The Australian’s CEO Survey 2024: AGL, BHP to Bendigo Bank
The Australian surveyed asked the nation’s CEOs their views on inflation, energy and opportunities for their businesses in 2024. From AGL, BHP to Bunnings. These are their full responses.
The Australian surveyed the nation’s CEOs for their views on inflation, energy and opportunities for their businesses in 2024. From AGL to Bendigo Bank. These are their responses.
AGL, Damien Nicks
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
-We are acutely aware of cost-of-living pressures and the impact on Australian households.
-We are focused on supporting our most vulnerable customers with assistance including the $70 million in customer support we have put in place over the next two years.
-We continue to see inflationary pressures in our supply chains with increased prices for materials and equipment. Additionally, demand in the renewables and firming pipeline remains significant.
-The supply of components is also difficult as factories and supply chains, including the shipping industry, have been constrained and slow to ramp up.
-There are not enough wind farm components available, for example, and transformer supply of all sizes is becoming hugely problematic. Even sourcing the special type of steel required for transformers is difficult.
-If the Australian dollar remains weak this will likely keep equipment costs higher for much of the materials, we must import.
■ How would you rate the shape of the Australian economy as we head into the New Year?
-While we remain cautious about the broader economy, there continues to be strong activity in our industry and we remain very positive about the outlook for AGL through the energy transition.
-In the energy sector we continue to see strong demand for materials and for skilled labour to support the development and build out of new projects.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
-The energy transition is one of the most significant, most complicated, and most important transformational challenges Australia has ever attempted.
-For it to succeed, transition requires all of us – the energy industry, all levels of government and regulators, and the Australian community – to work together to meet Australia’s emissions reduction targets.
-We need to consider all the moving parts of transition to overcome challenges. This includes supply chain delays, attracting an adequate level of global capital, ensuring we have the required industry skills and experience, improving grid connections and planning and approvals processes, and bringing projects to market quicker by breaking down some of the challenges we are currently seeing.
-We must bring communities and customers along on this journey as well – they have the potential to be both facilitators and beneficiaries from the transition.
-In the short term, helping consumers with affordability is important. One option governments can help with is the harmonisation of state concessions schemes and energy relief grants programs to create a more targeted and unified concessions framework across Australia.
-In the medium term, policies to help support a significant increase in customer energy resources (CER) like rooftop solar, home batteries, and electric vehicles and the orchestration services to take advantage of a decentralised grid will be critical. To date these policies are mostly managed at a state-by-state level. A coordinated national CER policy and working closely across the energy retail sector could help to ensure the expansion, management, and benefits of a more decentralised electricity system are experienced across the National Electricity Market.
-While the scale of the challenge is significant, Australia’s 2030 targets provide the certainty of a set goal to help drive the change and innovation needed.
-At AGL, we continue to accelerate our efforts to build and contract up to 5 GW of new renewables and firming capacity by the end of 2030 as part of our ambition of adding up to 12 GW of renewables and firming by the end of 2035.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
-To keep Australia’s energy transition on track, we need to prioritise and expedite approvals for those projects that are most readily achievable while considering the important issues of delivering on our environment and social licence.
-This would mean an immediate focus on projects that can utilise existing infrastructure such as transmission connections.
-The current time for planning, approval and delivery of energy projects is too long.
-While it’s important there are robust planning and environmental approval processes
in place, the need for the transition to make significant gains over the next six years means that efficiencies in prioritising renewable and storage projects in the planning process (which today can take longer than three years) and a streamlined connection process (which can take more than one year) is needed to keep the transition on track.
-This is not a criticism of any agency or department, but an acknowledgment this transition is such an enormous task that we need to do things differently. We welcome governments leaning into whole of government approach to the energy transition and engaging planning and transport portfolios.
-At AGL we can utilise our thermal generation sites as energy hubs and take advantage of their existing infrastructure including grid connections. This allows us to go faster at those sites and therefore we are focussing on bringing on batteries as quickly as we can.
■ What level of adoption is your business currently at with the use of AI technology?
-AGL is committed to innovation and exploring ways new artificial intelligence (AI) technologies can be used across our business and a key part of our strategy is leveraging technology, digitisation and AI.
-Leveraging new technology will help us to enhance customer experience and strengthen our trading operation and risk management capabilities.
-We already use AI in our retail business and have more than five million transactions managed through AI annually and this continues to grow incrementally.
-Our load forecasting team use machine learning models and AI to help forecast customer usage patterns for electricity and gas. These forecasts are produced using machine learning models such as neural networks designed to learn patterns from large complex data sets. These forecasts enable us to more accurately manage how our portfolio of assets are dispatched into the grid to meet variable customer demand.
-To strike a balance between leveraging Generative AI efficiencies and safeguarding our data, we have developed a new Generative AI policy which will evolve as the technology applications of AI evolve.
-We are in the process of rolling out our enterprise-wide AI functionality for employees. AGL is one of the first companies in Australia to trial Microsoft’s 365 Copilot Early Access Program.
-Co-pilot has the potential to remove tedious tasks and improve productivity by using AGL’s own data including documents, emails, calendars, and chats to help employees generate content and complete daily tasks.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
-Several high-profile cyber security attacks in Australia this year continue to reinforce the ever-evolving cyber critical risk for all businesses. We continue to evolve our systems, monitoring and detection, and testing to keep pace with the cyber landscape. We have increased the resilience of our systems this year and continue to scale up our cyber security systems and teams, but we can’t afford to stand still. The risk is always there, and we need to be alert to emerging threats.
-The resilience of the market and ageing thermal assets to firmed renewables will need to be carefully managed and monitored to ensure reliability and affordability is carefully navigated. This includes how the industry provides system resilience through what is predicted to be a hot summer.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
-At AGL, environmental, social and governance (ESG) considerations are a critical part of our strategy, in terms of how we operate our existing assets responsibly, connect our customers to a sustainable future, and bring to market the assets of tomorrow.
-ESG considerations are particularly intertwined and require a balancing act as we transition our thermal sites into integrated energy hubs and as we build out new renewable energy projects and infrastructure. It’s critical we engage and support the communities in which we operate to make the energy transition a success, and we continue to keep customer affordability in focus through the transition.
-We are committed to being transparent with our stakeholders about our performance
and the challenges and opportunities arising from the energy transition. The introduction of the proposed new Australian Sustainability Reporting Standards will help drive transparency and accountability throughout the Australian market in relation to how businesses manage climate-related risks and factor in their financial implications, which we see as a positive development. AGL was an early adopter of the voluntary Task Force on Climate-Related Financial Disclosures (TCFD) reporting framework (upon which the new standards build) and therefore the transition to the new standards will not be a big leap for AGL.
-That effective corporate governance and ethical conduct underpin our ESG Framework and the way AGL drives shareholder value through the delivery of our strategy. The significance of these factors has also been recognised by the proposed new Australian Sustainability Standards.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
-In 2023, we announced a new hybrid working arrangement with corporate employees working in the office three days a week.
-Two of these days are set ‘anchor days’ allowing for all members of each team to be in the office at the same time. The third day in the office can be chosen by each individual employee.
