Directors Show Concern for Climate Change

Climate change and social issues rated highly in the Australian Institute of Company Directors 2018 Director Sentiment Index. Kyrn Stevens looks at the results.

For the first time in the survey’s history, directors have nominated climate change as the number one issue the federal government needs to address in the long term.

More directors are also highlighting it as the priority issue for the federal government to address in the short term, and increasing numbers (50 per cent) are nominating energy policy as the number one priority.

Renewable energy was also identified as the number one priority for infrastructure investment, with 50 per cent of respondents rating it as the top priority.

The survey

The Australian Institute of Company Directors’ Director Sentiment Index is the only measure of the opinions and future intentions of directors on a range of issues. The survey was conducted with 1,252 members in September 2018.

Publicly-listed Australian entities made up 12 per cent of respondents, while 42 per cent were private/non-listed Australian entities, 34 per cent not for profit, 8 per cent public sector/government and 3 per cent overseas bodies.

In terms of sectors participating, health and community services made up almost a quarter at 24 per cent, with another quarter being from services – finance and insurance 15 per cent, and property and business services 10 per cent.

Diversity

Board diversity was also a feature of the 2018 index.

The effort made to increase the diversity of skills in board membership was stable in 2018, with 74 per cent of directors stating that their business was actively seeking to improve in this area. Fifty three per cent indicated their business was actively trying to increase diversity in terms of gender.

Conduct and trust

Respondents were asked, “given the decline in public trust in all institutions, including business and the not-for-profit sectors”, what steps should boards, “be prioritising to regain and rebuild public trust” .

While 82 per cent of directors supported stronger penalties for misconduct and 57 per cent of directors agreed with increased funding for regulators, only 33 per cent supported greater accountability in cases of misconduct.

Fifty two per cent of directors believe that demonstrating respect for customers and communities should be prioritised by boards in order to rebuild public trust.

Indigenous disadvantage ranked 15th at 17 per cent as a short-term priority for federal government.

Perhaps not surprisingly given that a third of respondents were from the not-for-profit sector, 86 per cent of directors believe that the contribution they make to the economy and society influences their willingness to serve on a board.

Global comparison

Meanwhile, The Australian Institute of Company Directors advises that a recent global director survey has also looked at social and environmental issues.

The Global Network of Director Institutes inaugural Global Director Survey 2018 took the pulse of more than 2,000 directors from 17 member organisations – representing Africa-Middle East, the Americas, Asia-Pacific and Europe – aiming to get insights across a range of economic, business and governance issues.

Only 51 per cent of directors viewed gender diversity as important, fairly important or very important.

Diversity and inclusion in organisations ranked sixth of relevant environmental, economic and social issues that affect organisations’ strategies and activities.

Ethical behaviour (72 per cent), health and safety (65 per cent) and employee engagement (57 per cent) were the three most relevant environmental and social issues and risks among surveyed directors. 

However, the report revealed many environmental issues and risks were not prioritised, including climate change (57 per cent), carbon-related issues (67 per cent), resource scarcity (56 per cent) and depletion of fossil fuels (70 per cent).

About the author: Kyrn Stevens has executive experience across the not-for-profit, private, and government sectors, and completed an MBA thesis on social investing at Sydney Business School, University of Wollongong. He is a senior corporate affairs and marketing professional who has worked in legal services, for a federal regulatory authority, as well as for Australian Red Cross and in Indigenous health. He is also a non-executive director of the Fairy Meadow Community Bank Branch of Bendigo Bank. Contact him through LinkedIn: www.linkedin.com/in/kyrnstevens/