At a recent BDO Australia event, BDO invited a panel to discuss 'The evolving state of sustainability in Australia (and why you need to prepare now)'. Hosted by Aletta Boshoff, National Leader – ESG & Sustainability, the panel included guests Julie Green (Non-Executive Director, RACV) and Adam Vise (Group Treasurer, GM – Strategy & Impact, Australian Unity) alongside BDO's Dylan Byrne (Partner, Business Services) and James Dixon (Partner, Audit & Assurance).
After a robust and insightful discussion about the evolving state of sustainability in corporate Australia, here are the five key takeaways.
1. There are many paths towards sustainability
An organisation's approach to sustainability is as unique as the organisation itself.
However, depending on the industry, there may be similarities in focus and area of most impact. For example, a service-based business is likely to focus on its people and the social aspects compared to a food-based company which is expected to have a greater scope for impact in environmental matters like food waste, packaging and energy consumption.
The organisational alignment with strategy and purpose is critical in driving a sustainability approach, regardless of the type of business or industry. A standalone sustainability strategy might be limited in gaining traction in the business. In contrast, a sustainability strategy aligned with the organisation's overall goals and risk management approach, while also being culturally aligned with its purpose, has a greater chance of creating a transformation both in and for the business.
2. Sustainability is well and truly on the leadership agenda
While sustainability has been on the agenda for many organisations in differing capacities for some time now, what's changing is the more frequent and consistent conversations at the board and executive levels.
While sustainability activities might have 'ticked a box' in years gone by—perhaps a junior employee was assigned to prepare a carbon audit before it was printed and filed in a drawer—this is no longer the case. Now, sustainability is actively on the agenda—and even key performance areas—of the board, CEO, CFO, and board sub-committees. The recent launch of the International Sustainability Standards Board's (ISSB) new standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, will ensure this trend continues. These new standards will force more organisations to take a risk-based approach versus an 'activist' or employee-led approach.
3. Assurance over sustainability reports isn't mandatory yet, but start as if it were
We are awaiting the Australian Government's guidance for organisations on adopting IFRS S1 and S2, which will also provide direction on its approach to assurance over sustainability reports.
While it might not be mandatory yet, engagement in an audit process could help by illuminating the gaps or areas of opportunity for an organisation's sustainability report. This can be done on a step-change basis, working your way through more significant issues, or key focus areas.
Whether your organisation engages in an audit before it's mandatory or not, it's important to establish suitable data systems from the outset. Ensuring you have appropriate systems to account for the sustainability data you report now ensures you can generate comparative data as you report in the future.
Engagement with the organisation's finance or data team, for example, can be beneficial to ensure the data is not only warehoused appropriately but also repeatable – either for future reports or expanded data requirements in the future.
4. Sustainability is a whole-of-business issue, but it needs a home
When you look at the sustainability ecosystem within an organisation, it's clear there are many parts to play, and many interested parties. And there are various ways that sustainability can be driven and led in organisations.
Our panel members agreed that while there's not one 'right answer' for where sustainability should sit within a business, it does need a place to call home—appointing someone or a team to drive the collaborative effort. That could be the audit and risk committee or the IT, human resources, facilities, or finance team. Our panel also highlighted the need to engage and empower people from across the business to contribute to the organisation's sustainability efforts, no matter where the responsibility to draw it all together lies.
By aligning sustainability with the strategy and purpose, this process becomes streamlined. More of the business can contribute to the overall positive impact as it's not creating a point of friction.
5. Don't underestimate the value of sustainability on your employer brand
Our panel wholeheartedly agreed on the importance of a sustainability program on the employee value proposition, particularly as more Generation Z enters the workforce.
Having a clear, communicated approach to sustainability that aligns with the organisation's purpose allows your current and potential future employees to ensure their workplace supports their values and purpose.
Naturally, there will be self-motivation from within your employee group to do things differently and make change. Having clear communication for the level of scope and support for a grassroots or employee-led approach to sustainability initiatives within the business can help people choose the place to work that is 'right' for them and provide potential opportunities for improved sustainable impact across the organisation.
The continued sustainability evolution
Once the board sets the direction and expectations, and the sustainability leadership is appointed and empowered, organisations can develop a path to sustainability that best suits their needs. With consideration of and alignment with the organisation's strategy, risk management approach, purpose and values, businesses will be well-placed to adapt as the state of sustainability in Australia continues to evolve.
Sustainability activation checklist
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This article by Aletta Boshoff, Partner National Leader, IFRS & Corporate Reporting National Leader, ESG & Sustainability first appeared on BDO Australia website on 19 July 2023.