-We believe this strikes a balance between providing flexibility for employees and fostering opportunities for team members to be together in person, enabling connection, collaboration and opportunities to learn.
-It also helps us to build a productive and dynamic culture across our business, which operates 24/7, driving collaboration and learning. Ultimately, we believe this strikes the right balance to deliver our strategy, support our customers and supply reliable energy to the grid.
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AMP, Alexis George
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
There’s no doubt it’s a particularly challenging economic environment for our business and for our customers, as the flow of cheap money which has helped fuel our economy and investment returns for more than two decades has come to an abrupt end.
We like most of our bank peers are facing some of the toughest trading conditions in recent history, driven by a combination of increased funding costs and intense competition. While the majority of our bank customers have good financial buffers and we’ve only seen a small increase in refinancing this year, that will likely ramp up as saving buffers wear off and cost of living pressures really kick in.
We are starting to see an increase in calls from customers facing financial hardship in our contact centres and our teams, who are well trained, and doing an amazing job to work with those customers on solutions to support them through this challenging period.
On the superannuation and investment platform side of our business we’re seeing customers who benefited from a sustained period of strong returns from growth assets, now adjusting to a lower growth environment. Some conservative investors are switching out of their managed funds into term deposits and cash, with returns from these safe investments now comparing favourably.
Our investment management team has also been making some broader structural changes to our superannuation asset allocations, including shifting out of alternative investments and listed property and selectively allocating to public market credit and private debt, which is now offering the potential of equity-like returns but with significantly lower risk.
■ How would you rate the shape of the Australian economy as we head into the New Year?
The economy has definitely slowed, with that weakness being partly masked by a combination of stronger than expected population growth, a still tight labour market, the savings buffers that many Australians built up through the pandemic, and more borrowers than normal being on fixed mortgage rates. Stronger than expected global growth has also helped support export demand.
Aside from the strong population growth, these other supports are starting to wear off with job vacancies down significantly from their highs, which is pointing to an easing jobs market.
With mortgage pressures increasing, a recession is a risk, particularly if the RBA continues to raise interest rates. The good news though is that inflation is gradually cooling and this should start to take pressure off official interest rates through 2024.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
One of Australia’s most significant social and economic challenges is undoubtedly our ageing population and the growing number of retirees relative to our workforce. We need to continue reform which addresses this challenge, and that includes reviewing our age pension system to ensure it best incentivises and supports more older Australians wishing to stay in the workforce longer.
AMP’s research highlights that many Australians find our retirement system too complex with many lacking the financial confidence to spend their savings and fully enjoy their later years. The Government’s Retirement Income Covenant has rightly called out the superannuation sector to lift its game and provide better retirement solutions and services. This is a key focus of our business right now and will continue to be so over the coming years. It’s also important that the Quality of Advice reforms are implemented as soon as possible to help clear the path for more retiring Australians to access affordable financial advice.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
We know the financial sector has a key role to play in emissions reductions, the transition and supporting climate adaptation. Some of the opportunities include investing in and scaling new technologies, supporting the adaption to natural disasters and the sector reducing its own emissions.
Policy settings that support the efficient allocation of capital from Sustainable Finance Taxonomies, product labelling and common ESG disclosures should all play an important role.
■ What level of adoption is your business currently at with the use of AI technology?
There is no doubt AI has the power to radically transform how we work and how we interact with our customers. Equally, that power and potential means we need to have the right systems in place to ensure there aren’t unintended consequences through its adoption for certain solutions. Our team has been partnering with academics to establish an ethical framework, as well as a series of working principles based on Federal Government guidelines, to embed into our decision-making processes across the business. This will allow us to govern the safe use of AI as well as providing us the capability to hold our suppliers to account on how they approach AI.
We are investigating and experimenting with selective use cases to drive efficiency in the business. Future opportunities for AMP include how AI can support digital and personalised financial advice solutions, enhanced customer service and support through virtual assistance, and helping prevent fraud and cyber-attacks through early detection of anomalies and suspicious activity.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
Many Australians are facing cost of living pressures, and ensuring we are there to support our most vulnerable customers is always front of mind for me.
Heightened funding costs are a challenge for all banks and likely to continue, so ensuring we manage our loan book in a sustainable manner in the immediate term is an important priority. We’ve taken action to diversify and strengthen our funding mix in the medium term, through developing a new digital banking division, focused on transactions in the small businesses market.
More broadly, AMP operates in highly competitive industries across banking, super and investment platforms. This is great for customers and is keeping us on our toes to innovate and differentiate ourselves, particularly in retirement, banking and advice, where we’re making progress. We have established a dedicated working group to explore AI opportunities.
Cyber threats remain a significant risk to be managed by all businesses and they have become increasingly sophisticated. So ensuring we take every possible measure to protect our business and customer information is also a key priority.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
We look at ESG as a set of inter-related issues, not as individual pillars or issues in isolation. Managing competing stakeholder demands requires trade-offs, which are an everyday reality for most businesses. What’s important is that we’re clear about our material ESG issues, accountable and report meaningfully to our stakeholders on our performance and the impacts.
Governance is the starting point for all ESG conversations and while it requires ongoing evolution, listed companies have been addressing issues such shareholder rights and remuneration for decades.
What we are seeing is environmental matters receiving the most attention, given the systemic nature of those key issues such as climate change. And while we’ve seen other social issues, such as working conditions, health and safety receive heightened attention during the pandemic, this has now normalised.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
While there’s a huge opportunity with hybrid working to broaden the pool of talent available, it’s also clear that there are benefits of agility, creativity, and learning that come when we spend time together in the office, and I see this as a critical part of driving performance.
That said, hybrid working arrangements are here to stay and at AMP we use a flexible working approach, which allows our people and their leaders to consider what works best for the individual and the team, to drive performance. We have set a minimum of eight days per month for our people to attend the office.
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ANZ, Shayne Elliott
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The number of customers with home loans experiencing financial stress remains relatively modest by historic standards, because many came into 2023 with strong household savings and our lending buffer was relatively high. We are seeing now that much of that has been absorbed but many households now have higher incomes or may be benefitting from rising house prices. So on average, their balance sheets remain in decent shape, and the same can be said for most of our small business customers.
However, we can see that some customers are starting to cut back on spending and changing what’s in their shopping basket, to save money. And for each customer who is struggling, these times will be tough. That’s why we regularly contact customers to check in and make sure their loan arrangements remain suitable for their circumstances. We’ve also improved our data capabilities to proactively identify customers whose transaction patterns indicate potential future stress.
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The Australian economy has been remarkably robust through 2023 but we do see the environment becoming more challenging as we head into 2024. Our economists expect economic growth to slow next year before the beginnings of a rebound in 2025, however they expect we will avoid a recession.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
We know many people are concerned about the ability of hard-working people to buy a home. We all agree we want to be lending responsibly, but the unintended consequence is that it is harder to get a home loan in Australia today than it has been in 30 years. Other factors include the high cost of construction and a lack of affordable housing. We want to help people to be able to get onto the property ladder and not feel like that is a dream beyond their reach.
