Mark Baker (Braddon, Liberal Party) Share this | Hansard source

I also rise to speak on the report of the Joint Committee on Corporations and Financial Services entitled, Corporate responsibility: managing risk and creating value. The committee’s inquiry closely examined the increasingly important corporate governance issues facing Australian companies today.

In the past, the corporate world often relegated corporate responsibility from an environmental and social perspective to one or two paragraphs in their annual reports. Generally, the view was that the only thing of value to a business was the bottom line—that is, financial profit or loss—and social and/or environmental issues were not given due consideration. In the past, corporate responsibility was not viewed as profit-making within the business structure, and subsequently was not considered an important aspect of business operations. Increasingly, however, corporate responsibility is being viewed with much greater emphasis and importance by Australia’s business community and, indeed, by corporations globally.

Often the term is applied somewhat erroneously to describe charitable deeds by a company—a donation to a good cause or sporting sponsorship, for example—but corporate and social responsibility should go well beyond that. The term is best described in practice as a company or organisation considering, managing and balancing the economic, social and environmental impact of its activities. This is also referred to as triple bottom line reporting or accounting, and our committee found that over the past decade corporate responsibility has moved and developed practical mechanisms for companies to assess and manage their non-financial risks and maximise their long-term financial value.

We have seen in recent years how companies are increasingly coming under pressure from consumers and their own shareholders to consider the social and environmental impacts of their business decisions. We have witnessed a new group of investors who believe in the concept of socially responsible investments, challenging companies to consider their ethical and moral obligations to the community. Thus, the demand for greater corporate responsibility is being driven at contrasting ends of the corporate world by consumers and investors.

One example which best underlines my strong view on corporate responsibility is the manner in which vegetable growers have been treated by some in corporate Australia. When the fast-food chain McDonald’s chose early last year to cut a contract for potatoes from my electorate in north-west Tasmania in preference to imports, it raised in many of my constituents’ minds the question of whether such corporations do have a social conscience. That decision by McDonald’s has had long-term ramifications for the vegetable industry not only in Tasmania but throughout Australia, particularly when one considers it was all done for an estimated additional profit of $4 million Australia-wide or just a few extra cents per packet of french fries. It gave rise to the fair dinkum food campaign, which I am proud to support, and it brought attention to the failure of large corporations to support the communities from which they profit.

My complaint against a corporation such as McDonald’s is that they did not once stop to consider, as a major buyer of produce in Australia, that they have a duty to consider the effect their actions would have on the long-term viability of an important industry such as Australia’s vegetable industry, nor did they stop to consider the effect their actions would have on other communities within Australia.

Another example of where I suggest there is an opportunity to encourage a greater sense of corporate responsibility is the wholesale destruction of rainforests in such places as the Amazon and Borneo. Also, in my home state of Tasmania, the local forest industry, which employs directly and indirectly over 10,000 workers, adheres to world’s best practice: it sets a standard. However, the Tasmanian forest industry has to compete with imports from overseas, timber that has not been harvested in accordance with the world’s best practices, timber that has been harvested from forests using the ‘cut and burn’ method, where no attempt is made to renew the resources and where dangerous workplace practices are the norm.

We have to compete at home as Australian furniture and paper manufacturers look for the cheapest timber. I believe there is a case for Australian companies to decide that they will only use timber that has been harvested in accordance with world’s best practice. Thinking globally, there is a case to be made to other countries to be more discerning in their choice of timber and woodchips. Recently I visited a 100-year-old timber mill in my electorate and one of the directors made an interesting remark on those who protested against the forestry industry. He said that protesters would be out in the streets with their placards one day and buying a piece of furniture the next day made from timber that originally was a tree in the Amazon rainforest, whose trees, in a frightening manner, are being wiped out in grave numbers.

We all hold the environment close to our heart, but there is a real inequity here. In my view, this is certainly a case where many companies at the national and international level should come under some pressure to ensure that the wood products that they are buying are from a renewable resource harvested in accordance with world’s best practice.

Corporate responsibility is not about dictating to companies that they cannot make decisions that are in the best interests of their shareholders but about encouraging companies to consider the social and/or environmental impacts of their actions as part of the decision-making process. Along with that comes transparency in their annual reports. Along with that comes a movement away from their only emphasis being on profit and the financial aspect of reporting.

Throughout this inquiry many of the companies and directors involved demonstrated that they are prepared to listen to the views of stakeholders, which was refreshing. This reinforces the finding of our committee’s inquiry that the vast majority of Australian company directors are moving forwards, not backwards. This view essentially allows directors to consider and act upon legitimate interests of stakeholders other than shareholders to the extent that these interests are relevant to the corporation. One could never give a better example than the mining industry, especially with Australia’s vast resources. Some have described corporate responsibility as an insurance policy, a defence against bad publicity from perhaps unrelated events or decisions. The public, however, is becoming more and more cynical of corporate philanthropy, so it goes beyond that. Corporate responsibility in Australia is still in its developmental stages and, in the course of the inquiry, the committee was encouraged by the evidence of increasing engagement by Australian companies and government agencies with sustainable practices and sustainability reporting.

However, as a nation and as a country we still have a long way to go. There is still much progress to be made and it is important that the Australian government and the Australian Securities and Investments Commission, where appropriate, continue to monitor this progress. The committee strongly supports further successful engagement in the voluntary development and wide adoption of corporate responsibility. The committee believes that the recommendations contained in this report will play an important part in progressing the future of corporate responsibility in Australia and making our great nation even better.

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