Corporate Social Responsibility:

The GFC means it is time to revisit CSR

Corporate Governance: LAWS4028

Aaron Magner

ABSTRACT

The dominant influence of corporations evidenced by the impact of the

global financial crisis (GFC) and associated examples of corporate
irresponsibility has been a catalyst for a surge of interest in corporate
social responsibility (CSR). The devastating economic and social
consequences of the GFC has stung governments and undermined the
orthodoxy of the shareholder primacy model of corporative governance.
As a result policy makers are increasingly willing to consider a more
expansive view of what is material to a corporation’s short and long term
performance. However the question of what corporate social
responsibility issues should be reported and the most effective form of
regulation in this area is still far from resolved. In Australia voluntary
reporting of environmental obligations and sustainability risks has been
the preferred approach of business and the government. Variations of
sustainability and triple bottom line reporting are emerging
internationally and a range of forms of CSR reporting standards are
mandatory in a number of jurisdictions. While there are many
sustainability standards the Global Reporting Initiative (GRI) has
emerged as the leading framework for companies reporting on CSR. The
rate of adoption and level of enforcement of CSR reporting requirements
in the coming years will be a key indicator of the mainstreaming of the
corporate responsibility agenda. The GFC and changes in the attitude of
governments means the framework of existing voluntary CSR reporting
is likely to be a precursor to mandatory CSR reporting and
accountability.

1
 INTRODUCTION

This crisis did not happen solely by some accident of history or normal turn of the
business cycle, and we won’t get out of it by simply waiting for a better day to come,
or relying on the worn-out dogmas of the past. We arrived at this point due to an era
of profound irresponsibility that stretched from corporate boardrooms to the halls of
power in Washington, DC. For years, too many Wall Street executives made
imprudent and dangerous decisions, seeking profits with too little regard for risk, too
little regulatory scrutiny, and too little accountability. Banks made loans without
concern for whether borrowers could repay them, and some borrowers took
advantage of cheap credit to take on debt they couldn’t afford. The result has been a
devastating loss of trust and confidence in our economy, our financial markets, and
our government.

US President-elect Barack Obama, 8 January 2009.

The GFC and associated controversies exposing unethical and irresponsible behaviour
of corporate executives and senior managers has bewildered the community.1 As the
global financial crisis starts to touch the lives of all of us through rising
unemployment,2 reduced wage growth3 and collapsing asset values4 bewilderment is
transforming into anger. Yet apparently disconnected from the reality of recent events
resistance remains toward taking a more coercive approach to corporate governance
by, for example, requiring that companies behave ethically, avoid harm to others and
take into account impacts on the community and environment arising from their
actions.5 The ‘profound irresponsibility’ to which Barack Obama refers highlights the
importance of corporate responsibility, and the impact of its absence. Previously
viewed as a soft or peripheral issue this area of corporate governance has been shown
by the GFC to be absolutely crucial to global social, economic and political stability.
Within this context the devastating consequences of the GFC has brought the
shareholder primacy model, the very orienting principle of corporate governance, into
question. The scale and long term impact of the GFC strongly suggests that if we wish
to continue achieving economic growth and if we want to ensure that growth is
sustainable, corporate governance will need to integrate sustainable practices into the
1
Arising from the GFC arguably the most conspicuous instance of corporate irresponsibility has been
the patently excessive and, as it turned out, manifestly undeserved salary packages of financial sector
executives who received huge payments prior to, and for some, subsequent to their companies being
bailed out by American taxpayers. It has been generally accepted that the GFC is in large part an
outcome of attempts to make profits by way of reckless and irresponsible functioning by the
investment bankers/institutions and their top functionaries. The collapse of some of these corporations,
in particular Lehman Brothers, Goldman Sachs and Morgan Stanley, precipitated the unraveling of
other highly geared and unstable financial institutions including, in Australia, Storm Financial Group
and Opus Prime et. al. See The World Economic Outlook, Crisis and Recovery, 22 April 2009.
Available at < http://www.imf.org/external/pubs/ft/weo/2009/01/index.htm> (accessed 23 April 2009).
2
The International Monetary Fund predicts unemployment in Australia will rise from 6.8 per cent in
2009 to 7.8 per cent in 2010. See The World Economic Outlook, Crisis and Recovery, 22 April 2009.
3
The Reserve Bank of Australian board meeting minutes for 7 April 2009 included a statement
predicting: “…wage growth to moderate in the period ahead.” See: <http://www.rba.gov.au/
MonetaryPolicy/RBABoardMinutes/2009/070409.html> (accessed 22 April 2009).
4
In Australia the All Ordinaries index has fallen, as at 21 November 2008, approximately 53% from
the 1 November 2007 high. As at 2 March 2009 the New York Stock Exchange’s Dow Jones Index has
fallen below 7,000 for the first time since 1997. House prices in Australia have fallen 3% since 2007
and some predict they will fall up to 20% in the period to 2010. US house prices are reported to have
fallen by 50% or more from peak values in some markets. Sources: <www.comsec.com.au>; and the
Economist Intelligence Unit <www.iec.com>.
5
See Lumsden, Andrew J. and Friedman, Saul, Corporate Social Responsibility: The Case for a Self
Regulatory Model. Company & Securities Law Journal, 2007; Sydney Law School Research Paper No.
07/34, et al. Resistance to companies having a social responsibility beyond serving the interest of their
stockholders can be traced to views first expressed Milton Freidman, in A Freidman Doctrine – the
Social Responsibility of Business Is to Increase Profits, N.Y Times, September 13 1970 6 Magazine.

2
core of company operations. For this to occur the true costs of corporate actions will
need to be reported and accounted for – both financial and non-financial. Yet this will
require no less than the dominant shareholder primacy perspective to change and for
corporate governance to embrace an approach generally described as ‘enlightened
shareholder value.’6

While this essay uses the term corporate social responsibility or CSR, similar terms
are often used to describe the same idea - that is a process whereby a company
considers and manages the long-term impact of its decisions on its stakeholders.7 The
question - who is reasonably considered a stakeholder, gives rise to a plethora of
possible answers.8 This essay will not directly engage in the debate concerning
shareholder versus stakeholder theory other than to acknowledge that members of the
community, other than the shareholders of corporations, have a stake in corporate
activities and that they therefore should be regarded as stakeholders whose interests
should be taken into account.9 Taking leads from approaches taken in overseas
jurisdictions, this essay considers how the values embodied in CSR are already
applied within the sphere of corporate governance. Existing voluntary CSR initiatives
will be explored, as well as the reasons that the business community and the
government have given for continuing to maintain the voluntary status of these
initiatives. Various international CSR indices are considered, in particular the Global
Reporting Initiative or GRI, which has emerged as the leading international
framework for voluntary CSR and sustainability reporting.