While many in the community are aware and concerned, no one group can solve this alone. The issue requires a co-ordinated strategy built for the long-term across government, banks, builders, developers, state governments, councils and others. The market won’t be able to solve this easily as distortions, including from taxes and local development laws, can exacerbate the issue.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
This is a significant challenge for governments, businesses and communities alike. We have an important role to play as the largest institutional bank in Australia, supporting our large business customers in the transition to net zero. The key is going to be collaboration and we know the most important role we can play is working with our customers to reduce their emissions and enhance their resilience to a changing climate.
It’s relatively easy to run away from a problem and say: these are all the things we’re not going to do. We prefer to focus on the things we are going to do and how we’re going to help emitters reduce their emissions. We’ve got to work together. We’ve got to make sure the companies we work with have a credible plan to transition to net zero. Also, let’s not forget that this energy transition represents an incredible opportunity if we get things right.
■ What level of adoption is your business currently at with the use of AI technology?
I’d say we’re somewhere between the experimentation and early adoption phase at this stage, but things are moving quickly. We recently launched an ANZ-built tool called Z-GPT which allows staff to type in a simple question, with an answer generated from internal data is suitable for exploration using AI. We think of it as our in-house version of Chat GPT and it will be rolled out to many of our staff in 2024.
We are also testing solutions that will make all our people more productive in how they collaborate. We’re running multiple experiments in our so-called AI Centre of Experimentation, so you can expect to see more initiatives in coming months. We expect the turnaround time from experiment to pilot will be shorter than we have previously experienced, given the rate of change with this new technology.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
I often think about potential disruptions from our fintech competitors, given the industry is evolving at a rapid pace. We need to be constantly investing and learning in order to stay relevant to our customers. We’re lucky in we’ve become pretty accustomed to dealing with disruption in our industry and in simplifying our business we are well set up to respond.
My other 3am thought is around the current cost of living pressures. We need to be careful because we often look at the numbers, but numbers are not people. We need to make sure we think about the people who are doing it tough as inflation and interest rates remain high. And there’s an increasing number of those people - the renters, the young, the people without secure employment - who are actually in a pretty dire position. We need to support them.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
At ANZ we consider the ethical, social, economic and environmental impacts of decisions we make. These are underpinned by the G in ESG – governance. We take this extremely seriously and work hard to get the balance right between the needs of all stakeholders. Our ESG governance framework considers how relevant risks and opportunities are effectively managed, how decisions are made, how we engage with our stakeholders and how we set targets. Ensuring our governance and risk management processes are embedded in our day-to-day work helps us better identify and manage emerging risks while achieving fair, ethical and balanced outcomes.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
At ANZ, we’ve had flexibility arrangements in place for a long time and well before the current focus on working from home. Today our people have the flexibility to work up to half the time remotely, whether that’s from home or another location. That means we expect on average that our people spend a minimum of 50 per cent of their scheduled work time in the workplace.
It’s worth noting, we have a diverse workforce spanning 29 countries doing very different jobs – and one size doesn’t necessarily fit all. Productivity for a contact centre is very different to productivity for a foreign exchange trader, or a banker in Commercial, or a software engineer. That’s why we are principals-based - we do what works and that will continue to evolve just has it has over the past decades.
We do believe there are many benefits to working in person alongside others, including opportunities for informal learning and development, building networks and sustaining a sense of belonging and a strong culture. I’m not suggesting everybody has to be in the office every day, I don’t think we’ll be going back to those days. But we do see significant benefits for our staff from being in the office and that’s what we’re working towards.
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APA, Adam Watson
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
There are obvious challenges with a higher interest rate environment, however, it’s critical we get inflation under control. APA has a strong balance sheet and we are well positioned to execute our growth strategy in a disciplined way. Our customers, who are energy consumers and wholesalers, are focused on ensuring their energy infrastructure solutions are reliable, affordable and low emissions.
■ How would you rate the shape of the Australian economy as we head into the New Year?
There are headwinds in the economy, but we are optimistic. When it comes to the energy transition, competition for skilled labour, critical minerals and equipment remains high. But we can’t take our foot off the accelerator when it comes to investing in new projects to deliver reliable, affordable and lower emissions energy.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Given the significant challenges for energy transition, governments must continue to establish education and training programs that will build the human capital required to successfully deliver major projects. And we need sensible energy policy.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
We strongly support the government’s renewables target and efforts to reduce emissions, but we need to ensure our energy system remains reliable and affordable. There are significant challenges to the delivery of these three things. Australia can’t deliver a fast, fair and affordable transition by continuing to extend our reliance on coal-fired generation, while demonising the important role gas plays. Gas is required to back up renewables, power our key industries and support emerging industries, such as critical minerals. So we need to move quickly and prioritise unlocking new gas projects.
■ What level of adoption is your business currently at with the use of AI technology?
We strongly support the government’s renewables target and efforts to reduce emissions, but we need to ensure our energy system remains reliable and affordable. There are significant challenges to the delivery of these three things.
Australia can’t deliver a fast, fair and affordable transition by continuing to extend our reliance on coal-fired generation, while demonising the important role gas plays. Gas is required to back up renewables, power our key industries and support emerging industries, such as critical minerals. So we need to move quickly and prioritise unlocking new gas projects.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Meeting the energy trilemma of reliable, affordable and lower emissions energy will continue to be a challenge for our economy. AEMO and the ACCC have warned of potential energy shortages so it’s critical we bring new supply to market to keep the lights on. The Federal Government has recognised the critical role gas will play and we are pleased to continue to engage around the ‘Future of Gas’ strategy.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Australian listed companies are held to high standards as far as their reporting, management and engagement on ESG issues. Governance is a critical part of this and continues to be a focus across our organisation. Ultimately, we see management of ESG issues as an important part of our ongoing social license and it can also be a source of competitive advantage for our customers. We continue to invest in it to ensure we can deliver our growth strategy.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We ask our office-based teams to spend a minimum of 40 per cent of time, over a month, in the office. One of the greatest advantages of flexible working is the opportunity to drive greater diversity and inclusion across our workplaces. And there is no doubt that flexible working for those roles that allow it is an important part of attracting and retaining talent, particularly as the competition for human capital continues to intensify.
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Ashurst, Paul Jenkins
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Higher costs are causing many businesses to take a more cautious approach to investment decisions. As a consequence, there is uneven demand in some areas of legal services, such as real estate and equity capital markets. But we also see an uptick in areas such as disputes, regulatory advice and insolvency. Other factors are also driving demand for our services – ranging from concerns about privacy, data protection and cyber risk to ESG and the energy transition.
Even in a challenging economic climate, we find that clients increasingly need an integrated legal, risk and tech-enabled solution. This need is driving the continued expansion of our risk consulting and legal technology offerings in Australia, with these areas being two of the fastest growing practices across the firm.
■ How would you rate the shape of the Australian economy as we head into the New Year?
We are anticipating the more subdued outlook to continue for the first half of 2024. However, Australia’s economy has proven resilient and has weathered recent challenges well. We are expecting demand for our transactional services to continue to pick up in the second half of 2024, particularly if interest rate pressures start to ease.
