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Sustainability Balanced Scorecard Disclosures: An Australian Investigation By

Evangeline O. Elijido-Ten and Yulianda Tjan Swinburne University of Technology

Abstract: The purpose of this study is to examine the extent by which the Balanced Scorecard (BSC) disclosers among the Top 100 Australian listed companies incorporate sustainability measures/targets/perspective in their performance measurement system and to analyse the level of commitment to sustainability of firms through the use of the RDAP (reactive, defensive, accommodative and proactive) model. This is an archival empirical study using content analysis to scrutinise the publicly available reports provided by the BSC disclosers. A set of index and criteria are developed to facilitate the RDAP analysis. The analyses show that for 2008 and 2007, most of the BSC disclosers incorporate sustainability measures/targets/perspective in their performance measurement system, hereafter referred to as Sustainability Balanced Scorecard (SBSC) disclosers. The results also show that the SBSC disclosers increase from 2007 to 2008. As to the commitment to sustainability, defensive profile is found to be the most dominant category within the sample in this study given that it holds the highest number of SBSC disclosers. Two major conclusions derived from the findings in this study are: (1) BSC disclosers are the ones most likely to also incorporate sustainability measures/targets/perspective in their performance measurement system; and (2) it is possible for the report users to have an understanding of the company’s level of commitment to sustainability from the publicly available reports. The conclusions from this study provide support for the voluntary disclosure theory which argues that superior performers are more forthcoming in truly discretionary disclosure channels.

Keywords: Sustainability Balanced Scorecard, Voluntary public disclosures, Australian Top 100 Version Date: 10th August, 2011 ----------------------------Corresponding author:  Dr Evangeline Elijido‐Ten  Faculty of Business and Enterprise  Swinburne University of Technology  PO Box 218 Hawthorn Vic 3122  Ph +61 3 9214 4471; fax +61 3 9819 2117  Email: [email protected] 

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1.0

Introduction

As sustainability becomes a major public concern, an increasing number of companies provide environmental and sustainability disclosures (see for example, Ernst and Young 2002; KPMG 2008). The literature is, indeed, replete with suggestions that these disclosures help firms to maintain their legitimacy as well as improve their image as ‘good corporate citizen’ (see for example, Patten 1992; Blacconiere and Patten 1994; Deegan and Rankin 1996; 1997; Bieker 2003; Elijido-Ten 2008). Consequently, a growing body of research emerges on the viability of embedding sustainability into corporate strategy and adopting the Balanced Scorecard (BSC) as a vehicle to align corporate values with financial performance (see for example, Epstein and Roy 2001; Figge, Hahn, Schaltegger and Wagner 2002; Chenhall 2005; Crawford and Scaletta 2006). Kaplan and Norton (2001) describe the BSC as a tool to assist management in aligning, communicating and tracking progress against ongoing business strategies, objective and targets. Given that the BSC is a flexible multiperspective performance evaluation tool, many BSC adopters have added other measures such as environment, safety, health, and community into their BSC (Malina & Selto 2001; Ittner, Larcker & Randall 2003; Zingales & Hockerts 2003). The practice of incorporating environmental and social targets/perspectives into the BSC paves the way to what is now known as Sustainability Balanced Scorecard (SBSC). An SBSC is a management tool based on the traditional BSC that integrates the three dimensions of sustainability namely: (1) profit (financial); (2) planet (environment); and (3) people (social) (Epstein and Wisner 2001; Figge et al. 2002). The implementation of an SBSC enables the integration of environmental and social strategies and objectives into the core management of companies. In a study of the Top 100 Australian publicly listed companies for 2007 and 2008, Elijido-Ten (2011) reports that all BSC disclosers also provide sustainability reports. Her research is limited to whether companies that provide BSC disclosure also provide sustainability reports and whether these disclosures are associated with size, industry and market performance. The question as to whether the BSC disclosers have incorporated sustainability measures/targets/perspective into their BSC has not been explored. This is significant because if companies are to achieve simultaneous improvements in the economic, environmental and social areas, sustainability has to be integrated into their core management and performance measurement model. Thus, the aim of this study is to investigate the extent by which Australian listed companies incorporate sustainability into their BSC. In addition, this study also seeks to explore the disclosing firms’ degree of commitment to sustainability by examining management practices and actions as disclosed in their publicly available reports using the reactive, defensive, accommodative and proactive (RDAP) model (Carroll 1979; Wartick & Cochran 1985; Hunt & Auster 1990). The lack of research in the area leads to the following questions to be explored in this study. 1. Do Australian listed companies that publicly disclose their BSC incorporate sustainability measures/targets/perspective in their performance measurement system? 2. Can the level of commitment to sustainability by the SBSC disclosers be determined from publicly available disclosures? 2   

 

Despite companies continuing to disclose sustainability information, numerous authors have indicated that disclosing firms are rarely integrating sustainability into their general management system (see for examples, Figge et al. 2002; Bieker 2003). Hence, it is possible that firms providing BSC disclosures and sustainability reports may not incorporate sustainability strategies/perspective/measures/target as part of their performance measurement system. In Australia itself, there has not been any study investigating the extent by which companies integrate sustainability perspective into their BSC. Likewise, no study has been conducted to investigate the disclosers’ level of commitment to sustainable practices based on publicly available reports. By examining the companies that provide SBSC disclosures and investigating their level of commitment to sustainability, this study can provide relevant insights for report providers in repositioning themselves to improve their public accountability and corporate image. The findings in this study can also assist the report users to become more discerning in reading the reports provided by the disclosing companies. In order to provide some practical empirical examples, this study will feature exemplary examples of Australian companies by featuring their sustainability practices that fit under the reactive, defensive, accommodative and proactive (RDAP) categories. This is valuable especially for users who seek to assess the firms’ true environmental and social concern. The rest of the paper is divided into four main parts. Section 2 presents an overview review of the relevant literature on BSC, SBSC and the RDAP concept. Section 3 provides an explanation of the research methodology. Section 4 presents the results and discussion of the findings. Finally, Section 5 discusses the conclusion together with the limitations of this study and the recommendations for future research. 2.0

Literature Review

2.1 Balanced Scorecard (BSC) The BSC is introduced by Kaplan and Norton in the early 1990s as a performance measurement system that translates an organisation’s mission and strategy into action. Kaplan and Norton (1992) state that the initial idea of devising the BSC is to provide a set of measures that gives managers a fast but comprehensive view of the business in the following areas: (i.e. the four perspectives of the original Kaplan and Norton BSC Model: 1) Financial Perspective - shows whether the translation of the company’s missions and strategies lead to improved economic success; 2) Customer Perspective focuses on how to create and keep customers; 3) Internal Business Process Perspective - monitors the internal processes that are critical to delivering products/services to customers such as product quality and innovation; 4) Learning and Growth Perspective - describes the infrastructure needed to achieve the objectives in the other three perspectives such as employee and information system capabilities. Each perspective in the BSC should consist of the relevant goals, indicators and measures that link to the corporate strategy. Kaplan and Norton (1996a, p. 75) claim that “the scorecard addresses a serious deficiency in traditional management systems: their inability to link a company's long-term strategy with its short-term actions”. They also advise managers to continuously embed the four perspective of the BSC in their 3   