The community now increasingly expects corporations to act with a view to the
common good and in a manner responsive to all of those stakeholders within its
sphere of influence.10 While voluntary soft law initiatives have an important role,
there is apathy and resistance to change in the business community to bring about the
necessary modifications in corporate culture voluntarily.11 Adoption of a universal
CSR standard will only happen if Governments lead the way. This essay concludes
that when the world economy recovers from the GFC governments should resolve to
take a more coercive approach to CSR with an eye to long term sustainability and the
collective good.

6
Horrigan, Bryan, Corporate Social Responsibility in the 21st Century, Edward Elgar Publishing, UK,
(2009) [unpublished], Chapter 7, p36.
7
This essay, while acknowledging there are different understandings of what constitutes ‘corporate
social responsibility’ vis-à-vis corporate citizenship, corporate responsibility, corporate sustainability,
triple bottom line reporting and/or corporate citizenship, encompasses each of these principles within
the rubric of the term ‘corporate social responsibility’.
8
The most authoritative definition of a stakeholder is that recently formulated United Nations Norms
on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to
Human Rights. <http://www.unhchr.ch/huridocda/huridoca.nsf/(Symbol)
/E.CN.4.Sub.2.2003.12.Rev.2.En> (accessed 8 June 2009).
9
Stakeholders in certain situations might include the employees and contractors, customers and
suppliers, the community, the society, the environment, even future generations.
10
Femke de Man, Tracking the gap between societal expectations of companies and perceived CSR
performance, Boston College Center for Corporate Citizenship, September 2007. GlobeScan conducted
a report in 2007 on citizens’ expectations of companies’ CSR activities finding that people in developed
and developing nations have high expectations of companies, see <www.bcccc.net>.
11
See Parliament of Australia, Parliamentary Joint Committee on Corporations and Financial Services,
Corporate Responsibility: Managing Risk and Creating Value, June 2006 at 7.1, where submissions
and views on the appropriateness of current reporting requirements were highly polarized with
corporations and business associations almost unanimously agreed that the current arrangements are
appropriate whereas NGOs in general agreed that there was scope for improvement.

3
 PART II – BACKGROUND

Good, successful business is part of society, and exists to meet society’s needs.
That is the purpose of business at the highest level.

Lord Browne, BP Group Chief Executive12

Corporate responsibility: an aspiration in need of definition

Definitions of what constitutes corporate social responsibility vary in their scope and
emphasis. Most stress the responsibility of corporations beyond their shareholders to a
much wider group of stakeholders.13 Key features of CSR include reporting on and
being responsible for upholding agreed social, environmental and ethical corporate
standards.14 CSR is also described in terms of a company considering, managing and
balancing the economic, social and environmental impacts of its activities.15

Various definitions for CSR were considered by the Australian Government in two
reports that specifically dealt with CSR and corporate governance. The first was from
the Federal Parliamentary Joint Committee on Corporations and Financial Services
entitled Corporate responsibility: Managing risk and creating value16 (the PJCCFS
Report) and a second entitled The social responsibility of corporations from the
Corporations and Markets Advisory Committee17 (the CAMAC Report). These reports
reflect the different approaches to defining CSR.

The PJCCFS Report described corporate social responsibility in terms of:

“A company considering, managing and balancing the economic, social and

environmental impacts of its activities. It is about companies assessing and
managing risks, pursuing opportunities and creating corporate value, in areas
beyond what would traditionally be regarded as a company’s core business. It
is also about companies taking an ‘enlightened self-interest’ approach to
considering the legitimate interests of a company’s stakeholders.”18

12
Speech by Lord Browne, BP Group Chief Executive, at the Massachusetts Institute of Technology
(MIT), Boston (2 May 2006) quoted in “Supplementary report by Labour [sic] members” to Parliament
of Australia, Parliamentary Joint Committee on Corporations and Financial Services, Corporate
Responsibility: Managing Risk and Creating Value, June 2006 at 1.5 and fn 471.
13
See Bottomley, Stephen; The constitutional corporation: rethinking corporate governance, Ashgate
Publishing, Ltd., 2007 and Corporate Law and Accountability Research Group, October 2006, Working
Paper No. 4.
14
See Anderson, Helen and Landau, Ingrid,; Corporate Social Responsibility in Australia: A Review,
Corporate Law and Accountability Research Group, October 2006, Working Paper No. 4 quoting M
Glazebrook, ‘Corporate Citizenship and Action Research: An Australian Perspective’ (Paris:
International Association of Business and Society Proceedings, 1999) 120–5; M Sweeney et al,
‘Social Reporting and Australian Banks: Endorsement or Pretence to the Triple Bottom Line?’ (2001) 4
Journal of Corporate Citizenship 91. There have been a number of inquiries into corporate
responsibility.
15
Anderson, Helen and Landau, Ingrid,; Corporate Social Responsibility in Australia: A Review,
Corporate Law and Accountability Research Group, October 2006, Working Paper No. 4
16
Parliament of Australia, Parliamentary Joint Committee on Corporations and Financial Services,
Corporate Responsibility: Managing Risk and Creating Value, June 2006, available at
<http://www.aph.gov.au/Senate/committee/Corporations_ctte/corporate_responsibility/report/index.htm
>, accessed 11th April, 2009. (PJCCFS Report).
17
Corporations and Markets Advisory Committee, The Social Responsibilities of Corporations,
December, 2006, (CAMAC Report).
18
The PJCCFS Report at 2.7. The concept of “enlightened shareholder value’ is examined below in the
context of s172 of the UK Corporation law.

4
The CAMAC Report described corporate social responsibility in terms of:

“the way in which the affairs of companies are conducted and the ends to
which their activities are directed, with particular reference to the
environmental and social impact of their conduct. A responsible company, like
a responsible individual, is one that acknowledges and takes responsibility for
its actions.”19

The World Business Council on Sustainable Development also provides a definition:

“Corporate [social] responsibility is the commitment of business to contribute

to sustainable development, working with employees, their families, the local
community and society at large to improve their quality of life.”20

While the World Bank has a different take describing CSR as:

“the commitment of businesses to contribute to sustainable economic

development by working with employees, their families, the local community
and society at large to improve their lives in ways that are good for business
and for development.”21

Having a universal and concise definition for CSR would be convenient but it is
unrealistic given the sheer diversity of modern corporations, in terms of size, sectors,
stakeholders, structures and strategies. It is not controversial that what constitutes
corporate social responsibility will have different meanings to different people in
different organisations, in different countries. Yet this lack of a universally agreed
framework for CSR means there is a lack of clarity about the standards which
companies are expected to uphold.