The labour market for high quality lawyers continues to be tight – we expect this to continue in 2024 as confidence returns to many offshore markets (eg, the US and UK) possibly at a faster rate than in Australia.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Comprehensive tax reform has significant potential to drive productivity improvements in the Australian economy. Over the last decade, Australia has seen a decline in non-mining investment, and tax reform is needed to incentivise investment into non-mining sectors, and facilitate the economy’s transition away from an over-reliance on resources. Tax reform should be comprehensive and not piecemeal to ensure it improves Australia’s productivity growth and delivers fair structural changes. This tax reform agenda is well-known, but for it to succeed, it requires bold leadership not only from politicians, but also business and community leaders.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
The government’s recent plan to underwrite renewables has the potential to underpin increased confidence in renewable projects. However, there are still considerable challenges including constraints in approval processes and environmental protection measures, skills shortages and supply chain issues that will need to be addressed to help accelerate our energy transition. Each of these factors contribute to substantial cost increases for the development of projects and, potentially, corresponding increases in energy prices, and each will need a suite of clear and simple policy responses.
■ What level of adoption is your business currently at with the use of AI technology?
We currently use a number of AI-enabled solutions and tools to assist with legal research, document review, document analysis, data extraction, data analysis, process automation, decision automation and translation. These tools are most commonly used in large-scale and complex disputes, investigations and transactional matters but there are potential applications of the technology across an even wider range of legal work. We are also trialling more advanced AI-based technologies including generative AI and the application of large language models.
Although still in the early stages of industry adoption, these technologies will have a significant impact on the business and practice of law. We do not see AI replacing traditional lawyers – instead tech will add to human interaction, not replace it. It’s about continuing to improve the value and efficiency of what we do for our clients.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
The persistent threats and new technologies being adopted by cyber criminals and the impact on data protection is one of the biggest concerns for our business and among our clients.
We take a vigilant approach to our own systems and people to ensure we protect confidential data. But we also know from our work on high profile cyber incidents that it only takes a small lapse in security to have a significant breach. No business is immune from the challenges posed by cybersecurity, and that is why our clients, governments and regulators globally, are lifting the bar when it comes to cyber security and readiness. We have a responsibility to protect our clients’ data and be ready to respond in the event of an incident.
It takes a multifunctional effort right across the whole business, to ensure we are one step ahead of this rapidly developing external threat.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
The business community is placing increased emphasis on ESG issues as companies demonstrate their participation in the energy transition and their ability to move through deep decarbonisation to a clean energy future. It’s a healthy tension that markets, investors, members, shareholders and regulators are increasingly testing the integrity of these ESG related statements and holding companies accountable for their management of ESG risks and opportunities. We have seen this with the rise in greenwashing allegations and this is already flowing through to litigation, highlighting the compliance risk that many businesses need to manage.
While environment and net zero commitments are garnering a lot of attention, we have also experienced a significant increase in demand for advice on corporate governance – the “G” in ESG. Issues such as anti-bribery, business judgment and corporate decision-making are bringing new complexity to directors’ duties that businesses can’t afford to ignore.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Ashurst has a hybrid working policy, with most of our people spending at least 60 per cent of their work week in the office. Through this approach, we have attempted to facilitate individual flexibility while ensuring we meet business and client requirements. In-person meetings and collaboration in the office will always play an important role in our work and the career development of our people. This approach has worked well since the end of Covid-era office closures and we intend to continue it.
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Aurizon, Andrew Harding
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
While we have seen an increase to our interest costs, driven by both an increase in debt to fund a strategic acquisition and a rising rates environment, the Network (infrastructure) business, where most of Aurizon’s debt sits, is insulated from the impact of rate hikes given regulatory settings.
On the non-regulated part of our business – the Bulk, Containerised Freight and Coal haulage businesses, the majority of our haulage contracts have quarterly or annual CPI escalation mechanisms that help mitigate the impact of inflation.
■ How would you rate the shape of the Australian economy as we head into the New Year?
I see the Australian economy remaining resilient as we head into 2024, despite uncertainty and volatility. But it requires discipline in spending and targeted investment, and policy settings that do not impose further costs and unnecessary regulation and roadblocks for business. Australian resources and agriculture will continue to support export earnings and government revenue (and our standing as a globally-competitive trading nation), with outstanding opportunities for the Australian economy as the energy transformation continues.
The labour market remains tight in the rail and transport sector, with key challenges in securing roles such as electricians and engineers. This has the potential to be a constraint on business growth.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
Investing to improve the efficiency and resilience of core rail freight transport infrastructure needs to be prioritised, especially as we face climate change and more frequent extreme weather events. Targeted investments to improve the capacity, as well as resilience and reliability of key interstate rail corridors, will unlock significant productivity benefits for the economy – for exports, imports and domestic freight for consumers.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
At a high level, streamline approvals and reduce regulatory burden for private sector investment in large-scale renewable energy projects. Concurrently, improve the focus on ensuring energy and supply security in a sensible structured process – and contain the price pain for consumers and industry – by also recognising the role of high quality Australian coal and gas through this transition.
In our sector, the rail industry is well-positioned to contribute more to the decarbonisation of Australian supply chains by doing more of the heavy-lifting on key corridors – using existing assets and also with the emerging technology of battery and hydrogen powered locomotives. These technologies will require funding support from government programs to assist with their development and testing in preparation for future commercial application. It is important that funding programs support a range of technologies and are available to rail freight transport, recognising that this is now occurring through programs such as the Powering the Regions Fund.
Using rail for heavy freight is already the safest, most environmentally-friendly mode of land freight transport with approximately 75 per cent fewer greenhouse gas emissions generated by rail per tonne of freight compared to road. Rail also delivers improved road safety outcomes for the community because one train can carry up to equivalent of 150 semi-trailers. Increasing the utilisation of rail freight, including through mode shift from road to rail on key freight corridors, has the potential to make a substantial reduction in overall transport sector greenhouse gas emissions.
■ What level of adoption is your business currently at with the use of AI technology?
Aurizon is in the early adoption phase. We expect to see an accelerated adoption of GenAI in low risk areas of the business with early exploration and adoption focused internally to drive efficiency in transactional and manual knowledge worker tasks.
More broadly, data science, machine learning and automation are improving the way we maintain and operate our capital-intensive assets of rolling stock and track infrastructure. This work is delivering significant cost reduction and safer operations. For example, remote monitoring systems of temperatures on our network to proactively manage operations; digital train technology to support optimal driving techniques; and wayside monitoring of trains for faults and maintenance requirements.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Geopolitical risk for our economy has the potential to disrupt supply chains and our valuable exports market, as we have seen in recent years. That said, our exports have remained relatively resilient through these recent challenges (for e.g. Covid-19, China coal ban).
Cyber and information security clearly remains a key focus for all business; and recent events reinforce the need for constant vigilance and an ability to respond rapidly.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
With this we have seen companies provide more detail and transparency in ESG reporting – this is a good thing and mutually beneficial for companies and stakeholders/ shareholders.
Generally, I think Australian business is striking the right balance when it comes to ESG and certainly governance remains core to running a business responsibly. Shareholders and stakeholders rightly expect us to deliver on “E”, “S” and “G” concurrently and in a measured approach. It’s much more than climate change and carbon emissions but also how we are performing in other areas such as work in local communities, ethical supply chains and the safety, health and wellbeing of employees.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Technology and tools to support employee productivity continue to evolve but our approach to flexible work is well-embedded in the Company and has not changed substantially in the past 12 months.
