Beyond the financial lens: compliance, competitiveness, and conduct

Election promises invite far reaching implications if they are not delivered upon and we all know that the new Labor government has taken an equally strong position on Climate Change and sustainability.

The Federal Budget will contain measures that will impact those operating in carbon-intensive industries with mitigation strategies to lessen their effect on the climate, and those seeking opportunities in more sustainable ventures aligned to broad energy transition and adaptation strategies, which will have an influence across many industries.

For those who finance and fund businesses and projects on either side of this equation, compliance and conduct has never been more important to remain competitive. People are willing to call out poor conduct more than ever before and at Grant Thornton, we are increasingly seeing our clients being held up to higher standards and in some cases, scrutinised for their business values by investors and consumers. A number of these organisations have experienced calls for greater transparency and even asked to provide evidence to show they truly are living and breathing their values, and not just paying lip service to words in an annual report.

One reason behind this trend is environmental, social and governance (ESG). Measuring the impact of investing in a business is possible through monitoring that businesses’ ESG factors. It’s not unusual when submitting a bid these days, to be asked what your approach to sustainability is. Or diversity and inclusion for that matter. It is no longer sufficient to only satisfy the expected legal questions on important legislation such as modern slavery, data privacy, and financial stability. There is more emphasis on living up to your company values throughout all your business dealings. In a similar vein, businesses are now paying more attention to client engagement risk, than ever before.

For organisations around the globe, this presents both a challenge and an opportunity. In Australia, where there is an absence of any clear regulation around ESG reporting, just knowing where to start has been a significant challenge. We encourage our clients to make an early move and start reporting now on measures outside of finances. Australia is in a position of strength to learn from what is occurring in the US, the UK, the EU and more locally in New Zealand and parts of the Asia Pacific region and support our clients who want to do the right thing and voluntarily disclose their commitments and ESG strategies.

Investors, consumers and the wider community will expect businesses to prove that profit and purpose are not mutually exclusive – and we can be certain they will watch on with a critical eye, ready to call out firms who they perceive to not be adhering to these types of strong values. We are already seeing “greenwashing” complaints increase around the world and Australia will be no exception to this. The reputational damage cannot be underestimated so taking the right steps now is critical for your business and your stakeholders.

Financial Services institutions have a significant role to play in addressing Climate Change and sustainability and with a Labor Government putting a premium on long-term sustainability in the face of a turbulent global outlook, the market competition will only increase as businesses explore all angles to attract investors and access capital.