 

ongoing management system by: (1) clarifying and translating the vision and strategy; (2) communicating and linking strategic objectives and measures; (3) planning and target-setting; and (4) strategic feedback and learning (Kaplan and Norton 1996a). Since its introduction, BSC has gained a high degree of recognition as one of the most widely used recent innovations in management accounting (Lawrie and Cobbold 2004). In building up a BSC, performance targets and measures have to be formulated for every chosen perspective. These performance targets and measures consist of lag and lead indicators that are causally linked. Figge et al. (2002) define lag indicators, also known as ‘key performance indicators’ (KPIs), as the outcome measures that indicate whether the strategic objectives in each perspective are achieved. Lead indicators, also known as ‘key performance drivers’ (KPDs), are the performance drivers which reflect how the lag indicators come about. The effectiveness of the BSC as a performance measurement system is significantly associated with the strategy and causal links within the BSC. These causal links should not only occur within the individual perspective of the BSC but also throughout the four perspectives. Numerous studies have found that the use of BSC is positively associated with improvement in organisational performance. For example, Malmi (2001) report that the introduction of the BSC improves areas such as logistics, delivery reliability, warehouse turnover, planning and control systems, as well as company growth. Similarly, in their study on the effectiveness of the BSC in the US banking industry, Davis and Albright (2004) find superior financial performance for branches adopting the BSC compared with the non-BSC adopting branches. BSC has also been found to lead to the outcomes of a more qualitative nature. For example, Epstein and Manzoni (1998, p. 196) note that the BSC “allows managers to keep an eye on the way performance is achieved and offers the organisation a clear way to communicate and reinforce its strategy”. Likewise, Malina and Selto (2001) suggest that BSC adoption provides greater opportunity to develop, communicate and implement organisational strategies. Nevertheless, not all studies highlight the positives. For instance, Ittner et al. (2003) find negative association between BSC usage and return on assets as well as sales growth. Ittner and Larcker (1998) reveal that BSC usage assists only a minority of managers in understanding the goals and strategies of the company or in relating their jobs to the business objectives. Moreover, Chenhall and Langfield-Smith (2007) report that while BSC is part of the ‘best practice’ of high performance firms, they are also evident in poor performing firms that has less developed management techniques. Hoque and James (2000) find that the effectiveness of the BSC is affected by the company’s size and the intensity of integrating BSC to the business process. They suggest that large firms make more use of the BSC than small firms. They also find that the greater the company integrates BSC to its core business strategy, the higher the opportunities to gain benefits from its use. In their survey of Australian manufacturing firms, Yu, et al. (2008) reveal that different forms of the BSC are used by different organisations. For instance, they vary in terms of the number of perspectives. Yu, et al. (2008) also suggest that there are a number of organisations that use additional measures/perspectives such as safety, environmental, behavioural and ethical measures/targets. 4   

 

As earlier noted, the incorporation of sustainability measures/targets/perspective is now commonly referred to as Sustainability Balanced Scorecard (SBSC) and this is discussed next. 2.2 Sustainability Balanced Scorecard (SBSC) The term ‘sustainability’ is defined by the United Nations (cited in Langfield-Smith et al. 2009, p. 851) as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs”. Based on this definition, ‘corporate sustainability’ is defined as meeting the needs of a firm’s stakeholders without compromising its ability to also meet the needs of future stakeholders (Bieker et al. 2001, p. 23). Many companies have incorporated sustainability management system into their core business process during the last decade. Figge et al. (2002), however, state that this system is often not linked to the critical success factors and performance evaluation system of the company. Thus, they suggest the introduction of a Sustainability Balanced Scorecard (SBSC). An SBSC is a management tool based on the traditional BSC that integrates the three dimensions of sustainability namely: (1) profit (financial); (2) planet (environmental); and (3) people (social). Conceptually, the adoption of an SBSC offers potential to create effective and efficient strategies in linking environmental and social managements systems with the firms’ strategic planning and management (Bieker et al. 2001; Figge et al. 2002). There is the example of Novartis where an SBSC developed for an environmental service unit enables the integration of sustainability into the overall company strategy (Zingales & Hockerts 2003). In addition, Bieker (2002) suggests that an SBSC also helps to identify the important strategic environmental and social objectives of the firm and to illustrate the causal relationship between financial and non-financial performance. In relation to this, Epstein and Wisner (2001) assert that an SBSC can be used to communicate the importance of company’s sustainability strategy thereby helping senior managers to reposition and improve their corporate image. They also claim that the improvement in sustainability performance is associated with lower operational costs, increased employee satisfaction, improved productivity, increased market opportunities and better shareholder relationship. Moreover, an SBSC could also enhance the transparency of internal process and contribution of employee in achieving corporate goals (Bieker 2003). There are, however, a number of challenges that companies may encounter when developing an SBSC. For example, developing an SBSC is quite complicated. Bieker (2002, p. 9) states that “according to practical experiences, developing and implementing an SBSC ... is rather a complex, highly micro-political process requiring a lot of patience, power and persistence”. As a result, many companies tend not to update their measures leading to outdated measures. Zingales and Hockerts (2003) also argue that many companies lack effective mechanisms to question the usefulness of those measures. Another challenge in setting up an SBSC is that, in practice, the nonfinancial aspects are difficult to measure (Bieker & Waxenberger, 2002). Furthermore, the introduction of an SBSC could potentially be rejected by some employees. This is because as transparency increases, the pressure from employers to achieve the corporate goals also increases. Bieker (2002, p. 9) explains that “a manager of the environmental department is extremely afraid of being more measurable concerning 5   

 