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AustralianSuper, Paul Schroder
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
More moderate inflation and low real interest rates over the last decade or so provided a boost to returns for most assets. But investing is always about the future and the current outlook is different, and higher rates will likely remove this tailwind to returns. More broadly, we will need to take into consideration the impact of higher inflation and the prospect of higher for longer interest rates on our investment approach. At this stage we continue to favour a structural pro-growth asset strategy over the longer term, and we will manage the portfolio as conditions and the outlook evolve.
■ How would you rate the shape of the Australian economy as we head into the New Year?
In comparison to the global outlook, the Australian economy has experienced a stronger rebound in immigration and better fiscal balances over the last 12 months. Those factors will serve as cushions to the economy in the case of a severe global downturn.
But Australian economic activity has slowed in the last few quarters. Consumption, the key engine of the economy, contributed modestly to growth as real disposable income was hit by rising living costs and interest payments.
While the labour market remains tight, tentative signs of a slight easing in pressures are beginning to emerge.
The muted Chinese economic recovery is unlikely to provide material support to Australian resources exports, whereas services trade is expected to fully recover by 2024. Since restrictive monetary policy is likely to persist until the end of 2024 at least, this will continue to drag on consumption. We expect the economy will show little growth until 2025.
Given this outlook for monetary policy, we think the “narrow path” (i.e. reducing inflation while keeping the economy on a growth path) that the RBA is seeking to navigate will be challenging to achieve.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
A key focus for big reform in the Australian economy remains infrastructure especially that linked to the energy transition. Australia is fortunate to be endowed with most of the resources needed to make the transition to a more sustainable energy economy: vast open spaces, sun and wind to generate potentially unlimited renewable electricity at low cost, the metals and critical minerals (“rare earths”) used to produce batteries such as lithium, copper, cobalt and nickel, hydro power and storage via Snowy 2.0 and scope for large-scale carbon storage. Now we need to harness this opportunity for growth. Energy security and diversity has given Australia an opportunity to advance the transition separate from government targets.
However, there are major challenges of distance and cost to build the infrastructure and grid flexibility for a competitive renewable transmission network, rising costs and borrowing rates and lack of certainty for major investment such as the SunCable project in the NT.
We will need to pursue net zero always conscious of the need for available and affordable power.
Also, the US Inflation Reduction Act has changed global dynamics around investments in renewable energy that will attract investment to the US that could erode Australia’s competitive advantage.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Meeting Australia’s short and longer-term emissions reduction goals will require collaboration and coordinated action between government, industry, investors and the broader community.
We are pleased to see the Government’s recent policy initiatives and consultations on climate. Supportive policy is important for investors in providing greater certainty and a supportive economic environment required for low-carbon investment.
We believe a smooth and orderly net zero transition over time will deliver the best investment outcomes for members and we stand ready to invest where and when it is suitable.
We recognise that the economy-wide transformation will take time, particularly for carbon-intensive energy sectors and hard-to-abate industries, which need to transform their business models, adapt to new technologies, and justly transition their workforces to align with a net zero economy.
The more we can all move in the same direction the better.
■ What level of adoption is your business currently at with the use of AI technology?
It is still early days at AustralianSuper for AI. We are in the learning by doing phase, looking at its potential to improve efficiency and speed of member interactions and experience and helping us make money for members. The Fund is investigating the benefits and efficiencies in database management and improvements in the processes across research, portfolio management and investments.
Ultimately the quality of databases and computing power will be the key to unlocking the power of Ai.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
Firstly, I try to ensure a good night’s sleep as worrying about things (especially in the middle of the night) is rarely productive. My overarching concern is ensuring the best long-term returns for members. They have entrusted us with their retirement savings and that is both a great privilege and heavy responsibility
We are currently experiencing a challenging economic environment, with volatility in investment markets, and we expect this to continue over the next 12 months. However, we have the right capability and measures in place to manage through these periods, and to take advantage of opportunities.
Secondly, we believe that the next 12 months offer a unique opportunity to shape the future of the superannuation system for retirees. In superannuation, we have a world-class savings system – we now need to complete the other piece of the puzzle with a world-class spending system. There is lots to be done here to make the system work better for those who are approaching and in retirement.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
It is important that companies maintain their social licence by operating in a way which treats their stakeholders fairly, consistent with community standards and expectations.
We believe companies that have good environmental, social and governance management provide better long-term returns. Good governance of ESG issues starts with an effective board. We dedicate time in our ESG and Stewardship program to focus on the ‘G’ and engage with ASX companies, either directly or through collaborative initiatives, seeking effective operation of company boards and appropriate management of ESG issues which can impact members returns.
We are encouraged by the work on the G and anticipate the S will increasingly demand a more mature focus
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
The Fund introduced a Blended Working Policy in July 2022 focused on balancing productivity, safety, risk, performance, and outputs, rather than presenteeism, so colleagues can be supported to do their best work for members.
A deliberate decision was made not to mandate when colleagues are to attend their office in terms of a percentage of time or number of working hours/days each week. Rather, colleagues are expected to maintain regular connection and attendance at the office.
Our colleague’s response to this approach continues to be positive and a real differentiator for us in a competitive market. We have recently incorporated our Blended Working arrangements into the Fund’s recently renegotiated Enterprise Agreement, which is an industry first.
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Bank of Queensland, Patrick Allaway
■ How is inflation and the prospect of higher for longer interest rates affecting your business?
Importantly, is the behaviour of your customers changing?
There is clear evidence the combination of higher cost of living and higher mortgage rates have eaten into customers’ discretionary incomes. This impact on the Banks’ loan book to date has been modest, although like all banks, we are prepared in the event things get worse.
Businesses focused on discretionary spending are increasingly feeling the pinch and we expect this could remain an issue for much of next year.
For banks, higher inflation is boosting costs and further crimping margins at a time of declining NIMs. A slowing economy at a time of cost pressure is likely to lead to a general narrowing of margins across the economy.
■ How would you rate the shape of the Australian economy as we head into the New Year?
The Australian economy ended 2023 in reasonable shape, particularly given the rise in interest rates and the decline in households’ real disposable incomes. We agree with the consensus view that the domestic economy in 2024 will experience only modest growth but avoid a recession.
There is the likelihood economic growth may be weaker than the consensus view as the experiences of 2023 could lead to households and firms proceeding with caution when it comes to their spending in 2024.
Some slowing in the economy, combined with strong immigration growth, has resulted in the labour market not being as tight at the end of 2023 as it was at the start. Further easing is probable in 2024 as economic growth remains sub-par. Labour shortages though are likely to remain a feature in certain occupations.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
A different tax structure is likely to be needed given the spending demands on the budget and changes occurring in the economy. But we recognise this is difficult, particularly at a time of other substantial reform.
Focusing on getting the energy transition right is an important economic reform, including maintaining energy reliability and minimising the cost, to both households and businesses as well as to the Budget.
