A report by global law firm Herbert Smith Freehills ("Stuck in the Middle? Unlocking ESG Investment in Australia 2024") reveals over half of Australian businesses believe the country is falling behind in achieving its Environmental, Social, and Governance (ESG) goals.

The report gives a detailed look at the changing ESG landscape and its impact on Australian businesses.

"Most respondents consider Australia to be in the 'late majority' in progressing toward ESG ambitions," says Timothy Stutt, Australian lead for Herbert Smith Freehills’ ESG practice.

"Our survey shows a clear sentiment that Australia remains behind the global frontrunners in regulating and practicing ESG."

The report is derived from a survey conducted by Herbert Smith Freehills in early 2024. The survey's objective was to gain insights into how businesses are addressing ESG issues. The findings underscore the escalating significance of ESG factors in investment decisions, driven by mounting expectations from customers, employees, shareholders, and new regulations.

Climate-related issues are still the top concern, but social issues like workplace safety, gender pay gaps, and cultural heritage are becoming more important. The report also stresses the role of governance in managing these issues and dealing with complex regulations.

“The conclusion that Australia is lagging on ESG may seem counterintuitive to Australian companies as many are being buffeted almost weekly by new regulation across a breadth of social and environmental areas. However, the data is clear that Australia is in “catch up” mode – and our longer term trajectory is one of continued, rapid change as we move into global alignment.

“Almost three-quarters of companies have moved to incorporating ESG considerations into their investment and diligence processes. However, only 56% have a human rights risk management system and less than a quarter have integrated broader social matters into their activities.

“While there’s a lot more work to be done, we do have the opportunity to piggyback off the learnings in other countries, where they are further along the curve of integrating ESG into their businesses. Boards and management teams are looking for guidance, not just on the content of new regulation, but on how to bring it to life within their organisations," concluded Stutt.

The report includes survey data from 161 business leaders and insights from Herbert Smith Freehills' ESG lawyers. It offers an overview of the challenges and opportunities Australian businesses face with increasing ESG regulations and expectations.

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Source: Herbert Smith Freehills