The three sustainability pillars and the board — student companion

Accounting Ahead | Original study resource | accountingahead.com.au

The emergence of CSR and the three pillars

MODULE 5 | PART D.1 | STUDENT COMPANION

How reporting emerged

When What happened

Early 1990s Reporting becomes widespread in Australia: mining companies, some water and energy

utilities and others publish voluntary stand-alone environmental reports

Mid-1990s Social information follows

Today Most leading companies publish sustainability or CSR reports (the labels are interchangeable)

covering economic, social and environmental performance

Regulation Modern slavery laws (California, UK, Australia); climate reporting in places such as the UK;

comply-or-explain reporting in Malaysia, Hong Kong, Singapore and the Philippines; the EU's

reporting directive

Three arguments for environmental sustainability

Argument In one line

Humanistic We depend on nature to survive, and we cause the damage, so we must fix it

Intergenerational It is unfair to leave future generations to live with our consequences

Naturalistic Nature has value in its own right and deserves protection for its own sake

Three pillars

Environmental

Protect nature's capacity to support life

Climate change

Waste and the circular economy

Pollution

Biodiversity

Resource limits, such as fresh water

REDcycle, 2022: about 12,000 tonnes of

soft plastic stockpiled, not recycled

Social

Keep communities functioning fairly

Child labour

Ethical trading: no bribery, corruption or

unfair use of power

Supply chain management

Fair relationships with staff, customers

and community

Seven-Eleven, 2015: underpaid workers;

about $173 million repaid

Economic

Stay viable, stable and transparent

Long-term viability

Stability of the economic system

Transparency about operations and

risks

Efficient, responsible use of resources

Porter Davis, 2023: builder collapse left

about 1,700 homes unfinished

ETHICS & GOVERNANCE | M5 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Case notes and the board

MODULE 5 | PART D.1 | REAL EXAMPLES AND CONCEPTS

REDcycle (environmental): shoppers returned soft plastics to bins at Coles and Woolworths. Collections

paused on 9 November 2022 and about 12,000 tonnes were found stockpiled. The operator was wound up

on 27 February 2023 and the supermarkets took over managing the stockpiles.

Seven-Eleven (social): an August 2015 media investigation revealed widespread underpayment in

franchised stores. A repayment program, first overseen by an independent panel chaired by Allan Fels,

repaid about $173.6 million to more than 4,000 workers by February 2020.

Porter Davis (economic): the Melbourne home builder collapsed into liquidation in March 2023, leaving

about 1,700 homes unfinished in Victoria and Queensland. About 560 customers had paid deposits without

the mandatory domestic building insurance being taken out, and the Victorian Government created a

one-off relief scheme for them.

Pillars are connected

Environmental

About 12,000 tonnes of collected soft

plastic stockpiled in warehouses, not

recycled

Economic

Operator wound up in February 2023;

the supermarkets take on the

stockpiles

Social

Public trust in recycling programs

takes a hit

The accountability lesson

Reporting what was collected is not the same as reporting what was recycled

A sustainability claim is only as strong as the weakest link in the value chain behind it. Weakness in one pillar spreads to the others.

ETHICS & GOVERNANCE | M5 PART D.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

The board's business case

The board

Responsible for strategy and for risk

Customers

Win and keep them

Innovation

New products and models

People

Attract, motivate, keep staff

Risk

Better identified and managed

Costs

Efficiency and less waste

Reputation

Brand and licence to operate

Capital

Access to funding

Pressure

Regulation, stakeholders, ethics

New organisational forms: social enterprises exist for a public or community benefit mission, trade to fund it

and reinvest much of their profit in it. B Corporation certification recognises businesses that use commerce to

tackle social and environmental problems; the Australian tour company Intrepid Travel was certified in 2018.

Sources: NSW EPA and Packaging News on REDcycle (2023); Fair Work Ombudsman, 7-Eleven compliance partnership report (October

2020); Victorian Government and liquidator Grant Thornton statements on Porter Davis (2023); Intrepid Travel release (August 2018).

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Accounting Ahead | Original study resource | accountingahead.com.au

Practice questions

MODULE 5 | PART D.1 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Which pillar?

Place each issue under the environmental, social or economic pillar.

Issue Pillar

(a) A factory discharges wastewater into a river.

(b) A supplier pays its workers below the legal minimum wage.

(c) A bank relies heavily on a handful of very large, uninsured depositors.

(d) A developer clears native vegetation that shelters threatened species.

(e) A sales manager offers a bribe to win a government contract.

(f) A company publishes clear information about the risks it is exposed to.

(g) A restaurant chain sends tonnes of food waste to landfill.

(h) A company cuts all research spending to hit this year's profit target.

Question 2 - Riverbend Foods

Imagine Riverbend Foods, a vegetable processor and the largest employer in a regional town. A severe

drought cuts river flows and halves its water allocation. Trace how this environmental problem spreads to the

economic and social pillars, and suggest one response for each pillar.

All issues and Riverbend Foods are imagined teaching examples.

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 5 | PART D.1 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Which pillar?

Issue Pillar Why

(a) Environmental Pollution

(b) Social Supply chain management and fair work

(c) Economic Viability and the stability of the financial system

(d) Environmental Biodiversity

(e) Social Ethical trading

(f) Economic Transparency

(g) Environmental Waste

(h) Economic Long-term viability sacrificed for short-term results

Question 2 - Riverbend Foods

Pillar How the problem appears Possible response

Environmental Water scarcity and stress on river health Recycle process water; cut water use

per tonne

Economic Lower output, higher costs to buy or truck water,

lower revenue; farmers supplying it earn less

Diversify water sources and suppliers;

plan for drought in strategy

Social Reduced shifts or job losses in a one-employer

town; stress for farming families; local businesses

suffer

Engage the community early; redeploy

rather than lay off staff where possible

The point: a problem in one pillar rarely stays there. Good answers show the links between all three.

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