There appears to be a growing skills mismatch in the workforce. While the reasons are not clear this may require more focus on the vocational training sector.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
There have been recent indications that Australia will get close to achieving its 43% target. If this is the case, most of the near-term focus will be on ensuring current policies are successfully implemented and we remain steadfast on achieving the longer-run reduction targets.
■ What level of adoption is your business currently at with the use of AI technology?
We are putting in the right technical and governance foundations and controls in place to ensure we can leverage AI capabilities in a safe, compliant and ethical manner.
This involves working closely with our strategic partners, including Microsoft, to understand its potential to improve employee productivity and enhance our customer and employee experiences.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
Key structural trends including digitisation, sustainability, cyber/financial crime/fraud escalation, ageing population, increasing regulatory impost.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
BOQ Group regularly reviews the most material environmental, social, and governance issues affecting our business. We continually monitor trends, concerns, publications and actions that emerge from a broad range of stakeholders. Corporate governance, accountability and transparency are considered as material ESG issues by the Group. We recognise that FY23 was a challenging year in terms of Governance, with commitments undertaken to strengthen the Bank and we remain focused on delivering these plans.
As part of this, the Group is building a pathway to deliver an improved governance model with clear end-to-end accountabilities, a better customer experience and an enhanced risk culture.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
BOQ Group has maintained its hybrid working model beyond the pandemic which encourages our people to find the balance that best works for their teams, their wellbeing and the business while continuing to value in-person connection.
Our hybrid working model allows people who work in roles that can be done remotely to work away from the office up to 50% of the time.
We also recognise for many of our customer facing roles where in person relationships are key to being the bank that customers choose, remote working is not possible.
Feedback from our people indicates they value the continued access to flexible work arrangements and being trusted to work within our hybrid work parameters to support their productivity, team connections and wellbeing and we’re supportive of this.
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Bendigo and Adelaide Bank, Marnie Baker
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
We expect official interest rates to remain restrictive for much of 2024 as the RBA continues to prioritise containing inflation. This will be challenging for borrowers who are also dealing with the rising cost-of-living. Borrowers are mostly well positioned and arrears remain low by historical standards. At the same time, we’re seeing demand for term deposits rising as investors and self-funded retirees are taking advantage of attractive rates, which has been the biggest change to customer behaviour in 2023.
■ How would you rate the shape of the Australian economy as we head into the New Year?
The Australian economy remains resilient, as shown by the very low unemployment rates and the strong services sector; however higher official interest rates are likely to cause economic growth to slow further in real terms. The economy experienced a per-capita recession in the first half of 2023 however the welcome rebound in net migration boosted aggregate demand. In 2024, we’re forecasting tight labour markets will likely ease as the economy and population growth decelerates, but we still expect Australia to benefit from service exports and to outperform other advanced economies.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
As a regionally headquartered business, we see first-hand the potential regional Australia offers the country. Australia today is one of the most urbanised countries in the OECD and as the population continues to grow, this is placing increased strain on our capital cities. Balancing Australia’s population and investment would boost prosperity and productivity for all, adding an additional $13.8b to GDP than if Australia just continued with the status quo. However, pursuing regionalisation requires careful planning and investment to ensure those who already call regional Australia home are not left behind.
Regionally based businesses often struggle to attract and retain skilled workers and so education and training are key to unlocking local talent pools. Incentivising partnerships between universities and businesses would improve the school to work talent pipeline. Of course, attracting more people would not be possible without public and private investment in regional housing. Government, communities, and business must work together to ease land availability, address affordability, and provide an appropriate mix of housing to attract key workers to regional areas – and keep them there. Regional housing must be a feature of local, state, and federal government housing agendas.
With the Albanese Government’s competition review now underway and a renewed focus from the Productivity Commission, 2024 is the perfect opportunity for the federal government to prioritise levelling the competitive playing field for business and growing productivity – one of the main drivers of improved living standards for Australians. Ultimately, we would be looking for policies that help reduce the regulatory burden for small and mid-tier banks and help free up capital for reinvestment into even better products and services for our customers. Stronger competition would lead to greater choice for all consumers.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Australia needs to rapidly deliver renewable power generation, electrification, and energy storage to support emissions reduction. To do this, we need the right policy settings, market enablers and technology, like we’re starting to see in the electric vehicle space. Critically it also requires an equitable distribution of value, risk, and cost as we build the energy network of the future. The impacts of these decisions touch all Australians – especially in the regions. This is a transformational challenge and we’re proud to do our bit at Bendigo Bank. We’re working on our target to reduce operational emissions 90% by 2025 while supporting our customers to reduce their own. It’s a powerful way we can feed into the prosperity of our customers and communities, not off it.
■ What level of adoption is your business currently at with the use of AI technology?
Our vision is to be Australia’s bank of choice and we are using AI in ways to help us achieve our goals in ways we know are safe and deliver results. For instance, we use machine learning in bounded environments for data analysis, such as income verification when we assess loan applications. We also use machine learning to personalise the customer experience and identify products or services you may need before you even know you need them. AI helps us identify consumer needs and perform repetitive tasks so our employees can spend their time delivering even better experiences to customers. Our approach is to be digital by design and human when it matters.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
Cyber security remains front of mind and so we’re working hard to protect our Bank and our customers from these types of incidents. Bendigo and Adelaide Bank takes cyber security very seriously. We use a combination of standard industry practices to safeguard our systems and protect customer data. We also work closely with cyber security agencies and intelligence services to make sure we can detect any malicious or abnormal behaviour. The security of our systems and the data of our customers’ is our number one priority.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Robust governance is essential to strong and sustainable growth and success. At our Bank, we always strive to act ethically, capably and with great care and attention, ensuring everyone is respectfully heard. However, like any organisation we sometimes make mistakes and when we do, we take ownership and act to make good and remediate any errors. The ESG space is dynamic, and our approach ensures we are managing the right risks and opportunities for our business. We are a responsible and ethical business with strong governance cascading from our Board and throughout our organisation. We also have policy settings guiding our strategy setting and risk management, an example of this is our climate strategy which outlines particular sectors we won’t provide finance to.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We understand the way our people work has changed, with many embracing working remotely and the flexibility it provides in creating work/life balance, so we continue to support a hybrid way of working. However, I’m a big believer that connection and relationships are at the heart of who we are and how we work. Being together and working side-by-side helps us build relationships across the business, create a vibrant culture, and leads to better opportunities for us to collaborate, innovate, and learn. Our people have told us having the opportunity to work remotely some of the time enables them to better balance their working and home lives. In line with this, I expect to see our people in the office the majority of the time.
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BHP, Mike Henry
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Inflation was slower to take off in Australia than other countries, and it peaked later and lower due largely to the delayed ending of pandemic lockdowns versus other countries.
Aggregate inflation since 2019 is lower in Australia than major economies in the US and the EU, but our current rate is among the highest in the developed world. We believe it is going to be a hard-fought battle to get back down to the RBA’s target range. Fuel prices are coming down, but the cost of rent, housing, food, electricity and labour-intensive services remain elevated.
Cost-of-living pressures are impacting many Australian households. We see this in the regional communities where we operate and where many of our employees live. Inflation puts pressure on the availability and affordability of key support services such as childcare and healthcare, which in turn affects our ability to attract and retain talent into our regional operations.
