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Tip of the Iceberg? Corporate Social Responsibility and Sustainability - The New Business Imperatives

This report authored by Professor Thomas Clarke and Alice Klettner is an international comparison of corporate social responsibility and sustainability practices commissioned by the Financial Services Institute of Australiasia (FINSIA) and published in 2007.

A substantial increase in the range, significance and impact of corporate social and environmental initiatives in recent years suggests the growing materiality of sustainability. Once regarded as a concern of a few philanthropic individuals and companies, corporate social and environmental responsibility is becoming established in many corporations as a critical element of strategic direction, and one of the main drivers of business development, as well as an essential component of risk management. Corporate social and environmental responsibility (CSR) is rapidly moving from the margins to the mainstream of corporate activity, with greater recognition of a direct and inescapable relationship between corporate governance, corporate responsibility, business performance and sustainable business development.

Corporate social responsibility is receiving considerably increased attention world-wide and is associated with significant economic, environmental and social benefits. It is important that Australia learns from this international experience as well as from local initiatives. Though interest and expertise is developing in the Australian corporate sector, there are grounds to believe this country is not at the forefront of appreciating or realizing the benefits of CSR: “Studies conducted in Australia over the last decade suggest that, although CSR is clearly being adopted by a greater number of Australian companies, they continue to adopt practices that are short-term and philanthropic in nature rather than integrating CSR into their business strategies and organizational practices” (Andersen and Landau 2006:3). However the ground is shifting, and in a recent Finsia survey of fellows not only did a majority agree that CSR reporting should take place on a voluntary basis, more surprisingly a small majority accepted the need for mandatory reporting (Finsia 2007).

There is a significant ongoing debate in Australia on the best means to encourage greater commitment to corporate social responsibility and sustainability, and whether this is best achieved by voluntary or mandatory means. The examination of these issues has encompassed two official national inquires in 2006 and consideration of altering the ASX principles of corporate governance. In 2006, both the Parliamentary Joint Committee on Corporations (PJC) and the Financial Services and the Corporations and Markets Advisory Committee (CAMAC) released reports examining the extent to which Australian companies should adopt corporate social responsibility. The reports concluded that corporate social responsibility, in addition to the social and environmental benefits, can be an important means for companies to manage non financial risks and maximise their long term financial value.

 A copy of the report is available here.