the value-added of his/her area than before”. He also suggests that an important precondition for the internal acceptance of an SBSC is a commitment from top management to implement the SBSC (Bieker 2003). For example, senior managers should take into account possible mental reservations of employees and tackle them in a proactive way. Consequently, the commitment from top management plays a significant role in the development of the SBSC. 2.3 Sustainability Disclosures There are various motivations in adopting and disclosing the company’s sustainability management strategy. These include improving the transparency and communication with the stakeholders, creating an image as a ‘good corporate citizen’, and maintaining ‘license to operate’ among others (Bieker and Waxenberger 2002; Bieker 2003; Finch 2005). The environmental disclosure literature has much to say in this area. For example, in a study of petroleum companies, Patten (1992) finds that the threats to the industry’s legitimacy, following the Alaskan oil spill, entice firms to increase the amount of environmental disclosures. He also finds positive association between firm size and the level of disclosures. Prior studies (Patten 1992; Deegan and Rankin 1996; 1997; Elijido-Ten, Kloot and Clarkson 2010) also find that adverse environmental events have significant impact on the level of environmental disclosures provided by firms. Moreover, Deegan and Rankin (1997) also confirm that report users consider environmental information in decision making and this is another reason behind the changes in their environmental disclosures. In their study on corporate environmental performance and environmental disclosure, Clarkson et al. (2008) find a positive association between environmental performance and the level of discretionary disclosures in environmental and social reports or related web disclosures. This finding supports the voluntary disclosure theory which argues that superior environmental performers are more forthcoming in truly discretionary disclosure channels. Given that more reporting measures and guidance are now available for firms to adopt and disclose BSC and sustainability reports, it is also conceivable that companies disclosing these reports are the ones who are more willing to incorporate sustainability measures/targets/perspective into their BSC as they are more likely to have this information readily available. Therefore, it is reasonable to expect that SBSC adoption and public disclosure will continue to increase. Apart from identifying the SBSC disclosers, this study also seeks to investigate the level of commitment to sustainability among companies that provide SBSC disclosure. In doing so, the RDAP model is adapted in this study. Hence, the literature discussing this model is reviewed next. 2.3 The RDAP Model Various studies have been conducted in differentiating between those firms that merely aim to meet legal requirements and those that adopt more proactive environmental strategies (Carroll 1979; Clarkson 1995; Henriques and Sadorsky 1999; Buysse & Verbeke 2003). Carroll (1979) suggests that sustainability responsiveness can range on a continuum from no response (do nothing) to a proactive response (do much). A range of typologies designed to classify firms according to their environmental management practices can be summarised into the reactive, defensive, accommodative and proactive (RDAP) model (expressed in terms used by McAdam (1973) and quoted by Carroll (1979, p. 502) as follows: 6   

 

1. Reactive (fight all the way) – those that deny their responsibility by doing less than what is required (Clarkson 1995). In other words, limited resources are committed to solve social and environmental problems. These limited resources are made to comply with the legal requirement. Henriques and Sadorsky (1999) also assert that reactive companies can be characterised as those that do not provide environmental reports, no employee environmental training and those that do not have much involvement of top management and employees in sustainability issues. They find that reactive firms appear to be more concerned about being caught while doing something wrong. This suggests that reactive companies are only doing something for fear of negative publicity. 2. Defensive (Do only what is required) - those that admit their responsibility but do only what is required (Carroll 1979). Buysse and Verbeke (2003) describe defensive firms as those with limited environmental competencies, little development of employee skills, little external reporting and a rather weak integration of environmental issues into corporate strategy. They also find that the environmental managers in these firms have limited participation in corporate strategic planning. 3. Accommodative (Be progressive) – those who value the input from community stakeholders. Henriques and Sadorsky (1999) suggest that accommodative companies view environmental management as a worthwhile function by involving top management, initiating employee environmental training and providing more external reports. Indeed they are more progressive doing more than is required (Clarkson 1995). 4. Proactive (Lead the industry) – those that are leaders in the environmental field viewing environmental management as an important business function (Henriques and Sadorsky 1999, McAdam (1973)) by conducting research and development projects in the area of sustainability (Buysse and Verbeke 2003). The inclusion of environmental issues into corporate strategy beyond what is required by regulation is viewed as a means to improve a company’s alignment with the growing environmental concerns.

Moreover, Henriques and Sadorsky (1999) assert that the companies’ actions with reference to environmental issues describe their level of commitment. They suggest that the classification of companies that have environmental commitment can be identified based on four characteristics: (1) support or involvement of top management, (2) the significance of environmental management, (3) environmental reporting (internal and external), and (4) employee environmental training and involvement. They also provide an example of exemplary environmental practice as: (1) having an environmental plan, (2) having a written document describing its environmental plan, (3) communicating its environmental plan to shareholders or stakeholders, (4) communicating this plan to employees, (5) having an environmental, health, and safety unit, and (6) having a board or management committee dedicated to dealing with environmental issues. The literature reviewed here helps in the content analysis which is discussed next. 3.0

Research Methodology

3.1 Sample Data This research is an archival-empirical study using publicly available data from corporate reports. Staw, McKechnie and Puffer (1983) explain that corporate reports are the documents by which companies publicly disclose their past performance, future expectation, and any other information that the managers feel significant to communicate to their relevant stakeholders. From Elijido-Ten’s (2011) study focussing on the Top 100 publicly listed firms in Australia, 48 firms in 2008 and 42 in 2007 have been identified as BSC disclosers. To extend Elijido-Ten’s (2011) study, the sample will focus on the Australian listed companies that provide BSC disclosures publicly in 7   

 

2007 and 2008. The BSC disclosers are identified through content analysis of company websites and publicly available reports such as annual reports, concise annual reports, sustainability reports, shareholder reviews and corporate responsibility policies or reports. The content analysis method adopted in this study is discussed next. 3.2 Content Analysis Content analysis is used in this project to carefully scrutinise publicly available information provided by the BSC disclosers in order to analyse the extent of inclusion of sustainability strategies/objectives/measures in the BSC. Content analysis is also used to analyse the level of management commitment to sustainability using the RDAP scale. Hair, Babin, Money and Samouel (2003, p. 126) explain that content analysis is useful when “....the researcher examines the frequency with which words and main themes occur and identifies information content and characteristics embedded.” Krippendorff (2004, p. 87) also points out the four components in content analysis, namely: “(1) sample text, in the sense of selecting what is relevant, (2) unitize (sic) text, in the sense of distinguishing words or propositions and using quotes or example; (3) contextualize (sic) what they are reading in light of what they know about the circumstances surrounding the text; and (4) have specific research question in mind”. Generally, content analysis can be used in both quantitative and qualitative study. This study, however, is mainly adopting the qualitative content analysis. White and Marsh (2006, p. 36) state that “qualitative [content analysis] researchers focus on the uniqueness of the text and are consciously aware of the multiple interpretations that can arise from a close perusal of it.” This suggests that in qualitative studies, many explanations for a single event can be taken into account. Hence, a series of analysing and cross-checking of various reports is conducted to increase the validity and reliability of the findings in this study. Janesick (2003) argues that qualitative research is credible when the researcher engages in a series of cross-checks and audits. To enable content analysis to be conducted in this study, an index is developed based on the BSC and SBSC literature. The purpose of this index is to determine whether sustainability is embedded within the company’s BSC disclosure. These criteria and index are outlined in the next section, followed by the description of how the RDAP model is applied in this study. 3.2.1 Sustainability Balanced Scorecard Developing an SBSC necessitates the formulation of performance measures, targets and strategy within each of the perspectives (Figge et al. 2002; Bieker 2003). Accordingly, in order for companies to be classified as SBSC discloser, the information regarding their sustainability measures, targets and strategy links have to be identified in their reports. The explanations concerning the techniques and processes used in these criteria are explained below. 3.2.1.1 Backward Looking Statement Since the adoption of an SBSC involves the incorporation of sustainability into BSC (Epstein and Wisner 2001), it is necessary for companies to define its sustainability strategy, objectives and measures. To identify these, the backward looking statements provided in their reports are scrutinised. The sustainability backward looking statement has to be stated in the company’s reports and it is the most basic criterion that must be met before a company is classified as an SBSC discloser. 8   

