The Australian Supply Chain Disclosure Imperative
2 October 2013 at 9:43 am
The newly introduced G4 guidelines provide a great opportunity for Australian companies to showcase their supply chain performance, but the issue is to disclose supply chain issues that might not be on the radar of the Australian public, says CSR researcher Martijn Boersma.
The Australian annual general meeting (AGM) season is upon us, and has been preceded by the release of annual reports outlining the financial performance of companies listed on the Australian Securities Exchange.
In addition to financial results, many companies will be outlining their sustainability performance, either through integrated reporting or via stand-alone sustainability reports.
The most frequently used tool to guide sustainability reporting is provided by the Global Reporting Initiative (GRI). Apart from the inclusion of new indicators, and the replacement of the A, B and C application levels by the categories core and comprehensive, other significant changes concern the ability to indicate reporting boundaries by determining materiality and an emphasis on supply chain disclosures.
These changes present opportunities as well as challenges for Australian companies.
While G4 emphasises supply chain disclosures and therefore encourages companies to recognise that the impacts of their business can reach beyond core operations, the framework will also enable companies to autonomously assess which indicators to include or exclude, based on whether issues are deemed material to their activities or not.
Providing companies with the opportunity to determine the boundaries of their sustainability reporting, while simultaneously encouraging them to expand thinking about their supply chains, can result in two very distinct outcomes: either a company will rise to the occasion and increase the breadth and depth of supply chain reporting, or alternatively it will do the exact opposite.
Calls for transparency surrounding supply chain practices of Australian companies have gained substantial traction in recent times.
Following the Indian Rana Plaza tragedy, in which 1129 workers lost their lives, it was revealed that several Australian-owned companies were among those using low-cost labour in Bangladesh. Consequently, Australian retailers that procure overseas goods such as clothing and apparel are among companies that the public expects to report on supply chain activities.
However there are also less straightforward examples of supply chain activities. At first glance, a firm that employs knowledge workers and does not produce physical products is not an obvious candidate to report on supply chain issues. However if it concerns an Australian corporation with a call centre based in India, they can reasonably be expected to report on the activities of this supplier.
In addition, as a consequence of globalisation, supply chains are often quickly associated with international business transactions. Onshore outsourcing and local procurement are however equally part of a company’s supply chain.
In the Australian context, examples of local supply chain issues are the prices supermarkets pay for locally produced foods and how this affects farmers, the environmental impact of energy companies that work with contractors to secure coal seam gas, whether real-estate companies hire cleaning companies that give employees fair hours, pay and job security, and the actions of telecommunication companies when their contractors find that pits and pipes contain asbestos.
This demonstrates that both overseas and domestic supply chain issues are of substantial concern to Australian corporations and deserve to be monitored and reported on thoroughly.
The newly introduced G4 guidelines provide a great opportunity for Australian companies to benchmark and showcase their supply chain performance, the challenge they face is to disclose supply chain issues that might not be on the radar of the Australian public, instead of hiding behind the moniker of materiality.
About the author: Martijn Boersma currently works as a researcher at the Centre for Corporate Governance at the University of Technology Sydney, which aims to align the interests of individuals, corporations and society. He also works for Catalyst Australia, a progressive policy institute and think tank.