Vale Phil Spathis

I first met Phil Spathis when we were at the Finance Sector Union of Australia. For a number of years I worked for Unite in the UK. I remember making a call from a phone box in Spain to talk to the FSU about my return to Australia. I got the time zones wrong and ended up calling at some un-godly hour in the morning. The phone was answered by Phil, the only one in the office. This was typical of Phil. His studying for his law degree whilst working full time and looking after a family were the stuff of legend.

Years later when we both found ourselves working in the industry fund movement, Phil’s commitment to the trade union movement had not wavered. He continued for many years to serve on the state executive of the FSU, and continued to be passionate about working issues.

When I began consulting in the responsible investment space it was Phil that gave me my first assignment, which was to establish a Sustainability Reporting framework that benchmarked the progress that the ASX was marking improving reporting around sustainability. Phil was the quiet force for investors on the ASX Corporate Governance Council, working in a collaborative, yet determined manner to incrementally improve governance stances of the Australian market.

Phil’s best known contribution to corporate governance is the battle that he led with Michael O’Sullivan against News Corp’s transfer of listing from Australia to US that would have undermined minority shareholders rights and entrench the power of the Murdoch family.

When ACSI stood up on behalf of Australian investors, Murdoch initially thought that he could brush them aside. But ACSI started organising – skills learned in the trade union movement – and established a global coalition that in the end forced Murdoch to the negotiating table.

Eleven years later the importance of corporate governance is universally recognised. But it wasn’t always like this. ACSI’s News Corp campaign was not just important for Australian investors. It gave legitimacy for others to stand up. That in the end describes Phil.

My deepest sympathy to Phil’s family.

Links

ACSI’s News Corp story:
http://www.theage.com.au/articles/2004/10/08/1097089571715.html?from=storylhs
http://www.acsi.org.au/sustainability-reporting.html

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Sandfire attack raises question: is it time to legislate sustainability reporting?

On 13th November 2014 Sandfire Resources announced that it had filed proceedings in the Federal Court against ESG researcher Centre for Australian Ethical Research (CAER) in regards to research profiles that CAER had provided to ANU.

In taking legal action Sandfire Resources has not just focused on the output of ESG researchers but has drawn attention to the gap between the information companies provide and what investors need to make informed decisions.

One of the foundations of responsible investment has been the idea that investors should engage with companies. But what do we do with companies that do not respond to engagement requests?

Sandfire Resources may be upset at CAER’s review, but responsible investors have long been frustrated that listed companies willingly choose to ignore requests for information.

In 2008, I approached the Australian Council of Superannuation Investors with a proposal to develop a benchmark of sustainability reporting practices of ASX 100 companies. My argument to ACSI was that whilst there were good examples of sustainability reporting in the Australian market, many companies either did not report in any way on sustainability, or reported in a way that was of limited value to investors.

As responsible investment develops a key question for investors is how to address the impediments that exist to implementing environmental, social and governance (ESG) practices in the market.

How can investors who are trying to integrate ESG factors into portfolios do so if they don’t have relevant information from all players in the market?

By creating a benchmark of sustainability reporting this provided a mechanism for investors to review the sustainability reporting practices of companies over time.

ACSI’s first benchmark of sustainability reporting practices in 2008 found that sustainability reporting was distributed according to a bell shaped curve with outliers being best practice reporters (16%) and companies that provided no reporting (17%).

ACSI has now been producing an annual report on sustainability reporting for seven years. This year’s report found that 85% of ASX200 companies provide some level of reporting on sustainability factors. Interpreted another way, there are 15% of companies that still provide no reporting at all.

Frustrated at the lack of response from laggard companies, last year ACSI publicly disclosed the names of 8 companies that had been rated at ‘No Reporting’ for four or more consecutive years. In 2014, 5 of those companies now provide some level of sustainability reporting.

If companies such as Sandfire Resources take legal action when they are not happy with the output from an ESG researcher, should investors be taking legal action when they get no response from a company to their information requests?

A better way than institutionalising legal conflict could be to legislate sustainability reporting. This would be far more efficient. It would remove any debate about what information a company should provide. Legislation could simply require that all companies report according to the Global Reporting Initiative. Other countries have already gone down this path.

By taking legal action Sandfire Resources has opened up the debate on sustainability reporting. The way Sandfire has done this may not be optimal but it will put a spotlight on sustainability reporting. This is something that investors have been seeking for the last seven years.

Whatever the outcome of the legal action, we can guarantee that the bar on sustainability reporting will be raised in coming years. This may either be through companies voluntarily lifting their reporting standards, or through legislation.

Links

ACSI Sustainability Reporting Journey 2014
http://www.acsi.org.au/images/stories/ACSIDocuments/generalresearchpublic/Sustainability%20Reporting%20Journey%202014.Jul%2014.pdf

ACSI Sustainability Reporting Journey 2008 – first report
http://www.acsi.org.au/documents/Sustainability%20Reporting%20(website).pdf