This uncertainty is indicative of the confusion and lack of consensus within the
corporate responsibility movement itself.22 In turn this leads to confusion regarding
what, if anything, can and should be expected of companies in the area of CSR.
Rather than continue to dissect the CSR definition dialectic, the existing framework
and emerging soft law initiatives should be considered. Whether voluntary standards
might act as a forerunner for future mandatory reporting and accountability
requirements is also examined and how these might ultimately integrate within the
existing corporate governance framework.

19
CAMAC Report at page 15.
20
World Business Council of Sustainable Development, <www.wbcsd.org> accessed 8 June 2009.
21
World Bank Group’s Department of Foreign Investment Advisory Service. Bank Group’s Corporate
Social Responsibility Practice.
22
Nolan, Justine, Corporate Accountability and Triple Bottom Line Reporting: Determining the
Material Issues for Disclosure (March 20, 2007). UNSW Law Research Paper No. 2007-15; Enhancing
Corporate Accountability: Prospects and Challenges Conference Proceedings. Available at SSRN:
<http://ssrn.com/abstract=975414> (Accessed 8 June 2009).

5
The Australian regulatory framework for corporate responsibility
The Corporations Act can, in some instances, operate to promote what amounts to
willfully blind and selfish shareholder centric behaviour. The encouragement to
externalise social costs combined with limited liability creates a moral hazard through
incentives to externalise all the adverse consequences of corporate actions. While the
legal structure of corporations bestows on them the rights and benefits of citizenship,
the law operates to encourage corporations to behave without any of the inherent
characteristics of good citizenship.23 The GFC and recent financial scandals means
that making corporations better account for the social, environmental and economic
impact of their activities is now an important element in the current discourse on good
corporate governance.

There are already some limited requirements in the Corporations Act that oblige
company directors to recognise the interest of stakeholders other than shareholders.
For example superannuation, life insurance and managed funds are required to
include in their product disclosure statements the extent to which they take account of
environmental, social, labour and ethical standards in their investment decisions.24
There are also provisions that require companies to include within their annual reports
details of breaches of environmental laws and licences.25 Disclosure of the financial
impact of environmental issues is not however required and the law does not therefore
allow for the application of traditional accounting concepts of materiality.26 This
means that while ASIC publishes disclosure guidelines27 directors are able to use high
levels of subjectivity to determine what they should and should not disclose.28 There
is limited third party auditing of disclosure and there have been no reported
prosecutions for a breach of these requirements.

Aside from the Corporations Act there are other measures that impose what are in
effect mandatory corporate responsibility reporting obligations. From employment

23
See for example, the lines of authority leading to Parke v Daily News Ltd [1962] Ch 927, including
Percival v Wright [1902], Coleman v Myers [1977]; Brunninghausen v Glavanics (1999). The view
that directors/officers owe duties to the company (shareholders), not ‘outsiders’, eg employees was
tentatively questioned in TeckCorp v Miller (1973, SC of BC).
24
Corporations Act 2001 (Cth) Section 1013D(1)(l) states: “if the product has an investment
component--the extent to which labour standards or environmental, social or ethical considerations
are taken into account in the selection, retention or realisation of the investment.”
25
Corporations Act 2001 (Cth) Section 299(1)(f). See discussion in G Frost and L English.,
Mandatory Corporate Environmental Reporting in Australia: Contested Introduction Belies
Effectiveness of its Application (November 2002). Available at <http://www.econ.usyd.edu.au/
drawingboard/digest/0211/frost.html >. A number of Australian companies already measure themselves
against an index of social, environmental and financial indicators. See discussion of voluntary CSR
indexes below.
26
With the introduction in July 1998 of section 299(1)(f) Australian public companies and certain
proprietary companies (that exceed certain thresholds) are required to include within their annual
report, a directors’ report that states: “If the entity’s operations are subject to any particular and
significant environmental regulation under a law of the Commonwealth or of a State or Territory –
give details of the entity’s performance in relation to environmental regulation.”
27
Section 1013DA disclosure guidelines; ASIC guidelines to product issuers for disclosure about
labour standards or environmental, social and ethical considerations in Product Disclosure Statements
(PDS)’ (December 2003). Available at <http://www.asic.gov.au/asic/pdflib.nsf/
LookupByFileName/s1013DA_finalguidelines.pdf/$file/s1013 DA_finalguidelines.pdf >.
28
Nolan, Justine, Corporate Accountability and Triple Bottom Line Reporting: Determining the
Material Issues for Disclosure(March 20, 2007). UNSW Law Research Paper No. 2007-15; Enhancing
Corporate Accountability: Prospects and Challenges Conference Proceedings. Available at SSRN:
<http://ssrn.com/abstract=975414>. Justine Nolan, among others, has criticized the open ended text of
s.299(1)(f) as being vague and unclear.

6
law29 and occupational health and safety,30 to environmental31 and consumer
protection laws,32 an array of mandatory legal requirements already limit corporate
conduct considered harmful to non-shareholder constituencies.33 While outside the
sphere of corporate law, these laws nevertheless regulate fundamental features of
corporate behavior in the name of stakeholders. The adequacy of this kind of
regulation, outside of the corporate law, is often relied on as an argument against CSR
specific regulation.34

While these limited forms of regulation imposing various reporting requirements and
standards of responsible corporate conduct (in particular circumstances) is within the
rubric of CSR, Australia has declined to take the next step by implementing a
universal and mandatory CSR standard. The recent PJCCFS and CAMAC Reports
both claimed it was too early to introduce mandatory CSR reporting requirements in
Australia.35 The CAMAC Report claimed: “any attempt to further non-financial
reporting would be premature and counterproductive, given emerging developments
and changing and diverse needs of interest groups and the community in Australia
and elsewhere.”36 Instead the PJCCFS Report said it was preferable for the
Government to “continue to monitor the acceptance and uptake of CSR reporting,
both nationally and internationally”.37 However, the PJCCFS and CAMAC Reports
do not however foreclose or limit Australian CSR policy and future law reform.
Furthermore, in the period since 2006 when these reports were released the Australian
and international economic landscape has been transformed by the GFC while
politically it has become more progressive. The GFC and the election of the Rudd
government in Australia and Obama administration in the United States, together with
the emergence of Global Reporting Index as the clear CSR reporting framework
leader, make now an appropriate time to revisit CSR regulation.

