Australian execs cite regulatory pressure for their climate change response, says Deloitte report

A Deloitte report shows 78 per cent of Australia’s executives surveyed increased action on climate change due to regulatory pressure.

Increasing regulatory pressure is prompting companies to step up their action on climate change, according to a report by consulting firm Deloitte.

The latest Deloitte Sustainability Report shows that 78 per cent of Australian executives surveyed cited the regulatory environment as the reason for their increased action on climate change – significantly higher than the global level of 65 per cent.

“Australian business executives are starting to see the shift from voluntary action to mandated change,” said Pradeep Philip, the head of Deloitte Access Economics, on the release of the report. “The recent proposed change to the Safeguard Mechanism and emission targets for big polluters show the regulatory environment in Australia is changing. The trend is likely to continue, marking the end of the age of voluntary action and the beginning of a new period of mandatory transition.”

The survey comes after a year in which the Albanese government has legislated national carbon emission reduction goals for both 2030 and 2050 and moved to take more action to push companies to reduce carbon emissions. A stricter regime for Australia’s major carbon emitters comes into force in July this year following changes to the Safeguard Mechanism after legislation passed last November.

The government is also considering the introduction of mandatory carbon emission reporting for major companies while the Australian Securities and Investments Commission (ASIC) is stepping up action against companies perceived to be “greenwashing” – falsely stating or overstating their green credentials.

Deloitte Australia Access Economics lead partner Dr Pradeep Philip.

Dr Philip said the report also showed that Australian companies were under increasing pressure from a range of sources to take more action on climate change including boards, consumers, clients, shareholders and employees.

The survey reflects the changing environment affecting Australian companies which are more likely to be pressured by external forces to act on climate change than their global peers, many of whom have been proactive in reducing their carbon emissions for some years.

The report shows Australian executives see climate change as one of the top three issues facing them – behind the economic outlook and the search for talent — with 68 per cent reporting that they had increased investments in sustainability over the past year.

Global executives were slightly less concerned than their Australian peers about the competition for talent: a reflection of labour shortages in Australia in the wake of the pandemic.

But they were more concerned about taking action on climate change, with 75 per cent of global executives reporting an increase in spending on sustainability over the year.

The report shows Australian companies were more likely than the global average to be focused on increasing energy efficiency and using more climate friendly technologies, as well as developing climate friendly products and services.

But they were less likely to be undertaking “needle moving” actions on climate change, such as requiring suppliers to meet sustainability criteria, relocating or upgrading facilities to be more climate resilient, and tying executive compensation to climate goals.

Australian executives are largely optimistic that the world will take sufficient action to avoid the worst impact of climate change, but they are more sceptical than the global average about the seriousness of the private sector and government commitment to addressing climate change.

Australian companies reported that the impacts of climate change on their businesses included the operational impact of climate related disasters and weather events, changing consumption patterns or preferences and the increasing cost of insurance and lack of insurance availability.

Dr Philip said Australian companies would find themselves under more pressure to step up their action on climate change.

“There is more to do and the pressure to invest in sustainability will only continue to grow,” he said. “While executives are united on some of the key benefits of climate action such as brand recognition, employee engagement and positively impacting a shared world crisis, only 31 per cent cited investor returns as a key benefit of accelerated climate action.

“Done right, rapid decarbonisation presents the single biggest growth opportunity for Australian business, and we expect to see this recognition shift as fast movers take the benefit of stakeholder demand for action.”

The report recommends companies embed climate goals into their overall business strategy and purpose, be prepared to undertake credible action on climate change, and invest in new technologies.