As a business, BHP is not immune. We have faced increasing inflationary pressure, with our cost base increasing by around 10% last financial year. Inflation will remain a challenge into 2024.
■ How would you rate the shape of the Australian economy as we head into the New Year?
There is cause to be optimistic for Australia’s economy, albeit with challenges to address and broader global uncertainty.
Australia is well positioned to benefit from the megatrends reshaping the global economy: decarbonisation, electrification and population growth. The energy transition and population growth will drive huge demand for metals and minerals: copper and nickel for electric vehicles, wind turbines, solar panels, batteries and wiring, and steel to build this new infrastructure. There are about 18 million electric vehicles on the world’s roads today; there could be well over 400 million in 2030.
Australia has significant critical mineral resources, but many other nations around the globe are equally – or even better – endowed and are moving with pace to capture this same opportunity. Australia must be ready and able to compete.
Australia’s economy also faces significant and increasingly urgent underlying structural challenges. Households are battling through a cost-of-living crisis, the housing market is tight, and we have an ageing population. Productivity growth is at 60-year lows. Business investment as a share of GDP is at low levels not seen in 40 years.
Australia needs a greater diversity of sectors to match the leading economies with which we compete. We need to encourage investment in the people, technology and skills required to create a modern economy, more efficient assessment and permitting for major projects, investment in strategic infrastructure to unlock resources and a stable policy environment to encourage global capital to flow to Australia’s shores.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
-Competitiveness.
Australia’s economy is well positioned to benefit from the megatrends reshaping the global economy: decarbonisation, electrification and population growth.
But we have to compete with other nations that are moving with increasing pace to attract global capital and new investment.
Australia shouldn’t try to replicate the Inflation Reduction Act in the U.S. and its associated large subsidies. Rather, we should focus on addressing the fundamentals required to make Australia one of the world’s most attractive destinations to invest.
There are four areas in particular that require sharper focus and collective effort:
Robust, efficient and streamlined permitting that maintains strong protections and provides certainty, consistency and predictability on parameters and time frames for major investments.
Major strategic infrastructure such as energy, rail, roads and water that helps to unlock new mining basins and other industry to grow, especially in regional and remote Australia.
A world class METS sector and a modern skills base that has the capability to develop and lead the use of new technologies across many sectors.
And underpinning all of this, we need stability in policy, fiscal and regulatory settings that will encourage new investment to flow to Australia’s shores.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
Decarbonisation relies on breakthroughs in technology, which will require deep investment and broad collaboration. We see that very clearly in our own business.
We have comprehensive decarbonisation plans in place to reduce our operational greenhouse gas emissions by at least 30 per cent by FY2030 from FY2020 levels, and a goal to achieve net zero operational emissions by 2050.
The increased use of renewable electricity in BHP’s global operations has seen our operational emissions reduce by nearly a third since FY2020, and we will continue to increase our use of renewables in coming years. The next major focus for lowering our emissions is working to replace diesel-powered haul trucks and trains with battery-electric models.
BHP has renewable electricity supply agreements for parts our Chile, Queensland, South Australian and Western Australian operations, and we are partnering with leading global manufacturers and developers like Caterpillar, Komatsu, Wabtec, Progress Rail and Toyota to accelerate the availability of larger scale battery-electric technology.
We are also working with major steelmakers in China, Japan, Korea and India representing nearly 20% of the world’s reported steel production, exploring multiple potential paths to reach lower emissions intensity across the industry.
■ What level of adoption is your business currently at with the use of AI technology?
Yes, we have been accelerating the use of next generation technologies like artificial intelligence, machine learning and data analytics for many years across BHP to improve the safety, sustainability and efficiency of our operations.
At our Escondida copper mine in Chile, we have used AI and machine learning to increase copper recovery, and also used real-time data analytics and automated corrective actions to reduce energy and water consumption in the concentrators and desalination plants.
At our WA iron ore operations, our autonomous haul trucks have significantly reduced potential safety incidents, we use algorithms to optimise the off-loading of iron ore trains at port, and automated ship-loaders at Port Hedland have helped increase output by one million tonnes per year.
We are also using machine learning to leverage 140 years of historical exploration data and identify potential opportunities to add to our growth pipeline.
■ What external issues do you expect to impact or disrupt your business within the next 12 months - the so-called 3AM thought?
We are living in a world of heightened uncertainty. We face a global economic downturn marked by slower recovery in China, falling growth in the U.S. and Europe, and broad inflationary pressure. And, the terrible tragedies and geopolitical instability we have seen across the globe will continue to impact Australia and world trade.
In Australia, the Albanese government has done good work through its focus on key trade relationships to the benefit of many businesses in the Australian economy. However, policy changes at both the federal and state level are creating further cost increases and greater investment risk. These will be a negative for business investment in Australia.
At BHP, we are focused on the things we can control: safety, operational excellence, project execution, disciplined capital allocation and creation of greater social value. We are also ensuring we have a portfolio that is resilient, with assets that have a bias towards upside value under a range of scenarios.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
Societal expectations of companies and how they conduct themselves has grown – and rightly so. This is not so much a challenge but an opportunity for business: those that go the extra mile to work closely with and generate value for all stakeholders – workforce, suppliers, communities, Traditional Owners, governments and investors – should be advantaged and will prosper longer term.
Within this however, there is a broader problem in the lack of rigour and standardisation in the way that ESG performance is measured and reported on, which leads to confusion among investors, governments, communities and companies. It also results in a dissipation of impact as companies invest excess effort in meeting the requirements of many different external standards, rather than focusing more intensely on achieving better outcomes, faster.
Both businesses and stakeholders would benefit from a set of common standards upheld by all, where performance against those standards is a greater determinant of access to capital and licence to operate.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
We have worked flexibly for many years, including with the majority of our people who work at 24/7 operations in regional and remote areas.
Flexible work has been a game changer and helped to improve the attractiveness of working at BHP. It has supported our ability to achieve much improved gender balance across our global business, which is now more than 35% female.
For office-based employees we find three days a week in the workplace helps teams connect and generate new ideas.
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Brambles, Graham Chipchase
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
Brambles’ business is weighted to consumer staples and there will always be demand for essentials. This means we will continue to see the movement of goods regardless of economic cycles, although consumers may trade down in the same category.
Our conversations with large retail and manufacturing customers however paint a clear picture that macroeconomic conditions are creating a softer demand environment and they have already begun adjusting inventory levels accordingly, particularly for discretionary items.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
We see the opportunity for greater co-ordination to address decarbonisation, which cuts across all sectors and is a clear objective for many businesses. For those of us in hard-to-abate industries, there is a need for large-scale investment in areas like intermodal transport, shifting from road to rail or sea, if the logistics and transport sector is to successfully move towards low emissions.
The forestry and timber sector in Australia is another area rich with opportunities to make better use of our land, from both the perspective of carbon storage as well as the industries it helps underpin. In addition to boosting sovereign capability, scaling up a sustainable, plantation timber industry would offer greater certainty and security of supply for a raft of businesses operating in housing and construction, packaging and paper products, and our own pooled pallet business that supports domestic supply chains.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
The federal government has set an ambitious decarbonisation target for Australia, which is welcome. It’s going to take a highly co-ordinated effort across every sector at great speed to get there, and will need to be underpinned by the energy transition.
