The governance of sustainability: how companies manage their corporate responsibilities

3 Jan 2012

This study reviews the structure of corporate responsibility in a sample of twelve large, listed Australian companies. In particular, it explores the governance of corporate responsibility: the structures and processes through which a company controls and directs its efforts towards becoming more sustainable. The research sought to identify: whether, and to what extent, companies disclose information regarding the structures and processes that they use to develop, monitor and implement their sustainability strategy; whether an interested stakeholder can easily find information to enable them to understand a company’s approach to the governance of sustainability. As we note throughout the report, we did not evaluate the quality of companies’ disclosures but searched for evidence of their internal governance frameworks.
Defining corporate responsibility Corporate responsibility can be defined at its simplest as a company operating in an economically, socially and environmentally sustainable manner. Thus we use the term corporate responsibility interchangeably with the term sustainability, to include social as well as environmental aspects of acting responsibly. For many companies, the development of corporate responsibility practices has occurred in a piecemeal fashion in response to the specific demands of stakeholders. Companies have now reached the stage where they need to consolidate and integrate these practices into their overall business strategy. Like any other aspect of corporate governance, this requires clear leadership, as well as structures and processes that ensure plans are properly developed, monitored and implemented. No governance process can be entirely failsafe. As we conducted this research, several of the companies in our sample received negative publicity for various reasons. Orica was very slow to alert the public about a chemical spill from its Newcastle plant; a dispute between Qantas and its workforce was escalated to national significance following the grounding of its aircraft; and BHP (and Rio as minority owner) were dealing with striking miners at a Chilean copper mine. Despite these events, the value of good governance and leadership is well-proven for providing the structures and processes needed to guide a company through the highs and lows of its life-cycle.
OUR SCORECARD We examined the governance of corporate responsibility in the twelve companies in our sample by reviewing: 1. Communication: the accessibility and clarity of their corporate responsibility reporting; 2. Commitment: the extent of their commitments to corporate responsibility reporting; 3. Leadership: evidence of leadership structures and governance processes for corporate responsibility and 4. Implementation: evidence of systems and policies to implement corporate responsibility. We reviewed only published data and therefore our findings reflect what the companies have disclosed in their reporting, rather than what they may be doing in actual practice. For comparison we rate the twelve companies against each of the four indicators above. 

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