29
Human Rights and Equal Opportunity Act 1986 (Cth), Disability Discrimination Act 1992 (Cth), Sex
Discrimination Act 1984 (Cth), and even the Workplace Relations Act 1996 (Cth) et. al.
30
Occupational Health and Safety Act 2000 (NSW) and the Occupational Health and Safety
(Commonwealth Employment) Act 1991 (Cth).
31
Protection of the Environment Administration Act 1991 (NSW) and Protection of the Environment
Operation Act 1997 (NSW) et. al.
32
Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) et. al.
33
For example the Environment Protection and Biodiversity Conservation Act 1999 (Cth), and the
National Greenhouse and Energy Reporting Act 2007
34
Lumsden, Andrew J. and Fridman, Saul, Corporate Social Responsibility: The Case for a Self
Regulatory Model. Company & Securities Law Journal, 2007; Sydney Law School Research Paper No.
07/34, et al.
35
CAMAC Report at 7.53 states that: “Despite the committee's strong support for a voluntary
sustainability reporting framework and the widespread acceptance of the GRI as the emerging
international standard for sustainability reporting, the committee believes that it is too early to
recommend the GRI as the voluntary Australian standard.”
36
CAMAC Report at p139.
37
PJCCFS Report at 7.55.

7
 PART III – CORPORATE SOCIAL RESPONSIBILITY: WHERE TO FROM HERE?

“We have seen the perils of short-term thinking, both, economically, socially and
environmentally. What we need now is a greater long-term view, one that is
grounded in socially and environmentally sustainable business practices. This is
vital if we are to secure Australia’s future prosperity and international
competitiveness.”

Senator Nick Sherry

Minister for Superannuation and Corporate law 38

Corporations, often more than governments, are today’s dominant institution.39

Corporations feature in all aspects of social, political and economic life - private and
public, business and non-business, large and small enterprises.40 As the size and
influence of corporations grows, the framework and effectiveness of corporate
governance regimes assumes wide ranging socio-economic and political impacts.
Inappropriate and outdated approaches to corporate governance including structural
incentives for corporations to not take into account the interests of stakeholders and to
ignore externalities will, and has, undermined our quality of life and eroded economic
growth in the long term. How can the law shape and exert influence upon corporate
conduct? If company law prescribed a different norm to the shareholder primacy
model, would different corporate practices and conduct follow?

United Nations treaties as a foundation for CSR

The Universal Declaration of Human Rights 1948 (UDHR) applies to all ‘organ[s] of
society’41 and as such has relevance to the regulation of corporate governance. The
UDHR touches on a range of issues relevant to CSR although a consensus on the
exact nature of the applicable rights and duties has not yet been achieved.42 However
the UDHR, as a declaration, is not legally binding. United Nations (UN) conventions
codifying the UDHR do however produce legally binding obligations on signatory
states, although these do not apply directly to corporations.43 There are a range of UN
38
Senator Nick Sherry, closing keynote address to the Australian Centre for Corporate Social
Responsibility 3rd Annual Conference, Sydney 5 February 2009. <http://www.treasurer.gov.au/
DisplayDocs.aspx?doc=speeches/2009/003.htm&pageID=005&min=njs&Year=&DocType=>
(accessed 8 June 2009). As of 5 June 2009 Mr Chris Bowen had replaced Sen. Nick Sherry as the
Minister for Financial Services, Superannuation and Corporate Law.
39
The increasing dominance of corporations and corporate culture in our lives is persuasively
articulated in Naomi Klein, No Logo, Flamingo, UK, 2001 and Noam Chomsky, Hegemony or
Survival: America’s Quest for Global Dominance, Metropolitan Books, New York 2003, et. al.
40
Bottomley, Stephen; The constitutional corporation: rethinking corporate governance, Ashgate
Publishing, Ltd., 2007, p3.
41
See the preamble of the Universal Declaration of Human Rights 1948 (UDHR): “…every individual
and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and
education to promote respect for these rights and freedoms and by progressive measures, national and
international, to secure their universal and effective recognition and observance, both among the
peoples of Member States themselves and among the peoples of territories under their jurisdiction.”
See also Article 29(1) of UDHR: “Everyone has duties to the community in which alone the free and
full development of his personality is possible.”
42
The UDHR encompasses a broad range of rights including the right to freedom of thought,
conscience and religion, freedom of peaceful assembly and association, the right to just and favourable
conditions of work and the right to an adequate standard of living. The preamble to the UDHR notes
that it is: a common standard of achievement for all peoples and all nations, to the end that every
individual and “every organ of society.” It is arguable that the UDHR and that as such they are called
upon to promote, respect and secure the recognition of these rights, particularly those directly
applicable to business.
43
The two key human rights covenants are the International Covenant on Economic, Social and
Cultural Rights (1966) and the International Covenant on Civil and Political Rights (1966).

8
conventions that include specific rights relevant to CSR such as the right to work, the
right to a minimum wage44, to form trade unions45 and to a healthy and safe
workplace.46 There are also a number of other non-binding international declarations
concerning environmental rights and sustainable development.47 While not legally
binding on corporations, and thus more aspirational than mandatory, international
conventions explicitly acknowledge the role that companies, along with governments,
have in promoting environmental and human rights, key aspects of CSR. These
conventions are also of significance as a number of the CSR reporting frameworks,
such as the UN Global Compact and the Global Reporting Initiative, are written to be
complementary to, and reinforce, the existing international legal framework,
including the ILO Conventions, the UNDHR and major environmental treaties.48

International legislative developments

At the nation state level a number of overseas jurisdictions have begun to redefine the
orthodoxy of shareholder primacy by regulating that companies must report on social
and environmental issues and in doing so have regard to a wider group of stakeholder
interests. In the United Kingdom, where there has been a Minister for Corporate
Social Responsibility since 2000, there is a legislated requirement for certain British
companies to produce an annual publicly available Operating and Financial Review
(OFR) addressing “other stakeholders”.49 The OFR is meant to provide an assessment
of a corporation’s performance and the main trends and developments affecting the
performance and position of the company now and in the future.50 The law adopts an
‘enlightened shareholder value’ approach under which a director must, in promoting
the company, have regard to factors such as the long-term consequences of business
decisions and the impact of the company’s activities on employees, the community
and the environment.51 Despite the UK Government’s aspiration to redefine the
corporate purpose by beginning to regulate CSR, and that 84% of UK companies
report on CSR, certain quarters of the UK business and legal community regard it as
‘business as usual’.52 While the CSR features introduced into UK corporate law are

