Environmental governance: Role of the business sector in environmental stewardship

Independent report to the Australian Government Minister for the Environment and Heritage
Beeton RJS (Bob), Buckley Kristal I, Jones Gary J, Morgan Denise, Reichelt Russell E, Trewin Dennis
(2006 Australian State of the Environment Committee), 2006

11.4 Role of the business sector in environmental stewardship (more information on this topic)

The business sector has played an increasingly important role in environmental stewardship during the last few decades as it has become more aware of environmental issues and their consequences. While progress in environmental stewardship is variable across business and industry sectors and across large and small sized enterprises, some managers realise that environmental stewardship contributes to profitability by decreasing costs and providing a competitive advantage. Many businesses have incorporated the principles of sustainability into their operations to increase their competitiveness and decrease their costs. The benefit most often perceived by companies from producing a sustainability report is reputation enhancement (CAER et al 2004).

In Western Australia, for example, many environmental issues are addressed by industry and mining groups at a standard that exceeds that of public sector groups. In some instances, the corporate knowledge base is higher in the private sector than in the public sector. In the longer term, this will cause problems in environmental reporting unless the environmental reporting systems are adapted to include these sectors.

Key roles for the business sector are as follows:

  • Ensuring protection—historically this has generally related to compliance with emission controls on industrial facilities as a result of government regulations. This role has expanded with community expectations, seeing the introduction of (for example) paints and glues with reduced toxicity and lower levels of volatile organic compounds. Other examples include voluntary agreements to reduce packaging and plastic bag use, reducing or offsetting greenhouse gas emissions, cultural heritage conservation and including biodiversity considerations before clearing.
  • Disclosing information—an increasing number of publicly listed companies in the private sector are beginning to release public sustainability reports, in addition to their traditional annual reports to shareholders. These exceed the statutory obligations to report details of breaches of environmental laws and licences (Corporations Act 2001). Companies in the manufacturing and mining sectors are the most likely to produce sustainability reports, but the overall reporting rate of the top 100 publicly listed companies is still low by international standards (KPMG 2005). Product labelling schemes, such as water efficiency labelling on fittings and appliances (WELS 2005), are being implemented with strong support from industry.
  • Supporting research and innovation—the business sector continues to play a role, along with universities and research organisations, in contributing to sustainability through research and innovation. The collaborative nature of innovative research efforts in Australia is demonstrated, for example, by the winner of the 2005 Prime Minister’s Prize for Science, who collaborated with the mining industry to improve the transport of mineral slurries. This project substantially decreased the amount of liquid waste produced, and saved the industry millions of dollars.
  • Implementing financial sector initiatives—the potential to promote sustainability is being increasingly recognised by the financial sector in Australia through initiatives such as socially responsible managed investment funds, socially responsible superannuation funds, individual portfolios invested using socially responsible criteria, lending policies that take account of environmental and social issues, green loans that reward sustainable choices, and green bank accounts.

The business sector plays a role in most areas of environmental protection and heritage conservation. A growing number of Australian businesses are coming to recognise the opportunities as well as the challenges in achieving sustainability.