LeadershipHQ Magazine 3rd Edition September Issue | Page 25

Ethical funds
that invest in
Australian shares
are typically
outperforming
their mainstream
counterparts by
three percentage
points year
on year.

efits to the bottom-line, and has enabled both companies and brands to
build value through differentiation
in the market place. Just look at Selfridges (U.K.) decision to remove plastic water bottles from their stores in
order to cut ocean pollution; or the
widely critiqued case study of WalMart (U.S.) which set ambitious sustainability targets through its ‘Sustainability 3600‘ program including
zero waste, 100% renewable energy,
and the supply of products which
sustain the world’s resources and environment. Wal-Mart continues its
environmental leadership to its supply chains, including assisting its cotton producers to ‘go’ organic and increasing the availability and supply
price (via substitution) of products
which it deems are environmentally
preferable.
Whilst traditional accounting models are limited in their ability to assess the benefits achieved from
sound environmental leadership;
social norms and expectations surrounding the environment and social impacts associated with a company, its product(s) or service(s) are
growing and are accountable, as
far as the client or consumer is concerned. Subsequently, companies
are making product and investment decisions regarding brand
impact and company risk with regards to the environment.
Organisations collect data on their
environmental, social and broader
sustainability performance. However, not enough companies are
effectively exploiting this data
for competitive advantage or for
stakeholder education. In order
to do this, the data needs to be
timely, accurate and consistent to
facilitate stakeholder understanding of the scale of opportunities, or
the impact of any changes implemented. In most cases, this data
is inconsistent, poorly considered
and entrenched in bespoke, legacy systems. The potential negative

consequences from ill-informed
strategic decisions relating to environmental leadership strategies
and programs are substantial, including increased costs, negative
and unintended environmental
impacts, project failure and damage to brand particularly if associated with ‘greenwashing’.
Senior executives are aware of
their obligations and liabilities
as set out in regulation and the
Council of Australian Governments’ (COAG) guidelines deliver
a nationally-consistent and a principles-based approach to the personal criminal liability of directors
and officers for corporate offences.
These offences include environmental offence liability, when a director will be personally liable for
environmental offences committed by a corporation.
Whilst the limited penalties for
non-compliance with environmental regulation may have historically provided a bottom-line case for
doing the wrong thing, the intangible negative costs are certainly
no longer worth the risk. Consumers and clients are expecting transparency including environmental
and sustainability reporting.
In what has been termed ‘green
to gold’ performance, ethically-aware investors are also creating
industrial change and demanding
evidence of environmental leadership. Ethical (or Responsible)
investment is when an investment
is selected to complement one’s
moral or political view and has
quickly advanced from a ‘fringe
activity’ to a significant movement.
Figures from the Responsible Investment Association Australasia
(RIAA) estimate that the total funds
under management in investment
portfolios in Australia totalled
$629.5 billion as at 31 December
2014; in 2002 the estimated figure
was $13.9 billion. Ethical funds
© LeadershipHQ 2015 | 25