Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Hansard source

It gives me great pleasure to make some further remarks on this valuable and, I would say, far-reaching, timely and adventurous report entitled Corporate responsibility: managing risk and creating value. Some of the feedback so far is that it has been a very good report, well received by business and that we are setting up for things in the future. Often in this place we are creating legislation after the event, so it is quite nice to be ahead of the game in some respects.

I do want to say, though, that it is quite frustrating to be involved in so many committee reports that are ignored by this parliament. I have been involved in several really good, long-reaching and breathtaking reports that have just sat on the shelf and nobody has paid any attention to. So I hope that, in this area of corporate social responsibility, some people will take note and actually put into implementation some of the 29 recommendations that are contained in this report.

At the outset, what do we mean by corporate social responsibility? It means many things to many different people. On a flippant level, people think of a corporation being a good social citizen by donating money to philanthropic services. Many corporations came along and said what great citizens they were because they had donated their staff’s time to various charities. That is laudable but it does not mean that they are a corporately responsible organisation. Labor members of the committee asked for this inquiry because corporations are changing. Some of our corporations nowadays are larger than, and have greater wealth than, some nation states. They are entities that can have a significant impact upon our society, our culture, the environment and even upon political process.

The massive growth in business and international trade make the external impacts of corporations greater than ever, and with that comes costs, as well as benefits, to society. To put into context what we mean by this, I quote from the supplementary report by Labor members:

The Labor members consider that corporate responsibility is fundamentally an issue of sustainability. Corporate responsibility is not primarily about charity or company philanthropy. The World Business Council on Sustainable Development provides a useful definition:

“Corporate [social] responsibility is the commitment of business to contribute to sustainable development, working with employees, their families, the local community and society at large to improve their quality of life.”

So we say this is going to be the reach of corporations. We believe, in the long run, that they should look at reporting upon these initiatives; indeed, it is in their own best interests. In a speech at the Massachusetts Institute of Technology, BP Group Chief Executive, Lord Brown, recently stated:

Good, successful business is part of society, and exists to meet society’s needs. That is the purpose of business at the highest level.

So businesses at the highest level are recognising that they do have responsibility to our society at a greater level. When we look at corporate social responsibility we ask: who are the stakeholders who must be considered when people are making reports? Who are the individuals that these corporations should be considering, engaging with, talking with and getting back to?

Much of the information before the committee looked at environmental impacts. This is vitally important and I do not dispute that at all. One of the things that did disappoint me greatly was that, when corporations look at their responsibilities in the wider context of society, very few actually looked at their employees as being part of the stakeholder group who should be taken into consideration. Indeed, there were many reports about who should be considered in these groups. ‘Stakeholders’ has a very flowing meaning and can have different looks. We need to look at this in a comprehensive manner and say: ‘Yes, various organisations get a tick—a big, gold star. They are great corporate social citizens, at one level, because they have donated money to a charity or because they have made some changes to the environment after ravaging it by whatever means.’

But they did not look at the whole picture; they did not look at the impact upon their staff. I think this is one of the failures of much of the work that has gone on here. It should be about all stakeholders within the corporate social responsibility framework and not just one. You do not just get to pick and choose and say, ‘We’re good corporate citizens because we have done this bit.’ You must be a good corporate citizen across the board. A similar comment was made by the Australian Centre for Corporate Social Responsibility:

The Australian Government may have numerous ways in which it encourages corporate social responsibility, but a lack of coherence and focus of initiatives and policies makes this difficult to ascertain.

The point I am getting at is that we do not know what we are after and what we are making people do. One of the fundamental findings of this report is that we need good government leadership to say what good corporate social responsibility is, what you need to do to report and what measures you should be reporting on, and these measures should be validated. So many of these reports say, ‘We’ve been great corporate social citizens because we undertook this initiative.’ But there is no validation of the reports to say that the community found that there was a benefit or a service, or that companies, particularly those involved in the mining sector, had left the environment in the way they said they had.

One of the other issues investigated at length in this report was directors’ duties. At the time, the committee was looking extensively at James Hardie and the claim made by one of their senior executives that they could not provide compensation because it would be in breach of their directors’ duties. If they provided funds to the people who had been injured, this would actually be against what they needed to do as directors because it would obviously reduce shareholder value. Much of the evidence before us was to say that, no, directors’ duties are not that limited, that they do have what is known as the ‘enlightened self-interest test’ and that there was no need to change the law. The committee came out with this, but I think this is a thing we need to do as a watching brief.

Indeed, we need only look at the waxings and wanings of James Hardie to say that directors’ duties should be put more clearly under the spotlight. I think it is beholden upon all of us who are now shareholders, by virtue of one thing or another, to also accept the duty of ensuring that directors are fulfilling their obligations not only to us as shareholders but also to the wider society. Never again should we have a corporation saying, ‘We can’t pay compensation to staff we have maimed, and many of whom we have killed through neglect, because it’s going to take away from shareholder value.’ Their staff were stakeholders and they had a responsibility to them. I would like to quote again from the Labor Party’s supplementary report. It states:

While this committee cannot make a definitive determination as to the legal parameters of existing directors’ duties in practice, Labor welcomes the ‘enlightened self interest’ interpretation of directors’ duties put forward by a range of business and legal witnesses. We hope such an interpretation is representative of the understanding and practical exercise of directors’ duties in future.

As I say, it will be a watching brief. The committee report states:

The committee is of the view that the Corporations Act permits directors to have regard for the interests of stakeholders other than shareholders, and that amendment to the Corporations Act is not required.

Indeed, this is the case at the moment, but there is no case law on it. Nobody has taken that further step of going to the law and asking, ‘Is this the actual interpretation of it?’ Some very interesting witnesses came forward on this part. But we will need to monitor it. Hopefully, we will never again have a situation like James Hardie, in which directors have less responsibility towards their employees—stakeholders—than they have toward their shareholders.

The committee found that we need to encourage sustainable reporting, that we need to encourage businesses at all levels to take it up and that we need to provide parameters in which they can do this. There were many examples of how reports are currently made, what initiatives are looked at, what is reported and what is not reported. The committee was strongly supportive of the GRI measure that is currently being used throughout Europe, but we need to see if it is applicable to Australia. A great deal of the information said that, if we go with mandatory reporting, we will just have a ‘tick a box’ approach in which corporations can say, ‘Yes, we’re good to our staff, we’re good to the environment, we’re good to this and we’re good to that.’ I dispute that, but that seemed to be the weight of evidence coming back to us. But we need to set some benchmarks. We certainly need the government to lay down some foundations that say: ‘This is the way to do it; this is how good businesses will do it in the future.’ Indeed, good businesses are doing it now.

Again, the report says:

The committee takes the view that although it is not appropriate to mandate the consideration of stakeholder interests into directors’ duties, or to mandate sustainability reporting, there is a need to seriously consider options to encourage greater uptake and disclosure of corporate responsibility activities.

One measure that we could start with would be to encourage government departments to be doing their own reporting, and we heard that while there are measures whereby government departments are encouraged to do that, particularly in the area of procurement—and particularly green procurement and green waste—very few of the Commonwealth departments are doing this. The report says:

Of particular interest is an example from overseas: the United Kingdom industry-led organisation Business in the Community, a network which works with business to develop practical and sustainable solutions to manage and embed responsible business practice.

I think this could be adopted now and we should ask the Australian government to look at the recommendations in the report and provide seed funding for such a network in Australia.

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