SYDNEY—December 05, 2022— Australia’s top business leaders agree unanimously that inaction on sustainability presents risks to businesses, however, only one-third see opportunity in taking the lead, according to a new study released today by Bain & Company.

The report, Sustainability: From surviving to thriving in Australia, is the result of a series of 20 exclusive, in-depth interviews with Australian business executives from across key industries driving the Australian economy – including Santos, Suncorp, Energy Australia, CSIRO, Unilever, MLC Life – and seeks to understand how they approach sustainability, progression opportunities, and constraints that are holding back a faster transition.

The report reveals an overwhelming sentiment among executives that there is still a long way to go to match global Environmental, Social and Governance (ESG) standards, with nine out of 10 executives declaring Australia trailing other developed economies in corporate sustainability.

Bain & Company Partner and Australia Lead for its Sustainability & Responsibility practice, Agathe Gross said that for two out of three executives interviewed, risk mitigation was the main motive for greater action.  

“Climate related risk mitigation is unanimously recognised as a necessity for all the executives we talked to. For a majority of them, it’s the main reason behind sustainability action,” said Gross.

“The majority of executives interviewed are taking practical steps in their organizations to cut greenhouse gas emissions through electrification or better efficiency of their operations, reduce waste, and increase their resilience to climate change, and comply with science-based targets and reporting requirements. But they are hesitant to take bold action to place themselves ahead of competitors in this regard.”

While recognising that market leadership has advantages, most respondents indicated they prefer to move with the market or be “very fast followers” instead of being at the front of sustainability innovation given the upfront investment and reputational risks this can involve. In addition, a lack of clear countrywide political narratives and policy direction has contributed to the challenges of sustainability-driven transformation in Australia.

However, the situation is not completely dire and there are big opportunities for progression, with one-third of interviewees seeing significant value creation opportunities from a sustainability-led transition.  One leader noted that brands that have committed to an ESG agenda are driving six times the growth compared to brands that have not.

Encouragingly, business leaders are hopeful that the new federal government and their stance on sustainability will add impetus to Australia’s green transition. Additionally, some CEOs are detecting a shift in how boards and investors are weighing a company’s financial, social, and environmental performance (the “triple bottom line”) as demand for ASX-listed companies to become more ESG-orientated is increasing.

The study outlines six recommendations on how companies can become more sustainable, moving away from the mindset that corporate sustainability is merely a tool for risk mitigation.

Actions for businesses:

1. Team up across the Board and executive team to move up the sustainability learning curve
2. Elevate sustainability as a core pillar of organisational strategy
3. Define the sustainability ambition and the roadmap to deliver
4. Embed sustainability in the operating model
5. Take the business on the transformation journey
6. Move beyond organisational boundaries to collaborate with other organisations

Key findings from the study include:

1. Sustainability is driving significant, cross-industry disruption: All business leaders recognise that the pressure to deliver more sustainable outcomes will keep rising and meaningfully disrupt the way they operate today, even in low-emitting sectors.
2. Everyone must mitigate sustainability risks: Business leaders agreed unanimously that climate change in particular presents significant risks to business. For approximately two-thirds of the leaders interviewed, this was the main motive to achieve sustainability outcomes. Similarly, these leaders preferred to move with the market instead of leading sustainability innovation given the investment and reputational risks that market leadership involves.
3. Some businesses see an opportunity to create value: One-third of interviewees see significant value-creation opportunities from sustainability beyond risk mitigation, citing examples including lower costs, access to new profit pools, and better equity valuations.
4. Progress for Australia requires collective collaboration: Business leaders said sustainability is a systemic challenge requiring a collective response in which government, businesses, and communities work together. It will not be enough for businesses to make progress on their own; Australia needs robust partnerships to drive the systemic and policy changes required.
5. Sustainability-centred business transformation is hard, but it is possible: These interviews, combined with Bain & Company’s own experience, highlight six steps to ensure a deep, sustainability-centred business transformation. Actions include integrating sustainability as a core pillar of strategy, embedding sustainability in the operating model, and teaming up across the Board and Executive team to lead and inspire organisational change.

Media contacts:

Michaela Cameron: 0429 262 799, michaela.cameron@secnewgate.com.au

Mathilda Checketts: 0468 692 478, mathilda.checketts@secnewgate.com.au