44
ILO Convention No. 131 (Minimum Wage-Fixing Convention).
45
Article 8 of the International Covenant on Economic, Social and Cultural Rights, Adopted and by
the UN General Assembly resolution 2200A (XXI) of 16 December 1966.
46
Article 7 of the International Covenant on Economic, Social and Cultural Rights.
47
The Declaration of the United Nations Conference on the Human Environment (Stockholm, 1972)
and the Rio Declaration on Environment and Development (1992), Agenda 21 (a plan of action to be
taken globally, nationally and locally by organizations of the United Nations System, governments, and
major groups in every area in which human impacts on the environment), the Monterrey Consensus (on
financing for development, 2002) and the UN Millennium Goals for Development (2000), the
Statement of principles for the Sustainable Management of Forests were adopted by more than 178
Governments at the United Nations Conference on Environment and Development (UNCED) held in
Rio de Janeiro, Brazil, 3 to 14 June 1992.
48
Submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry
into Corporate Responsibility from the Global Reporting Initiative. Available at
<www.aph.gov.au/SEnate/committee/corporations_ctte/completed_inquiries/2004-
07/corporate_responsibility/.../sub130.pdf > (accessed 8 June 2009).
49
Directors of all listed companies in the UK must prepare an operating and financial review (OFR)
for financial years which begin on or after 1 April 2005.
50
While the law states that directors should primarily address the OFR to shareholders it also
explicitly states that information in the OFR will also be of interest to “other stakeholders including:
employees, suppliers, customers, regulators and other users of reports and accounts such as those
particularly interested in the environment and broader community.”
51
UK Hansard House of Lords 11 January 2006, quoted in Horrigan, Bryan, Corporate Social
Responsibility in the 21st Century, Edward Elgar Publishing, UK, (2009) [unpublished] at Chapter 7.
52
Horrigan, Bryan, Corporate Social Responsibility in the 21st Century, Edward Elgar Publishing, UK,
(2009) [unpublished], Chapter 7, p36. According to the KPMG International Survey of Corporate
Responsibility Reporting 2008 in France 79 percent of the top 100 companies had a publically

9
still new, and as such largely untested, it is unlikely to be last we hear of CSR from
the UK.

Across the European Union there are varying versions of CSR regulation and the
uptake of the GRI is high.53 For example in France since 2002 all companies listed on
the premier marche54 are asked to release an annual triple bottom line performance
report disclosing social and environmental issues in annual reports.55 The report
assesses the company against a template of social and environmental issues56 but it
does not include sanctions for non-compliance with the disclosure requirements.57 In
Demark, since 1 January 2009, the largest Danish companies, investors and state
owned companies are required to include information on CSR in their annual
financial reports.58 The CSR report must include information on companies’ policies
for CSR or socially responsible investments, information on how such policies are
implemented in practice, information on what results have been obtained so far and
management’s expectations for the future with regard to CSR. Again there is no
sanction for non-compliance and if a company has no CSR policy they merely state
information to that effect explicitly in their annual financial report.

In South Africa all companies listed on the Johannesburg Stock Exchange are
requested to comply with codes based on the Global Reporting Initiative (GRI)
guidelines for disclosing social and environmental performance.59 Companies are
requested to report annually on the nature and extent of its social, transformation,
ethical, safety, health, and environmental management policies and practices.60

KMPG’s 2008 International Survey of Corporate Social Responsibility claims that

CSR has gone mainstream citing the rate of reporting among the largest 100
companies in 22 countries as 45 percent, with the highest numbers in Japan with 88
percent61 and the UK with 84 percent. Integration of corporate responsibility
available CSR report. In it was Norway 63%, Sweden 54%, Netherlands 55%, Spain 44%, Italy 42%.
53
Williams, Cynthia A.; Ruth V. Aguilera (2008). "Corporate Social Responsibility in a Comparative
Perspective". in Crane, A., et al. The Oxford Handbook of Corporate Social Responsibility. Oxford:
Oxford University Press.
54
The French equities market is divided into three sections. The Premier Marché, formerly called the
Official List, includes large French and foreign companies, and most Bond issues. The Second Marché,
lists medium-sized companies, while Nouveau Marché lists fast-growing start up companies seeking
capital to finance expansion, linked to Euro.nm, the European equity market.
<http://www.euronext.com/landing/indexMarket-18812-FR.html> (Accessed 9 June 2009).
55
The French law is known as the New Economics Regulations (NRE). See Nolan, Justine; Corporate
Accountability and Triple Bottom Line Reporting: Determining the Material Issues for Disclosure
[2007] UNSWLRS 15.
56
Including those related to human resources, community issues, engagement, labour standards,
health, safety and environmental standards, see Dhooge, Lucien J. ‘Beyond Voluntarism: Social
Disclosure and France's Nouvelles Regulations Economiques’ 21 Ariz. J. Int'l & Comp. Law 441 at
442.
57
For discussion go to Nolan, Justine; Corporate Accountability and Triple Bottom Line Reporting:
Determining the Material Issues for Disclosure [2007] UNSWLRS 15.
58
See the Danish Centre for CSR's official website <www.CSR.gov.dk> accessed 9 June 2009.
59
King Committee on Corporate Governance, March 2002, ‘Code of Good Governance’ can be
accessed at www.iodsa.co.za. King II’s Code of Corporate Practices incorporates a provision on
Integrated Sustainability Reporting, which states that: Disclosure of non-financial information should
be governed by the principles of reliability, relevance, clarity, comparability, timeliness and
verifiability with reference to the Global Reporting Initiative Sustainability Reporting Guidelines.
60
Nolan, Justine; Corporate Accountability and Triple Bottom Line Reporting: Determining the
Material Issues for Disclosure [2007] UNSWLRS 15.
61
Japan has specific legislation to mandate disclosure of particular sustainability related information.
All of Japan’s top 100 companies release a CSR report. See KPMG International Survey of Corporate
Responsibility Reporting 2008 at p13.

10
information into annual reports is also said to be on the rise in France, Norway,
Switzerland, Brazil, and South Africa.62 While CSR is still in its infancy, among our
key trading partners and political allies, CSR reporting has moved beyond the
experimental stage. For the majority of major comparable jurisdictions CSR is now a
legitimate and growing part of good corporate governance.

