Just 11% of the ASX 200 listed companies comprehensively disclosed how sustainable their sourcing practices were in 2022, according to a new index that could help Australians make more informed purchasing and investment decisions.
Created by RMIT University supply chain experts, the Sustainable Procurement Disclosure Index (SPDI) rates how Australia’s top 200 listed companies report on the sustainability of their economic, social and environmental sourcing practices.
Lead researcher Associate Professor Charles Lau said this index is an important step towards greater transparency on sustainability.
“The poor results show how much more work needs to be done by Australian industries in this space,” Lau said.
“This tool has potential to influence purchasing behavior and hold more companies accountable to engage in sustainable and ethical procurement.”
How do ASX 200 companies fare?
Ratings are calculated using 32 standards across governance, economic, social and environmental domains, as set out by the internationally recognised Global Reporting Index (GRI).
The SPDI reflects how many GRI standards a company reports on, and how comprehensively, via a 5-star rating system.
Sectors assessed in the new index include consumer discretionary and staples, energy, financial services, healthcare, IT, real estate and more.
Of those, 11% received 5 stars, 36% received 4 stars, 37% received 3 stars, 13% received 2 stars and 3% received 1 star for how comprehensive their disclosure was.
Certain industries, such as consumer staples and materials, disclosed significantly more than the others, such as financials.
According to Lau, the contrast in industry reporting could be due to the different levels of procurement activities undertaken in these areas.
“This contrast may be attributed to the distinct nature of their business, with companies in the consumer staples sector having a significantly higher volume of procurement of physical goods than finance.”
Regardless of industry, all disclosed more in governance and environmental aspects, while revealing less in economic and social aspects.
“Some reasons companies don’t report extensively on the economic and social aspects of their sustainable procurement practices may include reputational concerns, commercial secrecy, resource constraints, complex supply chains, or lack of standards or industry norms, to name a few,” Lau listed.
The level of disclosure had little relationship with firm size, meaning large corporations don’t disclose more or less than smaller companies.
Sustainability reporting not mandatory in Australia, for now
Lau said there are no established standards to assess sustainable procurement practices for Australian companies, which means they’re less inclined to disclose how sustainable their procurement practices are.
“Growing public concern regarding sustainable practices calls for greater transparency from companies and some sort of incentive, or disincentive, is what’s needed to encourage companies to thoroughly disclose this information.”
“There are countless ways a company can practice sustainability in sourcing of goods and services.
“This can be anything from decisions around where to purchase office supplies to the energy efficiency of appliances or equipment, how companies source their labor, or the environmental impacts of packaging used in products produced.”
To see where the ASX200 companies sit on the index search the Sustainable Procurement Disclosure Index – RMIT University.
Disclosure index development for sustainable procurement: An Australian perspective was published in Volume 420 of the Journal of Cleaner Production (138357). RMIT University authors Kwok Hung Lau, Aswini Yadlapalli, Muhammad Dan-Asabe Abdulrahman, Prem Chhetri, and Vinh Thai.
*Within the ASX 200 list, some entries are mutual or exchange-traded funds affiliated with financial institutions such as major banks. Examples include Betashares (5), Vanguard (6), NAB (3), Magellan (3), and Commonwealth (2), which have multiple funds listed on the ASX. The number in brackets denotes the number of firms listed on the ASX 200 with a single report. For instance, Betashares has five funds listed on ASX 200, but only one report is available. Consequently, after excluding these firms, the ASX 200 list is reduced to 182 companies with reports suitable for coding.
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