 

3.2.1.2 Forward Looking Statement Similar to the traditional BSC, within each measure/perspective of the SBSC, the sustainability goals and targets have to be recognised (Bieker 2003). These goals and targets can be identified by examining the forward looking statements in the company’s reports. To be categorised as forward looking statement, the statement has to indicate how things need to be different in the future. Given that sustainability goals and targets are essential in developing an SBSC, a company that only provides backward looking statements without any forward looking statements are not considered to be an SBSC discloser. 3.2.1.3 Strategy Statement Developing performance measures based on the strategy of the organisation is a fundamental feature of the BSC. Accordingly, having strategy statements is also a prerequisite in developing an SBSC. To meet this criterion, the disclosure must have summary statements of why sustainability/environmental perspective is important to the company, how it affects the company and how the targets can be achieved. As the above three criteria are fundamental requirements for a firm developing an SBSC, all three criteria must substantially be fulfilled before deciding that a company is an SBSC discloser. The next section outlines the criteria for the RDAP analysis. 3.2.2 RDAP Model In this study, those companies that are identified as SBSC disclosers are categorised as either reactive, defensive, accommodative and proactive based on their level of sustainability commitment. Thus, the criteria for the RDAP analysis are developed and summarised in Table 1. Details of these criteria are discussed in the following sections. 3.2.2.1 Forward and backward looking statements and linkage to strategy statement Although the forward and backward looking statements as well as strategy statements have been used to identify the SBSC disclosers, these statements are also used in the RDAP analysis by examining the quality of the information provided. Stead and Stead (2009) argue that an effective environmental management system requires developing clear environmental goals and communicating them throughout the corporation, along with specific strategy and objectives that support these goals. Clarkson (1995) uses the strategy statement as one of the central elements in evaluating the level of environmental responsibility that a company demonstrates in its management. He states that by evaluating the strategy of a company, the RDAP scale can be defined more clearly. Hence, this is the first criterion selected to determine the level of sustainability responsiveness of the SBSC disclosers in this study. The more specific and clearer the link between sustainability measures, targets and strategy statements provided, the more the company is committed toward sustainability. The literature hints that companies with a reactive profile are those that do not take their responsibility seriously (Clarkson 1995), hence they are likely the ones that focus more on what has been done with very few future targets and unclear link to sustainability strategies. Companies with defensive and accommodative profiles, on the other hand, acknowledge their responsibility and will therefore provide more balanced backward and forward looking statements that are linked to specific strategies. In contrast, proactive firms are characterised by being highly specific in their past and future measures/targets with clear linkage to sustainability strategies. 9   

 

Table 1: Criteria for the RDAP Analysis Criteria

References

Reactive

Defensive

Accommodative

Proactive

More backward than forward statements and unclear link to strategy statement

More balanced backward and forward statement but, unclear link to the strategy

More balanced backward and forward statements as well as clear link to the strategy

More detailed and more specific backward and forward statements with very clear link to the strategy

Yes may or may not be publicly available

Yes publicly available

Backward, Forward & Strategy Statement

(Clarkson 1995; Stead and Stead 2009)

Carbon Project Disclosure

(Kolk, Levy and Pinkse 2008)

No

Yes may or may not be publicly available

Sustainability Board Committee

(Buzzelli 1993)

No

No

Yes

Yes

Employee Sustainability Training

(Henriques and Sadorsky 1999; Buysse and Verbeke 2003)

None

None to a few

Yes less to more intensive

Yes more to very intensive

Sustainability Measure as Directors’ KPI

(Henriques & Sadorsky 1999; Buysse and Verbeke 2003)

No

No

No

Yes

3.2.2.2 Carbon Disclosure Project When a company voluntarily provides sustainability reports, it indicates that it is willing to communicate its sustainability strategies and plans to its stakeholders, and is not afraid to expose their sustainability performance. The literature (Salancik 1977) suggests that ‘going public’ builds commitment to a plan. Consequently, the act of voluntarily disclosing their sustainability information shows the company’s commitment toward its social/environmental plans and targets. The Carbon Disclosure Project (CDP) is an independent not-for-profit organisation holding the largest database of primary corporate climate change information voluntarily provided by companies around the world (CDP 2009). Kolk et al (2008) find that CDP has successfully urged firms to disclose extensive information about their sustainability performance particularly climate change activities. This study views CDP as a significant external reporting media that can be used to measure the companies’ commitment to sustainability. The literature refers to reactive companies as the ones that are afraid to be caught as having poor sustainability performance compared to other profiles (Henriques and Sadorsky 1999). Consequently, reactive firms are not likely to participate in CDP, whereas defensive, accommodative and proactive companies would be more willing to respond to this voluntary reporting mechanism. 3.2.2.3 Sustainability Board Committee When a company becomes committed to sustainability, issues such as carbon management and related social and environmental activities become a legitimate 10   

 

corporate concern. Buzzelli (1993) assert that the creation of a board committee dedicated to dealing with social/environmental issues is another practice that demonstrates the commitment of top management to stewardship. Given that reactive and defensive firms are those that deny/fight their responsibility (Clarkson 1995) and have less concern toward sustainability, both are expected to have no sustainability board committee. On the other hand, accommodative and proactive firms are more likely to establish sustainability board committee because they are more willing to accept their responsibility (Clarkson 1995) and are more progressive in demonstrating their serious concern toward sustainability (Carroll 1979). 3.2.2.4 Employee Sustainability Training By conducting employee sustainability trainings on a voluntary basis, a firm shows its ongoing commitment to sustainability. Henriques and Sadorsky (1999) hint that communicating an environmental plan through employee training is an important sign that a firm is serious about its environmental goals and targets. Buysse and Verbeke (2003) find that reactive and defensive companies tend to have none or very little investment developing the employees’ environmental skills, whereas accommodative firms tend to have more. The proactive firms, however, outperform the other profiles in terms of providing environmental training to their employees. Therefore, in this study, the firms that fit the reactive and defensive profile are expected to have none or only few environmental training, whereas those under the accommodative profile might have some or even more intensive training. Companies fitting the proactive profile are expected to provide various intensive employee environmental trainings. 3.2.2.5 Sustainability as Part of Directors’ Key Performance Indicators Henriques and Sadorsky (1999) suggest that the firms’ environmental commitment can be characterised by the support and involvement of top management. This involvement may include investments to environmental research and development (R&D) projects that could illustrate the importance given to sustainability related issues (Bieker 2003). Buysse and Verbeke (2003) categorise the level of environmental commitment by looking at the importance attached to the environmental performance in appraising top management’s performance. Thus, the use of environmental performance measure to evaluate the director’s performance is also an important sign that the firm is serious about its sustainability commitment. According to Buysse and Verbeke (2003), only few companies use environmental measures to evaluate top management performance. Hence, it would seem that only proactive companies will utilise sustainability measures as part of the director’s key performance indicators. The next section discusses the results and findings in this study. 4.0

Results, Findings and Discussion

4.1 Sustainability Balanced Scorecard (SBSC) Disclosers The analysis of publicly available reports reveals that most of the companies adopting BSC also integrate sustainability measures/targets/perspective in their performance measurement system. The results show that in 2007 and 2008, 93% (39 out of 42) and 85% (41 out of 48) of the BSC disclosers, respectively, incorporate sustainability in their BSC and henceforth referred here as SBSC disclosers.