CSR frameworks emerging in Australia

Without any form of regulation or even an agreed CSR standard it is not surprising
that the proportion of firms adopting CSR reporting standards in Australia is still
relatively low.63 Most of the analysis about Australia and CSR suggests that
companies continue to approach voluntary, non-enforceable obligations in a short-
term and non-strategic manner.64 Most corporations have not adopted a human rights
or labour code, maintaining simply that they obey the law of the countries where they
do business.65 While these corporations may face the threat of lost reputation and
brand value, this depends upon the willingness of consumers to make the conditions
of production a criterion in purchasing decision, an element often absent.66

Without a clear regulated CSR standard there has been a proliferation of various
voluntary CSR standards. This has the potential to confuse or misconstrue concepts of
CSR and impede the development of widely accepted standards of conduct. Over the
past 15 years numerous international and national guidelines have been issued to
assist companies reporting their social and environmental performance.67 The
Australian Stock Exchange (ASX) has the ASX Principles on Corporate Governance
and Best Practice Recommendations, a voluntary guide for publicly listed companies
in their corporate governance practices. It includes an expectation for listed
companies to internally report on ‘sustainability risks’.68 The Fairfax newspapers,69
with the St James Ethics Centre, are active sponsors of the Corporate Responsibility
Index (CRI) based on one developed by Business in the Community in the United
Kingdom.70 In 2008 just 38 companies participated in the CRI index. More recently
the St James Ethics Centre has joined the Global Reporting Initiative (GRI), the
leading CSR reporting framework, discussed below.

To the extent that there has been an increase in CSR report disclosures in Australia it
is driven in part by an increased focus on greenhouse gas emissions and broader
climate change related risk exposures as much as stakeholder expectations relating to

62
KPMG International Survey of Corporate Responsibility Reporting 2008 at p13.
63
Ibid. In Australia just 38 percent of the top 100 companies have a publically available CSR report.
64
See Anderson, Helen and Landau, Ingrid,; Corporate Social Responsibility in Australia: A Review,
Corporate Law and Accountability Research Group, October 2006, Working Paper No. 4 quoting to
Birch, D and Batten, J, Corporate Citizenship in Australia: A Survey of Corporate Australia
Melbourne: Deakin University, 2002.
65
CAMAC Report at p 64.
66
Fitzgerald, E V K; Regulating Large International Firms, p 14 (United Nations Research
Institute for Social Development, Technology, Business and Society Program Paper No 5, 2001).
67
Examples of international guidelines include the Valdez Principles (1989), the WICE (World
Industry Council for the Environment) guidelines (1993), the PERI (Public Environmental Reporting
Initiative) guidelines (1994), and the GRI (Global Reporting Initiative) guidelines (1999, 2002). There
are also numerous national guidelines, see for example; Top 120 Australian and New Zealand
Companies - Corporate Social Responsibility Index <www.reputex.com.au> (accessed 23 April 2009)
68
ASX Corporate Governance Principles. Available at:
<http://www.asx.com.au/about/pdf/ASXRecommendations.pdf>.
69
Including The Sydney Morning Herald, The Age, and the Australian Financial Review newspapers.
PriceWaterhouseCoopers validate the results and are also a sponsor of the CRI.
70
See <http://www.corporate-responsibility.com.au/content/faq> (accessed 20 April 2009).

11
corporate responsibility.71 The National Greenhouse and Energy Reporting Act 2007
(the NGER Act) created a system for Australian companies to report on greenhouse
gas emissions, energy production and energy consumption. These reports, which
directly relate to sustainability issues, facilitate and underpin the Federal
Government’s proposed Carbon Pollution Reduction Scheme.72 Under the NGER Act
if controlling corporations exceed certain emission thresholds they must submit a
report by 31 October 2009. As the emission thresholds reduce over time an increasing
number of corporations will need to disclose reports on greenhouse gas emissions.73

The development of generally accepted CSR accounting principles or other reporting

and benchmarking indices is essential. There has been some development toward a
common framework that identifies the rights relevant to business and the limits of a
company’s responsibility to implement them, but most of this defining work is still
ongoing.

The Global Reporting Initiative – the emerging global standard

As discussed, if a mandatory CSR reporting framework is ever adopted in Australia,
the increasingly globalised and interdependent nature of world financial and capital
markets clearly require it to be consistent with existing and emerging international
trends. While the UN Global Compact was, for a time, the most followed standard,
the Global Reporting Initiative (GRI) is now the leading disclosure framework for
assessing corporate conduct deserving closer examination.74 The GRI has been widely
adopted as an internationally recognised framework for sustainability reporting
throughout the European Union75 and increasingly, in recent years, other
jurisdictions.76 The GRI is developed and maintained by a global non-profit
organisation governed by an international multi-stakeholder Board and advised by
various stakeholder councils and technical advisory committees.77 GRI draws on a
global network of experts from accountancy, business, civil society, investment,
71
KPMG International Survey of Corporate Responsibility Reporting 2008 at p 32.
72
Under the National Greenhouse and Energy Reporting Act 2007 (Cth) requires the ultimate
Australian holding company of a corporate group that meet one or more specified reporting thresholds
for greenhouse gas emissions, energy production or energy consumption must report on the qualifying
greenhouse gas emissions, energy production and energy consumption of their corporate group or
facilities. The first reporting period ends on 1 July 2009 with registered corporations required to report
by 31 October 2009. The Carbon Pollution Reduction Scheme (CPRS) is part of the Australian
Government’s strategy to reduce Australia’s carbon pollution by 60 percent of 2000 levels by 2050.
73
There are two types of thresholds at which corporations are required to participate - facility
thresholds and corporate thresholds. Each type of threshold has a greenhouse gas threshold and an
energy threshold. If a corporation exceeds any one or more of the four thresholds for each year,
registration is required. See <http://www.climatechange.gov.au/reporting/apply.html#thresholds>
(Accessed 9 June 2009).
74
The UN Global Compact and the Global Reporting Initiative have announced a strategic alliance
aimed at comprehensive, “near or total universal” standard. See< http://www.unglobalcompact.org/
NewsandEvents/news_archives/2006_10_06.html> (accessed 9 June 2009)
75
KPMG International Survey of Corporate Responsibility Reporting 2008 find that more than three-
quarters (77 percent) of the top 250 and 69 percent of the top 100 reporting companies follow the
Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines.
76
See CAMAC and JPCCFS Reports. The KPMG International Survey of Corporate Responsibility
Reporting 2008 found the GRI Guidelines are the most common tool used to decide report content and
40% of reporters world-wide mention the use of these guidelines in their sustainability reports.
<http://www.aph.gov.au/senate/committee/corporations_ctte/completed_inquiries/2004-
07/corporate_responsibility/report/c06.htm> Chapter 6.42. The 2007 KPMG International Survey of
Corporate Responsibility Reporting found the GRI Guidelines are the most common tool used to
decide report content and 40% of reporters world-wide mention the use of these guidelines in their
sustainability reports. As a reflection of its basis of legitimacy, GRI remains neutral on the role of
regulation in sustainability reporting.
77
See <http://www.globalreporting.org/AboutGRI/> (accessed 8 June 2009).

