Sustainable business a balance

AS a banking customer, would you go to Westpac because it is rated the world’s best bank for corporate sustainability?

Or as an investor, would you be attracted to Stockland because it tops the global real estate industry on corporate sustainability?

Going back a step, how many investors and customers – or even staff – would know what corporate sustainability means?

And would you scratch your head if you read that Tabcorp was rated the world’s best gambling company in terms of its corporate sustainability?

These ratings were released last week by international investing and consulting groups SAM and Dow Jones. Since 1999, they have been rating the world’s 2,500 largest companies in the Dow Jones Sustainability Indexes.

The indices employ a best-in-class approach across 57 industry sectors, ranking companies on economic, environmental and social criteria, such as corporate governance, stakeholder relations and risk management.

This methodology is much more open than a number of other studies that seek to filter out companies operating in ‘bad’ industries.

Green investment funds, for instance, might exclude uranium-mining companies such as Perth-based Paladin Energy, even though from a global warming perspective nuclear power is far superior to coal-fired power stations and is seen by many as a big part of the solution.

And what about a company like Woodside that operates the North West Shelf venture, often rated as Australia’s largest emitter of greenhouse gases.

That might appear to be a black mark for an environmental sustainability assessment, and it is certainly true that extracting and producing liquefied natural gas (LNG) does lead to high carbon emissions. 

But that’s only half the story – the LNG that the NW Shelf venture exports is a clean fuel and, from a global perspective, delivers a superior outcome if it displaces coal and other ‘dirty’ fuels from power stations in China.

Rating corporate sustainability gets even more complicated when we dive deeply into some of the controversial issues facing businesses in Perth.

There are few issues more contentious than the gas project Woodside wants to develop, with state government backing, at James Price Point near Broome.

The project is causing sharp divisions, with many residents, tourism operators, and parts of the indigenous community opposed to the mammoth project.

Yet against that, it has gained majority support from the indigenous community and holds the potential to deliver enormous economic benefits to the state at large.

The challenge for Woodside is to convince the opponents that it can deliver these benefits while managing the potential adverse consequences, which range from environmental risks to higher housing costs and social disruption.

Wesfarmers is another Perth company grappling with community concerns, this time over the milk-pricing strategy of its Coles subsidiary.

Coles is presenting itself as the consumers’ friend by slashing prices, yet many people have misgivings about the potential dislocation to dairy farmers.

Here again, the onus has fallen on Wesfarmers to demonstrate that it can deliver benefits while managing potential adverse consequences.

Judging by the latest Dow Jones rankings, companies can bounce back from controversy.

Xstrata, which is arguably best known in WA as the company that shut down the Windimurra Vanadium project in contentious circumstances some years ago, has been rated the world’s best resources company.

In the banking world, Westpac has preached the virtues of ‘sustainability’ for many years, saying it helps to deliver “long-term benefits to our customers, employees, shareholders and the wider community”.

It has been included in the Dow Jones indices since 2002, and this year was ranked number one out of 190 banks.

Chief executive Gail Kelly said this was a “clear testament to the extent that the organisation and our staff have embedded sustainability into every aspect of our operations”.

Similarly, Stockland managing director Matthew Quinn said the number one real estate ranking “reflects our commitment to embedding environmental and social sustainability practices”.