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The SBSC disclosers are found to be operating in different types of industries as shown in Table 2. This table contains the number of companies in each industry group that provide BSC and SBSC disclosures. Panel A shows the environmentally sensitive industries (ESIs) whilst Panel B comprises the non-environmentally sensitive industries (non-ESIs). The companies considered to belong to ESIs are those in utilities, energy, transport, telecommunication and materials industry (which include the mining industry) consistent with prior studies (Clarkson, Li and Richardson 2004; Elijido-Ten 2007; 2011). As shown in Panel A, the BSC disclosers that do not incorporate sustainability measures/targets/perspective from the ESIs are those from the telecommunication service and energy for both 2007 and 2008. Panel B shows that the non-SBSC disclosers from the non-ESIs are those from capital goods (2007 only), commercial and professional service (2008 only) and real estate (2008 only). Moreover, Table 2 shows that in 2007, more than half (59% or 23 out of 39) of the SBSC disclosers belong to ESIs. About the same proportion holds true for 2008, albeit slightly less at 58% (24 out of 41). The results also show an increase in the number of SBSC disclosers from the two years (2007 to 2008) examined in this study. There are three companies which start to disclose both BSC and SBSC in 2008. Table 2: Number of BSC and SBSC Disclosers According to Industry Type Industry Type Panel A: Environmentally Sensitive Industries (ESIs) Energy Materials Telecommunication Service Transportation Utilities Sub-total

Number of BSC Disclosers

Number of SBSC Disclosers

2007

2008

2007

2008

6 14 2 2 1 25

8 14 3 2 1 28

5 14 1 2 1 23

6 14 1 2 1 24

2007

2008

2007

2008

Banks Capital Goods Commercial and Professional Service Diversified Financials Food and Staples Retailing Food Beverage and Tobacco Insurance Real Estate Sub-total

3 3 2 1 2 1 1 4 17

4 1 3 1 2 2 1 6 20

3 2 2 1 2 1 1 4 16

4 1 2 1 2 2 1 4 17

Total

42

48

39

41

Panel B: Non-Environmentally Sensitive Industries (Non-ESIs)

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4.2 The Commitment Level to Sustainability The results of the analysis on the commitment level of the SBSC disclosers to sustainability using the RDAP model is presented in Table 3 according to industry classification. As shown in the table, 15.4% (6 out of 39) in 2007 and 12% (5 out of 41) in 2008 of the SBSC disclosers fit the reactive profiles. There are two reactive companies that start to disclose their SBSC in 2008. There are also three companies that move from reactive to defensive profile in 2008. In contrast, the number of defensive companies is double the number of reactive firms in both 2007 and 2008. The results show that 41% (16 out of 39) in 2007 and 44% (18 out of 41) in 2008 of the SBSC disclosers are classified in the defensive profile. The profile details and criteria met by each of the SBSC disclosers are shown in Appendix 1. In addition, the results also show that 25.6% (10 out of 39) in 2007 and 24.5% (10 out of 41) in 2008 of the SBSC disclosers meet the accommodative profile criteria. These companies are mostly from the ESIs. Note that not all of the accommodative companies in 2007 are the same companies in 2008. There is one company moving from defensive to accommodative and one company moving from accommodative to proactive profile in 2008 (See Appendix 1). There are 7 companies in 2007 and 8 in 2008 that are found to have proactive level of commitment to sustainability. From these findings, it is deemed valuable to discuss what the companies fitting the RDAP profile have disclosed and how they meet the criteria set. The analysis shows significant similarities among companies that fit the categories in the RDAP model. For example, the analysis confirms that the disclosures provided by reactive firms have similar patterns. Thus, one representative company from each of the RDAP category is selected and discussed below. Table 4 provides a summary of the four companies chosen as well as the criteria used in the RDAP analysis. 4.2.1 Reactive Firm Example: Nufarm Limited As shown in Table 4, reactive companies are characterised by having limited sustainability goal and strategy statements in their reports, no sustainability board committee, no environmental employee trainings, no CDP participation, and no sustainability KPIs for top management performance evaluation. Nufarm, a company in the agriculture sector, is selected because it is the only ESI reactive firm that provide SBSC disclosure in both 2007 and 2008. In its health, safety and environment report, Nufarm states that its objective is: “to carry out its business with no adverse effect on its people, the community and the environment, and to strive for sustainable development and continual improvement” (Nufarm Limited 2008, p. 2).

This objective is linked to its sustainability strategy statement which is: “to meet the interests of all stakeholders in a manner that shows that we care about... the environment and the communities in which we operate” (Nufarm Limited 2008, p. 1).

13   

 

Table 3: BSC Disclosers’ RDAP Classification According to Industry Industry

2007

Panel A:Environmentally Sensitive Industry (ESI) Energy Materials Telecommunication Service Transportation Utilities Sub-Total

2008

R*

D**

A#

P##

Total

R*

D**

A#

P##

Total

1 1 2

1 6 1 8

2 3 2 1 8

1 4 5

5 14 1 2 1 23

1 1 2

2 6 1 9

1 3 2 1 7

2 4 6

6 14 1 2 1 24

R*

D**

A#

P##

Total

R*

D**

A#

P##

Total

1 1 1 1 4

2 1 1 2 2 8

1 1 2

1 1 2

3 2 2 1 2 1 1 4 16

1 1 1 3

2 1 2 2 2 9

1 1 1 3

1 1 2

4 1 2 1 2 2 1 4 17

Total

6

16

10

7

39

5

18

10

8

41

Percentage (%)

15.4 %

41%

25.6%

18%

100%

12%

44%

24.5%

19.5%

100%

Panel B: Non-environmentally Sensitive Industry (Non-ESI) Banks Capital Goods Commercial and Professional Service Diversified Financials Food and Staples Retailing Food Beverage and Tobacco Insurance Real Estate Sub-Total

#

##

*R: reactive; **D: defensive; A: accommodative; P: Proactive 14   

 