12
labour and others, who contribute on a voluntary basis to the governance of the GRI
and to the development and promotion of GRI’s Sustainability Reporting Guidelines
and wider framework.78

The evolution of the GRI framework is in its relative infancy. Since its launch in 2002
the GRI has published three versions of its guidelines, the most recent in 2006.79 It is
understood that continuous refinement of the GRI is necessary so that it always
reflects the interests of stakeholders. To this end GRI Guidelines users are encouraged
to engage in the process of developing and refining the guidelines over time.80 One of
the GRI’s key challenges is to accommodate the broad variety of disclosure needs and
expectations of its wide range of report users and company stakeholders. As at June
2009 over 1600 organisations used the GRI worldwide.81 In Australia 68 of the top
100 companies release a CSR report82 and of these 70 percent produce a sustainability
report following or making reference to the GRI.83

It is significant in terms of the GRI’s uptake in Australia that the GRI recently
appointed Dr Simon Longstaff, Executive Director of the St James Ethics Centre, to
the Global Reporting Initiative Board84 and more recently it was announced that the
Australian Government would be a member of the GRI Governmental Advisory
Group.85 Government and community involvement in the development of the GRI
will improve its relevance and increase its uptake in Australia reinforcing the existing
trend for Australian companies to report 'with reference' to the GRI Framework.86

As discussed, it was in 2006 that the CAMAC and JPCCFC Reports considered
whether to adopt the GRI Framework as the voluntary Australian sustainability
reporting framework. At the time this was considered ‘premature’.87 It was thought the
diversity of opinion over the appropriate framework for inclusion in the ASX Council
Recommendations demonstrated “a degree of uncertainty as to which framework was
preferable for Australian market conditions.”88 Since then increases in the level of
acceptance and uptake of the GRI framework, both nationally and internationally, as
well as economic and political developments, means it’s time to re-examine the

78
In May 2008 the Federal Government granted $2 million over three years to the St James Ethics
Centre to support to Australian businesses develop and refine the CSR management tools including the
Corporate Responsibility Index and the Global Reporting Initiative.
79
Known as G3, which build on the G2 (released in 2002), which in turn are an evolution of the initial
GRI Guidelines, which were released in 2000.
80
See <http://www.globalreporting.org/AboutGRI/> (accessed 8 June 2009).
81
Over 80 per cent of Global Fortune 250 companies now disclose their sustainability performance in
“sustainability” or “corporate responsibility” reports, of which more than 75% use GRI’s Sustainability
Reporting Framework as their basis.
82
KPMG International Survey of Corporate Responsibility Reporting 2008.
83
Ibid. This was a significant increase over the approximately 200 listed in 2003.
84
See <http://thehub.ethics.org.au/gri/> (accessed 8 June 2009).
85
Senator Nick Sherry, Closing Keynote address to the Australian Centre for Corporate Social
Responsibility 3rd Annual Conference, Sydney 5 February 2009. <http://www.treasurer.gov.au/
DisplayDocs.aspx?doc=speeches/2009/003.htm&pageID=005&min=njs&Year=&DocType=>
(accessed 8 June 2009). As of 5 June 2009 Mr Chris Bowen had replaced Sen. Nick Sherry as the
Minister for Financial Services, Superannuation and Corporate Law.
86
Submission to the JPCCFC Report from the Centre for Australian Ethical Research, The State of
Sustainability Reporting in Australia 2005, March 2006, p. 4. In Australia 70 percent of top 500
companies that produced a sustainability report for 2006 have followed or make reference to the GRI.
The number of top 100 companies reporting has doubled to 68, see KPMG International Survey of
Corporate Responsibility Reporting 2008 at p36.
87
JPCCFC Report at p. 29.
88
KPMG International Survey of Corporate Responsibility Reporting 2008 at p 13.

13
adoption of the GRI in Australia as an official sustainability reporting framework.

A way forward for CSR in Australia

There is a growing sense of convergence of CSR issues evidenced by the emergence
of the GRI as the leading international reporting framework. A reasonable number of
Australian companies have become more comfortable with the idea that at some level
it is now possible to define those CSR issues most relevant for corporate disclosure.
Tracking the development of soft law through voluntary reporting frameworks, and
the emergence of mandatory CSR reporting requirements, it is now possible to
develop a basic checklist of the principal social and environmental issues of concern
to stakeholders.89 International approaches to CSR and the various voluntary
guidelines already followed by individual companies provide indicia for reaching a
consensus on which social and environmental issues are relevant for a universal CSR
reporting framework.90

Adoption of a universal CSR standard will only happen if Governments lead the way.
When the world economy recovers from the GFC governments should resolve to take
a more coercive approach to CSR with an eye to long term sustainability and the
collective good. Government must play a critical role with respect to more clearly
defining the limits of corporate responsibility. If implemented effectively enshrining
CSR into the heart of the corporate governance could channel the immense power of
corporations making them a more progressive force in society. Of course legislation
and other forms of regulation alone may not create a responsible corporate culture.
Contemporary history of corporate governance is filled with instances of companies,
while upholding the letter of the law, failed to uphold the spirit of corporate
responsibility.91 However, an agreed expectation of what corporate responsibility
involves and standards for reporting on the social, ethical and environmental aspects
of corporate performance, would arguably give corporations a clearer framework for
navigating the inevitable dilemmas and conflicts of managing their businesses. As to
the appropriate level of detail to which such issues are reported, this may be difficult
for some companies to determine and will depend on the impact of the issue to the
company as well as its stakeholders. As such it will be important when encouraging or
mandating increased levels of CSR disclosure for regulatory agencies to provide clear
guidance on those particular social and environmental issues most relevant to business
and also give direction as to when such disclosure is necessary.92 The inherently
subjective nature of many CSR issues means that third party auditing of disclosure
should also be mandated and ultimately that there be sanctions for a breach of
minimum CSR standards.

