As published in CK Momentum Issue 10 (Click here to download)
While there are no specific laws mandating corporate social responsibility reporting in Australia, there are nevertheless good risk mitigation reasons for businesses to adopt it.
GROWING TREND
In 2014, the European Parliament passed legislation requiring large companies headquartered in the European Union to disclose information regarding environmental, social, employee, human rights, anticorruption, bribery and board diversity issues for their organisations. There is an implementation period, which means they are required to be fully compliant for the 2017 financial year.
Similar initiatives are taking place in other countries, including South Africa and Singapore. For companies caught by this wave of legislation, reporting about corporate social responsibility will no longer be voluntary. Larger Australian enterprises that have subsidiaries in countries caught by the changes may also be affected.
KPMG’s 2015 Survey of Corporate Responsibility Reporting indicated that including CSR data in annual financial reports is now a firmly established global trend. Almost 3 in 5 companies in the international group surveyed do this now, compared with only 1 in 5 in 2011.
HUMAN RIGHTS
As 7-Eleven recently discovered, human rights issues can have a big impact on a business. Following the media investigation (prompted by some whistle blowers coming forward), it was alleged there was systemic underpayment of workers at 7-Eleven’s stores with the complicity of head office in the exploitation of workers. Plaintiff law firm Maurice Blackburn is now acting for over 60 employees, with reportedly hundreds more inquiries.
Businesses that are interested in reviewing their human rights impact should consider:
- Adopting a human rights due diligence framework, such as the one outlined in the United Nations Guidelines on Business and Human Rights (which contains specific guidance for corporate entities);
- Embedding the commitment to respect human rights in a statement of policy, which specifies the expectations of personnel and business partners;
- Reviewing practices and procedures to ensure they align with the policy statement;
- Putting in place a fair and easily accessible grievance mechanism; and
- Undertaking regular human rights audits, with consideration being given to reporting the findings to stakeholders.
In 2015, Unilever published the findings of its human rights audit, which also details the process Unilever went through to determine the most important human rights issues that needed to be covered. The report has been seen as a benchmark for reporting on human rights issues and has earned Unilever significant praise and recognition.
BUSINESS SUCCESS
There appears to be some empirical data suggesting that product quality and investor returns are not enough for success these days. Customers and investors have a genuine interest in seeing that business practices are sustainable financially, ethically and environmentally.
The voluntary CSR reporting platforms provide businesses with the opportunity to clearly communicate a message to their customers and investors that their business genuinely shares a desire to be good corporate citizens.