Nufarm has been reporting sustainability information since 1999 but it does not participate in CDP. Moreover, several actions/measures are stated in its report portraying some attempt to achieve its sustainability objectives such as reducing the number of injury, energy use, water use, waste and number of complaints. However, as the report provides more information regarding its past performance, there are limited targets and strategy statements provided suggesting lack of commitment to communicate the firm’s sustainability plans and strategies. Consequently, given that Nufarm provide more backward looking and general statements with no specific targets linked to sustainability strategies, it has been categorised as a reactive company. Further, the report contents, for both 2007 and 2008 are quite similar and both are found to have no specific information to differentiate its sustainability reports from other disclosers. The provision of limited information could indicate that although Nufarm has incorporated sustainability measures/targets/perspective into its performance measurement system, sustainability commitment is not necessarily embedded in its operations. The literature suggests that superior performers provide voluntary disclosures that is not easily mimicked by poor environmental performers (Clarkson et al. 2008). In other words, inferior sustainability performers will only provide disclosure that is of general nature since it is hard for them to imitate what superior performers have disclosed. Table 4: Representative RDAP Companies with the RDAP Criteria

RDAP

Companies

Industry Type

Reactive

Nufarm Limited

ESI (Materials)

Defensive

National Australian Bank

Non-ESI (Bank)

Accommo dative

CSR Limited

Non-ESI (Capital Goods)

Proactive

BHP Billiton Limited

ESI (Materials)

Report Statements More backward than forward statements and unclear link to strategy statements Balanced but unclear link to strategy More balanced and clear link to strategy More than adequate and very clear link to strategy

Carbon Project Disclosure?

Sustainability Board Committee?

Employee Sustainability Training?

Sustainability Measure as Directors’ KPI?

No

No

None

No

Yes

No

Few

No

Yes

Yes

Less intensive

No

Yes

Yes

Very intensive

Yes

4.2.2 Defensive Firm Example: National Australia Bank Defensive profile is found to be the dominant category within the sample in this study since it has the highest number of SBSC disclosers. Three characteristics that differentiate defensive from reactive profiles are: (1) the quality of backward/forward-looking statements and strategy statements; (2) participation in CDP; and (3) presence of sustainability employee training. Similar to reactive firms, defensive companies have no sustainability board committee and have no sustainability measures in evaluating directors’ performance. National Australia Bank (NAB) is discussed in this section. NAB is selected because it shows an improvement in its sustainability reporting during the period examined. 15 

 

NAB is a firm operating in the financial service sector that has been disclosing its sustainability information in its corporate responsibility review. NAB has participated in CDP since 2006. Its sustainability key strategies include: (1) assisting disadvantaged communities; (2) commitment to carbon neutrality; and (3) building the capability of the employees and local community. Some actions taken include: (1) reducing its energy consumption and travel emissions; (2) increasing the amount of energy it purchases from renewable sources; and (3) purchasing carbon credits to offset the remaining unavoidable emissions. In 2008, NAB starts to provide sustainability training to its employees.  

NAB’s responsiveness toward environmental issues is shown through the reduction of its electricity, gas, water, and paper consumption. In terms of environmental disclosures, since NAB’s target is to become carbon neutral, the information provided is mainly on the electricity and gas consumption as shown in this statement. “Clearly our first priority is on reducing emissions and energy consumption, as it is not only better for the environment but more cost effective for us. The more we lower our energy bills, the fewer offsets we need to purchase” (National Australian Bank Limited 2008, p. 20)

Hence, it is clear from this quote that NAB’s environmental measures/targets are linked to their financial performance. However, NAB does not have a sustainability board committee and it does not include sustainability in its corporate governance/code of conduct disclosure. This suggests that it does not necessarily see sustainability as an important business function and the actions taken may have been done so as to be seen as ‘good corporate citizen’ without truly portraying commitment to sustainability. These patterns of disclosures reaffirm its fit into the defensive profile. 4.2.3 Accommodative Firm Example: CSR Ltd. Accommodative firms do all that is required and accept their sustainability responsibility. As such firms that fit this profile are expected to report more balanced forward and backward looking statements that are linked to strategies, to have a sustainability board committee and participate in CDP. CSR Limited is chosen as an exemplary example since it has undertaken a number of sustainability R&D projects suggesting a genuine concern toward sustainability. CSR Limited is a diversified firm involved in supplying building and property products as well as sugar production. CSR participates in CDP and has a sustainability board committee. In its sustainability report, CSR states that its main sustainability goals are to achieve: “zero injuries … minimising the impact of our activities on the environment and the communities in which we operate; and to operate in a sustainable manner across all our businesses.” (CSR Limited 2008, p. 4)

In order to achieve these objectives, the following sustainability strategies are used to embed sustainability into its core business process: “by reducing our operational footprint and by acting in a socially responsible way; and providing an expanded range of products and systems that contribute to sustainability through energy efficient solutions for the built environment and renewable energy and fuels” (CSR Limited 2008, p. 5).

Several targets and measures that are linked to these strategies have also been set such as: “to reduce 20% of the water use across all sites by the year end of 2009” (CSR Limited 2008, p. 25)... “Each CSR business strives to improve their environmental performance. We have established key performance measures for water and energy use, waste production and greenhouse gas emissions…” (CSR Limited 2007, p. 20)

Numerous actions have also been undertaken as part of its company strategy. These actions include: upgrading the Yarraville sugar refinery in Melbourne to improve efficiency and 16 

 

sustainability performance and rebuilding of the Viridian Dandenong float glass plant which results in providing 37% increase in plant capacity and delivering 15% more energy efficiency. Sustainability trainings are also provided to the employees. For example, it states in its annual report that: “Last year, CSR introduced a new Safety, Health and Environment (SHE) leadership training program, developed with the help of a cross section of employees. The program incorporates key aspects of CSR’s SHE management system, problem solving techniques, risk assessment methods and our leadership skills program” (CSR Limited 2007, p. 18)

Moreover, CSR has also developed a sustainability board committee with the function: “to ensure that the committee provides advice to the full board on CSR’s approach to sustainability, with specific regard to climate change” (CSR Limited 2008, p.10).

Apart from having a sustainability board committee, a Safety, Health and Environment management system has also been established. It is clear that CSR is fairly progressive in carrying out its sustainability responsibility by involving top management and employees in their sustainability plans and actions. As earlier noted, accommodative companies view environmental management as a worthwhile function by having top management and employee involvement (Henriques and Sadorsky 1999). CSR, however, falls short of including sustainability KPIs as part of top management’s performance evaluation measure. 4.2.4 Proactive Firm Example: BHP Billiton Ltd. Proactive companies can be identified as those that show the greatest commitment to sustainability. BHP Billiton is singled out as a good example of a firm fitting this profile. BHP Billiton Limited is a leader in the resources industry. BHP has enormous pressure to disclose its sustainability information and to produce reports that cannot be easily mimicked by others. Thus, its sustainability report is presented in two forms: a full report and a summary report which are prepared in accordance with the Global Reporting Initiative (GRI) Guidelines. BHP’s vision statement as stated in its sustainability report is: “to be the company of choice - creating sustainable value for shareholders, employees, contractors, suppliers, customers, business partners and host communities. Central to our vision is our aspirational goal of Zero Harm to people, our host communities and the environment” (BHP Billiton Limited 2008a, p. 13).