There has been a pronounced trend toward the mainstreaming of CSR issues in the

89
The key GRI indicators are as follows: Strategy and analysis, Organisational profile, Report
parameters, Governance, commitments and engagement, Economic indicators, Environmental
indicators, Product responsibility indicators, Labour practices and decent work indicators, Human
rights indicators and Society indicators. See <www.globalreporting.org>.
90
International Council on Human Rights Policy, Beyond Voluntarism; Human Rights and the
developing international legal obligations of companies (2002) at 65.
91
See for example Nolan, Justine; Corporate responsibility in Australia: rhetoric or reality? [2007]
UNSWLRS 47 discussing the Australian Wheat Board (AWB) who participated in the CSR Index at
the same time they were bribing the regime of Saddam Hussein in Iraq. See also Enron who won
awards for corporate governance and risk-management processes. See Cain, Daylain, Regulating
Behavior off the Books: Perverse Effects of Requiring Disclosure, at page 13 of Tenbrunsel, Ann E.,
Ethics in groups, Emerald Group Publishing, 2006.
92
Such as, but in more detail than, the ASX guidelines, ASX Corporate Governance Principles.
Available at: <http://www.asx.com.au/about/pdf/ASXRecommendations.pdf>.

14
broader corporate arena.93 Soft law initiatives linking corporate goals with social and
environmental concerns are rapidly developing. Sophisticated environmental and
consumer lobbying has seen pressure on business from wider civil society and
become increasingly influential over time.94 Through these developments the
definition of materiality is being practically extended to encompass information
beyond traditional financial information.95 Issues that are often categorized as non-
financial aspects are implicitly being taken to be material.96 The challenge lies in
folding in the emerging consensus on other values, generally understood to be
encompassed by CSR, into a broader understanding of issues that are material to a
company and thus require public disclosure.

CONCLUSION

Analysing corporate social responsibility is a Herculean task. Not unlike Hercules’s

dual with the Hydra97 each question gives rise to a larger number of related and often
unanticipated legal dilemmas. With each question answered, new unanswered
questions arise: Which corporations and which industries should be required to report
on which corporate responsibility standards? What social and environmental issues
should be disclosed; to what extent is there an emerging consensus on the materiality
of social issues? Should different reporting requirements be imposed on different
industries? What should the consequences be for corporations which fail to report, or
perform badly against a mandatory corporate responsibility framework? Should the
directors be liable, or the companies fined and lose government funding or tax
concessions, or be banned from tendering for government contracts or even delisted?
Which stakeholders’ perspectives should be addressed? What uses could the
information be put to? Could a disclosure by a company acting responsibly reporting,
lets say, a breach of some CSR standard, expose that company and/or its directors to a
class action claim or a hostile corporate litigation?98 And how would corporate
responsibility obligations be reconciled with the existing duties of directors to act in
the best interests of the corporation?99 These are just some of the alternative
perspectives and possible consequences requiring consideration as part of an
examination of the effect of introducing compulsory CSR reporting. A coherent
resolution to all of the issues raised in this area is, unfortunately, beyond the scope of
this essay; in part because the issues in corporate responsibility and corporate
governance are vast, complex and continually evolving.

It’s been just eight months since the GFC touched off reverberations in the real
93
KPMG International Survey of Corporate Responsibility Reporting 2008.
94
For example, Amnesty International has worked with the Body Shop to develop a charter explicitly
aims to “balance the financial and human needs of its stakeholders: employees, customers, franchisees,
suppliers and shareholders” and assumes an indirect role in protecting human rights.
95
Westpac’s annual report is an example of an expanded and reshaped annual report that reflects the
needs of customers and the community to understand the wider impact of the company on society.
96
For example see Michele Chan Fisher, Friends of the Earth, “What a reasonable investor would
need to know about a company to make financial and voting decisions won’t change…but what
reasonable investors and the public at large find important over time does change, so issues like global
warming…human rights can be included in the purview of what’s ‘material’”, July 11, 2003
<www.ishareowner.com/news/article.cgi?sfArticleId=1170> (accessed 8 June 2009).
97
The Hydra is a multi-headed beast in Greek mythology, which possessed the disturbing property that
for each head removed by the warrior Hercules two heads quickly grew from the stump of the neck left
behind.
98
See discussion in May, Steve; Cheney, George; Roper, Juliet; The debate over corporate social
responsibility, Oxford University Press, 2007 at p. 172.
99
For example under s 180(2) of the Corporations Act.

15
economy and reinforced the degree to which the absence of social responsibility
among a few corporations affected all of us. The causes and impacts of the GFC has
caused society to question how such unrestrained corporate excess was allowed to
happen, in most cases without a law being broken. What structures made this abuse of
trust possible? How did our corporate governance structures fail? What reforms are
needed to prevent such a failure of corporate governance and corporate responsibility
ever happening again? While answers to these questions are complex and difficult
what we can certain of is that business as usual is no longer an option. It no longer a
question of whether we should require companies to account for the interests of the
community but how should we require them to. The result of continuing with the
shareholder centric model or failing to mandate an agreed CSR reporting and
accountability standard is evident from the economic and social wreckage of the GFC.

The GFC has shown the folly of business and investment decisions based on the
pursuit of short-term profits over long-term real and measurable value creation. The
undesirable consequences of the GFC (and climate change) were driven in part by
adherence to the shareholder primacy model, putting shareholders’ interests ahead of
the community (and the environment). This model of corporate governance is no
longer tenable and must be transformed to guard against the global economic and
social dislocations which are able to be generated by relatively few, but high impact,
instances of corporate irresponsibility. Effective corporate governance mechanisms,
that appropriately reflect the legitimate interests of all stakeholders, will require
continuous and vigilant examination of the corporate law and corporate governance
regimes, with continuous fine tuning and regular reviews. This will be difficult to say
the least. For this reason the Australian Government should start by mandating
companies to utilise the GRI framework and disclose a CSR report. The GRI has
established itself as a legitimate and widely supported mechanism for engagement
with stakeholders. The adoption of the GRI, or some variation by the Australian
Government to enforce, or otherwise coerce, sustainability reporting, will be a key
indicator of the mainstreaming of the corporate responsibility agenda in the coming
years. If corporations do not implement CSR reporting, or fail to demonstrate they are
actively considering environmental and social risks as well as stakeholder concerns in
determining the interest of the company, it will be necessary for the Australian
Government to provide a clear articulation of CSR within the Corporations Act.100

100
See Supplementary report by Labor members to the JPCCFS. Chris Bowen MP (as at 5 June 2009,
Minister for Financial Services, Superannuation and Corporate Law; Minister for Human Services)
Senator Nick Sherry (now Assistant Treasurer but formerly the Minister for Financial Services,
Superannuation and Corporate Law) Senator Penny Wong (Minister for Climate Change and Water).
See also “Additional remarks by Senator Andrew Murray, Australian Democrats Senator for Western
Australia,” annexed to the JPCCFS Report.

16
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