Sustainability Risk Reporting
On 1 August 2007, Chris Murphy, Director of Econtech, participated in the 'Tip of the Iceberg'
Public Summit organised by the Financial Services Institute of Australasia (Finsia). At the summit,
Finsia released a report by Econtech on "The Financial Impacts of Sustainability Risk Reporting on business
and the broader economy".
SSR involves companies reporting on the societal and environmental risks of their activities, their
longer-term financial outlook and executive remuneration linked to long-term returns. This is to help
ensure that companies act more effectively in the long-term interests of shareholders.
From previous work, Econtech found that on average SRR reporting reduced borrowing costs by 30 basis points
by reducing long-term risk, and added 0.8 per cent to labour productivity and raised sales by 2 per cent by
enhancing a company's reputation with its employees and customers. Using ABS data on Australian industry,
Econtech found that these benefits added around 2 to 3 per cent to operating profits, but with the benefit
varying according to a company's size and its industry.
Econtech then applied these benefits on an industry-by-industry basis in its MM2 model of the Australian
economy. The modelling simulated the effects of Australia improving on its low international rating for
take-up of SRR, with the take-up rate for large corporates raised from 23 to 60 per cent. The costs of
SRR were also taken into account.
The economy-wide modelling estimated a gain in annual GDP of $1.2 billion. The gain in annual
private consumption or living standards was also $1.2 billion or $61 per Australian per year.
Download the Econtech presentation on SRR reporting
Download the full Econtech report - "The Financial Impacts of Sustainability Risk Reporting on
Business and the Broader economy", FINSIA, 2007.
For more information, email Chris Murphy or phone him on (02) 6295 0527.
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