meet with new partners.
The meeting led managers to revisit the organisation’s purpose, reorienting the business around the concept of shared value.
“We wanted to be a purpose-led organisation,” said Ramana James, IAG’s head of shared value. “So we agreed to consider shared value as part of our overarching business strategy. This meant we could leverage our scale and influence to deliver value to all key stakeholders, not just shareholders but our people, partners, customers as well as the community.”