No stepping back from corporates on social licence

Australian companies still recognise the need to maintain their social licence

Paul Jenkins. Picture: Britta Campion / The Australian

Australian corporates are not backing away from their commitment to a social licence in the wake of criticism over their support of the voice last year, according to Paul Jenkins, the global head of international law firm, Ashurst.

“(ESG) has obviously been politicised in some parts of the world and you are seeing a move to look at sustainability, at what’s in the interests of stakeholders in a broad sense, as opposed to (using the ESG terminology),” he says.

“(But local CEOs) are mindful of their responsibilities to the environment, to the community.”

Even so, companies are confronting regulations in the energy transition area that have “extremely accelerated” over the past few years, leading to a significant increase in his firm’s compliance work for clients.

“Australia is, to a degree, leading the way in terms of the concern being raised by regulators about greenwashing,” Jenkins says. “So there is definitely a significant increase in activity.”

He says that globally clients are keen to see stable policies in this area.

“In each of our jurisdictions, there’s an expectation that there will be regulatory constraints and they need to comply as they do in all areas,” he says. But clients want to avoid “surprises” in policy.

Jenkins says reducing the regulatory burden is one way to increase competitiveness and attract much-needed global capital.

He says a recent Business Council of Australia report found Australia’s competitiveness had dropped from fourth compared with other countries 20 years ago to 19th – a drop he says must be addressed as we look for investment in energy transition and the digital economy in particular.

“Other countries are focusing on their competitiveness, with an obvious example being the inflation reduction opportunities for investment in the US market,” he says.

“The BCA had six, seven recommendations to improve our competitiveness. One of the key ones is ensuring we reduce the regulatory burden in Australia.”

Jenkins is “quietly confident” the Australian economy will have a soft landing by the end of the year and notes the recent IMF statement that we’re “descending” into that soft landing.

“There’s still a degree of descent that needs to occur and still a fair degree of uncertainty in terms of the economic position, business conditions, geopolitics but the general view among our clients is that it does appear more than likely that that there will be a soft landing,” he says.

“They are starting to see some significant opportunities.”

The firm’s clients globally are identifying opportunities for investment in decarbonisation and the infrastructure needed for the energy transition, and digital infrastructure, including cyber-related work, data security and privacy related issues, he says.

Ashurst Global CEO Insights 2024 reveals common threads across the globe with clients focusing on energy transition, geopolitical upheaval and the digital economy, and how to cope with organisational risks.

“From cyber-attacks to the psychosocial wellbeing of their employees to more traditional concerns, such as the cost of financing, business leaders are having to cope with an unprecedented range of challenges,” the report says.

“Despite a very mixed economic situation, we are hearing that many of our clients are confident that 2024 presents them with opportunities. In this environment, there is uneven demand in some areas of legal services, such as real estate and equity capital markets, so we expect a subdued start to the year for some transactional work, including in public M&A and commercial real estate, but this could pick up later in 2024.”

The Insights report says Ashurst teams covering disputes, regulatory advice work and insolvency are relatively busy at present, and this is likely to continue.

“The labour market for high-quality lawyers continues to be tight and we also expect this to continue in 2024 as confidence returns to many offshore markets (eg the U.S. and UK), possibly at a faster rate than in Australia,” the report says.

Top concerns among Australian CEOs include ESG regulation; greenwashing claims; cyber security; and the impact of world economic conditions and events on the business.

As well they are focused on the “evolution of the Australian workplace, including managing issues such as psychosocial risk in workplaces, positive duties to ensure safety at work, and compliance with laws relating to terms and conditions of employment”.

“Although the unemployment rate is edging up, this is due partly to the increase in migration and Australians entering the job market in greater numbers, and the labour market is still historically strong,” the report says.

“We expect to see further consolidation in the energy sector in Australia next year and we foresee additional foreign interest in Australian renewable assets given the relatively cheap capital available to well-capitalised overseas companies.

“Japanese companies, in particular, have access to relatively cheap finance, which has also driven their expansion in Australia’s commercial property sector.

“There remains a significant amount of work in large infrastructure projects under development in most states across Australia, although we expect the challenges regarding the supply of labour and building materials will continue into 2024.”