While these statements show the connection between its corporate vision and sustainability goal, BHP also states that this vision is linked to its corporate strategies comprising of two dimensions: (1) the business dimension; and (2) the sustainability dimension. Within the sustainability dimension, the strategies include: “improving our energy efficiency and investigating cost effective alternative energy sources, including wind, solar and geothermal power.”(BHP Billiton Limited 2008a, p. 104)

It also states in its sustainability report that: “our Sustainable Development Vision and Strategy are underpinned by our Sustainable Development Policy and HSEC (Health, Safety, Environment and Community) Management Standards, which are applied to BHP Billiton sites and operations throughout the world.” (BHP Billiton Limited 2008a, p. 14)

In addition, several health, safety and environmental targets have also been set to reflect its goal of zero harm. For example, by June 2012, BHP targets: “6 per cent reduction in greenhouse gas emissions per unit of production [...]; 10 per cent improvement in the ratio of water recycled or reused to high-quality water consumed [...]; 30 per cent reduction in incidence of occupational diseases [...];50 per cent reduction in Total Recordable Injury Frequency Rate [...]; and 10 per cent reduction in the land available for rehabilitation by 30 June 2012” (BHP Billiton Limited 2008a, p. 2-3)

17 

 

Further information regarding BHP’s sustainability measures, targets, and strategy is stated in its sustainability reports. Hence, there is a clear link between BHP’s vision, sustainability strategies, targets as well as objectives. Moreover, different initiatives have been taken in line with these targets and strategies. In terms of health and safety aspect, actions taken by BHP Billiton include conducting the graduate training program, improving the personal protective equipment for employee, developing a clinic for HIV/AIDS therapeutic therapy in South Africa, and providing aid to develop new anti-malarial drugs. For the environmental aspect, activities such as the land rehabilitation program, recycling initiatives, environmental trainings, as well as investments in projects to improve biodiversity and energy efficiency are carried out. Moreover, R&D in both social and environmental aspects are also undertaken by BHP Billiton. These projects include research in greenhouse gas reduction technologies, cutting-edge technology, low carbon emissions technologies and developing high quality coking coal. In its sustainability report, the social and environmental performance is summarised and reviewed for each of the group sectors in BHP Billiton, including the challenge and objectives for each of the group within the five aspects: Fatal Risks, Occupational and Community Health, Greenhouse Gas Emissions, Management of Resources (land, water, biodiversity and people), and Sustainable Community Development and Closure. BHP also participates in CDP since its inception. BHP’s voluntary provision of specific information about its sustainability strategies, targets and actions indicates its willingness to communicate its sustainability commitments to the relevant stakeholders. BHP has also established its sustainability policy and standards and sustainability board committee which further shows its ongoing commitment. The roles of its sustainability board committee include oversight of the performance and compliance with health, safety and environment regulatory requirements, monitoring sustainability risks and leadership on sustainability functions including the preparation of sustainability reports. Furthermore, as part of its commitment to involve the top management in the sustainability performance, BHP also uses sustainability measures for the directors KPIs. It states that: “Measures are set to reflect the critical KPIs of the Group in a combination of financial and nonfinancial areas. The key group measures for the Group Management Committee (GMC) in FY2008 were Health and Safety, Shareholder Value Added and Net Present Value Added” (BHP Billiton Limited 2008b, p. 140)

In summary, BHP’s actions – i.e. participating in CDP, having sustainability committees, conducting employee trainings, using sustainability measures for director’s KPI as well as initiating various sustainability R&D - indicate a high level of commitment to sustainability. The provision of specific voluntary disclosures pertaining to BHP’s sustainability initiatives/targets/measures embedded into their core business processes cannot be easily mimicked by inferior performers. As such BHP Billiton fit the proactive profile. 5.0

Summary and Conclusion

This study seeks to investigate whether Australian listed companies that are BSC disclosers incorporate sustainability measures/targets/perspective in their performance measurement system. Moreover, this study also aims to examine the companies’ level of commitment to sustainability by adopting the RDAP model. Hence, the two research questions explored are: 1. Do Australian listed companies that publicly disclose their BSC incorporate sustainability measures/targets/perspective in their performance measurement system? 18 

 

2. Can the level of commitment to sustainability by the SBSC disclosers be determined from publicly available disclosures? This study contributes to knowledge in a number of ways. Firstly, it identifies the SBSC disclosers in the Top 100 listed companies in Australia. Secondly, based on the relevant literature, it develops a set of criteria to enable the use of the RDAP model in analysing sustainability commitment. Thirdly, it examines the firm’s level of commitment to sustainability based on publicly available reports. Finally, it provides specific examples of SBSC disclosing companies that fit the RDAP profile. The main findings of this study are summarised as follows:  Most of the companies that provide BSC disclosures in publicly available reports also incorporate sustainability in their performance measurement system;  There is an increase in the number of SBSC disclosers from the two years (2007 to 2008) examined in this study whereby three companies start to disclose both BSC and SBSC in 2008; and  Whilst the defensive profile is found to be the dominant category, the number of firms fitting the proactive and accommodative profiles combined is less than half of the overall sample in this study. Two major conclusions are offered from the results in this exploratory research. Firstly, the conclusion derived from the SBSC disclosure findings is that companies that incorporate sustainability into their core business processes are the ones more willing to provide more specific and detailed SBSC disclosures since they have this information readily available. Given that most of the sustainability and BSC disclosers also provide SBSC disclosures, it is reasonable to expect that SBSC disclosures will increase in the same manner that sustainability reports increase overtime. From the two years (2007 to 2008) examined in this study, there is already evidence that this is happening. This is potentially beneficial for both the report users and reports providers. From the report providers’ point of view, the increasing pressure to integrate sustainability into their core business process and the inherent demand for transparency could force them to re-evaluate and enhance their sustainability strategy and performance. From the perspective of the report users, this greater push for transparency has positive implications on corporate accountability. However, voluminous disclosures could overwhelm report users. Hence it is necessary for them to be more discerning, i.e. to be able to identify the company’s true level of commitment to sustainable practices. Following this line of thought, the second conclusion drawn from the RDAP analysis indicates that the level of commitment to sustainability by SBSC disclosers can be determined from publicly available reports with the aid of a set of criteria developed based on the relevant literature. Likewise, the findings that less than half of the firms included in the sample fit the accommodative and proactive file could be taken to suggest that not all SBSC disclosers are truly committed to sustainable management practices. It is possible that some firms are merely providing SBSC disclosures to improve their corporate image and be perceived as legitimate by the relevant publics. Moreover, the discussion of four exemplary examples confirms that superior performers tend to provide voluntary disclosures that are not easily mimicked by inferior environmental performers. They are also the ones most likely to conduct various sustainability research and development. 19 

 

As in all research, these findings and conclusions must be interpreted with caution subject to the following limitations. Firstly, since this study is conducted using publicly available reports, the analysis is based only on what the company has disclosed. It is possible that some companies in the Top 100 might implement SBSC without providing disclosure. As such, they are excluded from the sample in this study. Likewise, given that this exploratory study is limited to the Top 100 publicly listed companies in Australia, its generalisation could be limited. Despite these limitations, this study can be used as a catalyst for more indepth studies particularly since SBSC disclosure continues to increase. Further studies are needed to substantiate the findings in this study. Firstly, in-depth studies using primary data such as survey or interview will be useful to clarify the findings in this study that can provide new insights to the current body of knowledge. In addition, further study as to whether SBSC adopters outperform the non-adopters could provide further understanding regarding SBSC implementation. Likewise, it will be interesting to find out the relationship between the level of the company’s commitment to sustainability and the company’s market performance.

