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New index exposes Aussie large cap disclosure shortfalls

By Jessica Penny
3 minute read

The majority of the ASX 200 listed companies need to lift their sustainability reporting game, RMIT found.

Just 11 per cent of Australia’s largest companies comprehensively disclosed how sustainable their sourcing practices were in 2022, according to a new index.

The Sustainable Procurement Disclosure Index (SPDI), created by RMIT University, rates how Australia’s top 200 listed companies report on the sustainability of their economic, social and environmental sourcing practices.

Using a five-star rating system, RMIT revealed that 11 per cent of companies were awarded five stars, while 36 per cent claimed four.

Meanwhile, over a third of Australia’s largest companies (37 per cent) received three stars and 13 per cent received two.

RMIT gave five companies one star for how comprehensive their disclosure was.

According to the university, disclosure levels varied across industries, with financials having the lowest average while consumer staples brought in the highest average.

Lead researcher, associate professor Charles Lau, said the contrast across sectors may stem from the varying levels of procurement activities taken on.

“This contrast may be attributed to the distinct nature of their business, with companies in the consumer staples sector having a significantly higher volume of procurement of physical goods than finance,” Lau noted.

Regardless of industry, however, ASX 200 companies were inclined to report more on governance and environmental aspects according to Global Reporting Index (GRI) standards, and tended to reveal less about economic and social aspects.

“Some reasons companies don’t report extensively on the economic and social aspects of their sustainable procurement practices may include reputational concerns, commercial secrecy, resource constraints, complex supply chains, or lack of standards or industry norms, to name a few,” Lau explained.

However, the level of disclosure had little relationship with firm size, according to RMIT, meaning large corporations didn’t disclose more or less than smaller companies.

When will Australia step up?

Noting that there are no established standards to assess sustainable procurement practices for Australian companies, Lau said Australian large-caps wont be incentivised to disclose how sustainable their procurement practices are.

“Growing public concern regarding sustainable practices calls for greater transparency from companies and some sort of incentive, or disincentive, is what’s needed to encourage companies to thoroughly disclose this information,” he said.

There are countless ways a company can practise sustainability in sourcing of goods and services.

This, he said, could encompass decisions around where to purchase office supplies, the energy efficiency of appliances or equipment, how companies source their labour and the environmental impacts of packaging used in products produced.

“The poor results show how much more work needs to be done by Australian industries in this space,” Lau added.

“[SPDI] has potential to influence purchasing behaviour and hold more companies accountable to engage in sustainable and ethical procurement.”