Tackling those industries that contribute the most to Australia’s emissions profile will be crucial and, while there is greater complexity involved, there is also a strong willingness from businesses to work with government because many of us also have ambitious decarbonisation targets and we all know that none of us can do it alone.
Having the right policy settings, sensible investment in infrastructure and a transition to a lower carbon energy mix will support the whole economy to move more quickly in the same direction.
■ What level of adoption is your business currently at with the use of AI technology?
Machine learning is already a prominent feature of our business and will have an outsized role to play as we progress our transformation strategy.
We’ve been using the technology to help build predictive capabilities that allow us to optimise collections, detect anomalies and identify inefficiencies in the flow of our pallets. The net result is that customers can benefit from enhanced efficiencies and avoiding duplication or misdirection of resources, while we have more accurate visibility of our asset pool.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
There’s certainly growing awareness that every stakeholder group needs to be considered not just independently but in a more integrated way with each other. Each of those groups now has a greater sense of one another’s presence – investors are regularly asking about customers’ interests and employees are highly attuned to external perception of the company. To have a sustainable business, it’s not possible to focus only on one stakeholder group or one of the elements of ESG – your business may succeed in its environmental practices but this won’t hold sway if you are neglecting your social licence.
The governance piece is critical to the other two pillars. Increasingly, there is an expectation that governance needs to be proactive. What’s also becoming clear is that stakeholders are prepared to hold businesses to account if poor governance has led to shortcomings in the ‘E’ or ‘S’ of ESG.
■ How has your organisation’s approach to staff working from home evolved since the pandemic? Is there now a set operating rhythm?
Our hybrid model of working is now very much embedded in the organisation and we continue to approach flexibility for employees from all aspects, prioritising how they work rather than where they work.
Our people are encouraged to split their time between remote and office-based working in a way that best works for them, their team and the nature of their work. The allocation of days our employees spend in the office varies across teams, areas of business and geography but in Australia, 2-3 days in the office, on average, appears to provide the optimum balance.
There is a common understanding that the role of our office has changed and is now viewed as a place to meet and collaborate. Our employees recognise the value of spending time in the workplace as a way to reconnect in person and build relationships within their teams and across the broader business.
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Bunnings, Mike Schneider
■ How is inflation and the prospect of higher for longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
It’s no secret many Australians are feeling the pinch at the moment, which is why our lowest prices proposition is so important and really resonating with consumers.
Naturally we are seeing customers prioritise value, and we are focusing our efforts on ways we can help them stretch their budgets further in tougher economic conditions.
The recent launch of our expanded cleaning range is all about delivering customers everyday value and an even wider range of necessity products with bigger quantities and better prices. While it is still early days, we’re hearing really positive feedback from customers and our data is indicating the range is boosting visitation and cleaning basket size.
We’ve worked hard over the past 12 months to lower our operating costs and boost productivity so we can continue providing customers with the widest range at the lowest prices.
We also know that our tradie and small business customers are facing a range of challenges in the current environment, so we’re really focused on continuing to strengthen our offer so we can help them run and grow their businesses.
As always, we remain focused on ensuring our operating model is resilient across all phases of the economic cycle.
■ How would you rate the shape of the Australian economy as we head into the New Year?
Interest rates have obviously spiked over the past 12 months, but we’re really confident in our ability to navigate any further tightening of the economy and continue advancing our growth agenda – in particular by delivering a compelling customer offer, making disciplined investment decisions and driving productivity throughout our business.
Fortunately, some of the economic challenges are offset through a stabilisation of shipping rates and an easing of some Covid-era supply shortages in key categories like timber.
Like many retailers, we’ve also continued to experience a tighter labour market which is likely to continue, and why it’s so important we ensure our team feels rewarded and valued for their great work.
■ What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
It’s pleasing to see collaborative efforts of various state and territory governments to address housing supply as national priority to ensure we can accommodate our expanding population. Everyone deserves a home to live in – it’s central to a sense of belonging and wellbeing. An ambitious housing agenda not only addresses this need but also supports the economy through local builders, tradespeople and material suppliers. Progress nationally in housing will serve as a prime example of the benefits of broader policy alignment across states and territories, which we’d like to see more of.
Key to success in the housing agenda is labour market reform, particularly to enhance productivity. We must ensure we have the right skilled labour and apprenticeships in construction to build the homes of the future, including by boosting female representation in trade. This can be supported by investing in innovation and technology to bolster our current workforce and propel our industry forward.
■ Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
We all need to work together and move quickly to achieve these targets. Government plays a big role through policy that ensures there’s sufficient renewable energy and storage while providing confidence and certainty for private investment. Business obviously has a key role to play as well, and sustainability remains an integral part of ensuring we stay relevant and profitable into the future.
We’re well on track to achieve 100 per cent renewable electricity by 2025, and Bunnings is now powered by 75% renewable electricity across our Australia and New Zealand network, including Beaumont Tiles and Tool Kit Depot Sites. That’s 75 per cent of our operational electricity requirements being met by solar, hydro and wind power.
■ What level of adoption is your business currently at with the use of AI technology?
AI is something we’re exploring and it’s been interesting to see the increasing role it’s played in the business sector over the past 12 months.
We’re currently trialling and testing a few AI-driven tools to see how they can help increase team productivity and operational efficiency, and we’ll work with our Innovation team to assess any potential benefits to our business over the coming months.
We’re always looking at ways we can leverage technology to boost efficiencies and allow our team to spend more time helping customers and providing the best customer experience.
■ What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3AM thought?
It’s been widely reported that the retail industry is facing rising incidents of abusive and violent customer behaviour, which is incredibly saddening.
My philosophy on this is simple: everyone deserves the right to come to work and feel safe from verbal and physical abuse.
That’s really what keeps me up at night, knowing we have team who have to face these types of encounters every week. It’s absolutely a minority of customers, but it’s an issue that’s on the rise.
It’s also why we’re working as hard as we can to create the safest possible store environment for our team, by continuing to invest in a number of safety tools and training, while advocating for stronger legislation to protect frontline retail team members.
■ Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
It’s becoming increasingly important for businesses to demonstrate they’re operating in a sustainable and responsible manner, which I think is an important and positive trend.
While the environmental and social practices of businesses are generally well-publicised, that’s not to say proper governance is being left behind. Effective and responsible governance is an extremely important element of our business and we have a number of longstanding frameworks in place to ensure our reporting, compliance and risk management are of the highest standard.
We continue to work hard to balance the demands of various stakeholders and undertake thorough materiality assessments to ensure we’re getting the ESG balance right, while identifying any focus areas.
■ How has your organisation’s approach to staff working from home evolved since the pandemic?
Our support centre team continues to tell us they value the flexibility of being able to work from either the home or the office, and we know from experience there are several positives about hybrid working when it comes to wellbeing, engagement and performance.
Overall, we continue to see our support team split their time evenly between the two, and we really encourage them to strike a healthy balance to maximise the benefits of both.
While it looks different for every function, we hear and see the benefits of collaborative working when teams are all in the office, as well as the social benefits of spending time together in person.
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