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23 

 

Appendix 1: Analysis of SBSC Disclosers Using the RDAP Model

No.

ASC code

Companies

RDAP Categories (Reactive, Defensive, Accommodative, Proactive

Criteria For RDAP Analysis Report Statements (S1a, S2b, S3c, S4d)

Carbon Disclosure Project?

Sustainability Board committee?

Employee Sustainability training

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

Sustainability measure as Directors’ KPI? 2007

2008

No

No

No

No

1

AGK

AGL energy Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

Few

2

AMC

Amcor Limited

D

D

S2

S2

Yes

Yes

No

No

Few

Less intensive Few

3

ANZ

ANZ Banking Group

D

D

S2

S2

Yes

Yes

No

No

Few

Few

No

No

4

AQP

Aquarius Platinum Limited

D

D

S2

S2

Yes

Yes

No

No

Few

None

No

No

5

AWE

Australian Worldwide Exploration

-

R

-

S1

-

No

-

No

No

BHP

BHP Billiton Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

Yes

7

BLD

Boral Limited

D

D

S2

S2

Yes

Yes

No

No

No

No

8

BSL

Bluescope Steel Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

Yes

9

BXB

Brambles Industries Limited

R

R

S1

S1

No

No

No

No

Very intensive None

None Very intensive Less Intensive Very intensive None

-

6

Very intensive

No

No

10

CBA

Commonwealth Bank Australia

-

R

-

S1

-

Yes

-

No

-

None

-

No

11

CEY

Centennial Coal Co Limited

R

D

S1

S1

No

No

No

Yes

No

CSR

CSR Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

No

No

13

DXS

Dexus Property Group

D

D

S2

S2

Yes

Yes

No

No

Few Less intensive Few

No

12

Few Less intensive Few

No

No

14

ERA

Energy Resources of Australia

D

D

S2

S2

Yes

Yes

No

No

Few

Few

No

No

15

FGL

Foster's Group Limited

-

D

-

S2

-

Yes

-

No

-

Few

-

No

Few

24 

 

No.

ASC code

Companies

RDAP Categories (Reactive, Defensive, Accommodative, Proactive) 2007 2008

Criteria For RDAP Analysis Report Statements (S1a, S2b, S3c, S4d)

Carbon Disclosure Project?

Sustainability Board committee?

Employee Sustainability training

Sustainability measure as Directors’ KPI?

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

16

IPL

Incitec Pivot Limited

D

D

S2

S2

No

No

Yes

Yes

None

Few

No

No

17

LEI

Leighton Holdings Limited

D

-

S2

-

Yes

No

-

None

-

LGL

Lihir Gold Limited

A

A

S3

S3

No

Yes

Yes

Few

Yes

Yes

19

LLC

Lend Lease Corporation Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

Few

Less intensive Less intensive

No

18

Yes n.p.a*

No

No

20

LNN

Lion Nathan Limited

R

D

S1

S2

Yes

No

No

None

Few

No

No

21

MGR

Mirvac Group

D

D

S2

S2

Yes n.p.a* Yes

Yes

No

No

Few

Few

No

No

22

MQG

Macquarie Group Limited

R

D

S2

S2

No

Yes

No

No

None

None

No

No

23

NAB

National Australia Bank Limited

D

D

S2

S2

Yes

Yes

No

No

No

NCM

Newcrest Mining Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

No

No

25

NUF

Nufarm Limited

R

R

S1

S1

No

No

No

No

No

No

26

ORG

Origin Energy Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

Yes

27

ORI

Orica Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

Yes

28

OST

OneSteel Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

Few Less intensive None Very intensive Very intensive Few

No

24

None Less intensive None Very intensive Very intensive Few

No

No

29

OZL

OZ Minerals Limited

D

D

S2

S2

No

No

Yes

Yes

No

QAN

Qantas Airways Limited

A

A

S3

S3

Yes

Yes

Yes

Yes

Few Less intensive

No

30

Few Less intensive

No

No

25 

 

No.

ASC code

Companies

RDAP Categories (Reactive, Defensive, Accommodative, Proactive) 2007 2008

Criteria For RDAP Analysis Report Statements (S1a, S2b, S3c, S4d)

Carbon Disclosure Project?

Sustainability Board committee?

Employee Sustainability training

Sustainability measure as Directors’ KPI?

2007

2008

2007

2008

2007

2008

2007

2008

2007

2008

31

RIO

Rio Tinto Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Very intensive

Very intensive

Yes

Yes

32

SGM

Sims Metal Management Limited

D

D

S1

S1

Yes n.p.a*

Yes n.p.a*

No

No

Few

Few

No

No

33

SGP

Stockland Corporation Limited

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

STO

Santos Limited

A

P

S4

S4

Yes

Yes

Yes

Yes

Yes

35

SUN

Suncorp-Metway Limited

R

R

S1

S1

Yes n.p.a* No

No

No

No

No

No

36

TCL

Transurban Group

A

A

S3

S3

Yes

Yes

Yes

Yes

No

No

37

TLS

Telstra Corp Limited

D

D

S2

S2

Yes

Yes

No

No

No

No

38

TSE

Transfield Services Limited

D

A

S2

S3

No

Yes

Yes

Yes

Few

No

No

39

WBC

Westpac Banking Corporation

P

P

S4

S4

Yes

Yes

Yes

Yes

Yes

Yes

40

WES

Wesfarmers Limited

D

D

S2

S2

Yes

Yes

No

No

Very intensive Very intensive None Less Intensive Few Less Intensive Very intensive Few

Yes

34

Very intensive Less Intensive None Less Intensive Few

No

No

41

WOW

Woolworths Limited

D

D

S2

S2

No

No

No

Yes

Very intensive Few

Yes Yes No No Few More Yes Yes Yes Yes 42 WPL Woodside Petroleum Limited A A S3 S3 intensive n.p.a* n.p.a* a S1: More backward looking than forward looking statement as well as unclear link to the strategy statements b S2: More balanced backward looking and forward looking statement, but, unclear link to the strategy statements c S3: More balanced backward looking and forward looking statement, as well as clear link to the strategy statements d S4: More than adequate and more specific backward and forward looking statement as well as very clear link to the strategy statements *Yes - n.p.a: Participate in Carbon Disclosure Project but the report is not publicly available

Few More intensive

26