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ESG considerations are informing decision-making

Australian companies are more profoundly aware of their corporate responsibilities and reputation than ever before. Environmental, social and governance (ESG) considerations continue to increase in importance as part of the equation when making investment decisions. In part, this reflects growing expectations from customers, employees and shareholders, but also the rising tide of domestic and international regulation, and other external vectors.

Embracing ESG in a measured, practical and authentic way can help businesses tap into aligned investors, elevate their employee value proposition and reposition brands. There is an appetite among many Australian companies to be ambitious in setting their strategy and targets around material ESG issues. However, it is tempered by the complexity of the regulatory landscape and the risks (real and perceived) associated with aiming too high and falling short. Failure to properly take account of ESG-related risks, or misrepresenting a company’s ESG credentials, can cause reputational damage and leave companies and boards vulnerable to adverse action and, in some cases, litigation. 

In early 2024, we conducted our second major ESG survey to gauge how businesses are grappling with the rapidly changing ESG landscape. We wanted to explore the different dimensions of an area sometimes perceived as amorphous, as well as to re-test business sentiment following years of geopolitical, economic and climate-related disruption.

Climate first, but not only, as ‘S’ closes in on ‘E’

Our survey this year coincided with a period of substantial ESG-related regulatory shifts in Australia. Climate-related concerns still top the issues that companies identify as being the subject of ESG reviews by a significant margin, however it is notable that 'S' issues have gained prominence. Legislative reforms addressing sexual harassment and psychological safety in the workplace have been introduced, alongside mandatory gender pay gap reporting. The ASX’s Corporate Governance Principles and Recommendations also necessitate certain 'S' disclosures, with further revisions concerning stakeholder interests and diversity objectives under consultation. Beyond the workplace, the Modern Slavery Act 2018, post-review, received 30 reform suggestions, including the introduction of due diligence requirements. Conversations around Aboriginal and cultural heritage, social licence, and the value of a just transition are also intensifying. 

It’s a much more complex world in 2024 and that’s what we wanted to draw out, says Herbert Smith Freehills Environment, Planning and Communities Partner Melanie Debenham. “That is not to say that ‘E’ issues – and particularly climate change – have been left behind,” she adds.  Notably, a Bill to implement mandatory climate-related financial disclosure was introduced in the Australian Parliament in March 2024. While the current focus of this legislation is on climate reporting, other topics under the environmental sustainability umbrella are not far away. This aligns with the recent broader reform agenda for key environmental laws in Australia.

‘G’ is the common thread

“There’s been a huge amount of regulation across the board. The law is requiring companies to do more and to put in place the frameworks for managing a broad range of environmental and social issues,” says Herbert Smith Freehills Partner and ESG Lead, Australia Timothy Stutt. 

The ‘G’ is the common thread that weaves through all the ‘E’ and ‘S’ issues, adds Herbert Smith Freehills Partner Carolyn Pugsley, who specialises in corporate governance and board advisory. “Boards and management teams are looking for guidance, not just on the content of new regulation, but on how to bring it to life within their organisations. Issues of accountability, resourcing, information flows and integration of ESG issues into organisational decision-making are cropping up across all the ‘hot button’ areas, including climate change, human rights and cyber.” 

Perspectives on the shifting landscape

This report highlights the main findings from our survey of 161 business leaders, including C-suite executives, board directors, company secretaries, general counsel and senior management. It combines survey data from business leaders with insights from our ESG lawyers, to give shape to the challenges and opportunities Australian businesses face amidst escalating ESG regulations and stakeholder expectations. The landscape is constantly shifting. While businesses have been grappling with ‘E’ and climate change issues for some time now, the ‘S’ in ESG is increasingly becoming a focus and, with it, evolving ways of understanding and managing risk, opportunity and impact. 




Key contacts

Timothy Stutt photo

Timothy Stutt

Partner, Sydney

Timothy Stutt
Melanie Debenham photo

Melanie Debenham

Partner, Perth

Melanie Debenham
Heidi Asten photo

Heidi Asten

Partner, Melbourne

Heidi Asten
Antony Crockett photo

Antony Crockett

Partner, Hong Kong

Antony Crockett
Natalie Gaspar photo

Natalie Gaspar

Partner, Melbourne

Natalie Gaspar
Olga Klimczak photo

Olga Klimczak

Partner, Perth

Olga Klimczak
Lucy McCullagh photo

Lucy McCullagh

Partner, Head of Finance, Melbourne, Melbourne

Lucy McCullagh
Kathryn Pacey photo

Kathryn Pacey

Partner, Brisbane

Kathryn Pacey
Carolyn Pugsley photo

Carolyn Pugsley

Partner, Melbourne

Carolyn Pugsley
Mark Smyth photo

Mark Smyth

Partner, Sydney

Mark Smyth
Melissa Swain-Tonkin photo

Melissa Swain-Tonkin

Partner, Brisbane

Melissa Swain-Tonkin
Jacqueline Wootton photo

Jacqueline Wootton

Partner, Brisbane

Jacqueline Wootton

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