Re: Waste & NIMBYism
Investors are increasingly looking to businesses in Australia and New Zealand to report on their Environmental, Social and Governance (ESG) efforts. As ESG reporting continues to develop, stakeholders are demanding more – both in reporting standards and the ESG activities themselves.
Currently, there are great differences in ESG reporting standards among waste producers, such as construction and manufacturing companies that generate and dispose of waste.
Waste companies have as much to gain, or lose, as those in other sectors from disclosing the ESG impacts from their operations and associated ESG risks to the company. The difficulties in waste reporting should not prevent the sector from using ESG reporting to connect with stakeholders.
In 2015, the UN published its Sustainable Development Goals (SDGs) to address global challenges around inequality, environment, peace, and prosperity. As we approach the 2030 deadline for the targets laid out in the SDG’s, responsibility must be shared by the private sector, and consumers, as well as governments. A PwC Report concluded that while ESG reporting improves year on year, too few companies are publishing ESG strategies which lay out specific targets and/or KPI’s.
Although Australia’s resource recovery rate is improving, the statistics show that more needs to be done to meet international and domestic targets (for instance, the 2019 National Waste Action Plan laid out a goal of 80% waste recovery by 2030 – we are currently just over 50% even after delaying the target) and increasingly stringent reporting is seen as central to these efforts.
Considering their impact on the environment, Australian waste companies, particularly those in the construction and manufacturing sectors, have an outsized role to play in ESG reporting.
Construction and demolition generate around 40% of Australia’s waste. While certain waste producers are improving their ESG reports, including, for example, Cleanaway which is assessed as a ‘detailed’ reporter by the Australian Council of Superannuation Investors (ACSI) (the second highest ranking category) – the disparities are simply too great, both among waste companies and as compared with companies from other industries.
In the absence of universally accepted standards on ESG reporting, it is essential that companies look outwards to understand how best to go about it. For waste companies looking to improve their ESG reporting, the following considerations could be kept in mind:
As referenced above, a PwC report into ESG reporting among ASX 200 companies revealed that 62% of companies fail to delimit their ESG strategies into short, medium, and long-term goals. That same report also identified setting targets and KPIs as one of the biggest opportunities for improvement. Not only will specifying deadlines and KPIs make ESG goals more actionable, but it will also reduce the risk of corporate ‘greenwashing’ and the attendant public scepticism.
ESG reporting should pertain to every aspect of the business – from investment procurement to recycling and reuse. Moreover, our analysis of ACSI reports, reveals that ACSI promotes a risk-based approach to goal setting. For ESG reporting to be considered ‘comprehensive’, companies must outline their specific ESG risks and provide detailed mitigation strategies, based on those risks.
Waste companies must have access to data on all stages of the waste management procedure – from procurement sourcing metrics to waste generation tonnages, landfill diversions, transport emissions, destinations of recyclables, and overall carbon footprint metrics.
Further, stakeholder engagement is a key part of ESG reporting. At Currie, we have experience in stakeholder engagement for waste clients, including Veolia and Cleanaway.
Considering the lack of universal standards or regulatory oversight of ESG reporting, third-party review is immensely valuable. PwC found that 66% of ASX 200 companies failed to have their reports externally reviewed. Moreover, the process of director approval of periodic ESG reporting tends to be opaque. Where possible, waste companies could ensure their criteria are consistent and transparent.
ESG standards are difficult to ascertain among waste companies considering the multivariate nature of the inputs and outputs. That said, stakeholders are coming to expect more from waste companies and preference will only increasingly reside with those companies that are best able to implement effective data capture and reporting processes.
Transparency, through ESG reporting, is the new norm. To this end, Currie is a partner in the Global ESG Monitor (GEM), a unique study that examines the level of transparency in non-financial reporting by many of the largest companies in the world.
