"We don't have this obligation here in Australia yet but clearly other jurisdictions are heading in that direction and we can see an evolving notion here in Australia, so it's incumbent upon all directors to consider carefully whether their obligations will extend to corporate social responsibility."
That was my prediction in 2016. How has that forecast panned out?
Well not long after I did that video in October 2016, Noel Huntley SC issued an opinion on climate change and the impact on directors. He said that in his opinion section 181 of the Corporations Act – which puts a duty of care and diligence on directors – extends to them a responsibility to consider the risks of climate change.
Now that's no real surprise considering the risks of climate change, you'd think – it's not that unusual in today's environment – but he went further than that and said that a duty of care and diligence also extended to a director having to make a conscious decision in response to the risk of climate change. Now, that decision could be to do nothing (he said that's quite possible) but the point is that a conscious decision actually had to be made in response to this issue.
Later in February 2017 Geoff Summerhayes of APRA gave a speech in which he stated that APRA's view is that boards have to consider what they call transition risks. Those transition risks are policy developments and the main one that he highlighted was again climate change and the policy developments around climate change.
More recently the ASX Corporate Governance Council issued a communiqué in which it proposes to make amendments to principle number 3 of the Corporate Governance principles based on the idea that, and I quote from their communiqué, "a listed entity must have regard to the views and interests of a broader range of stakeholders than just security holders". To say the words must have regard to effectively starts cutting across the traditional view that directors are only responsible to the shareholders. Here the Council is saying they must have regard to the views and interests of a broader range of stakeholders than just the shareholders.
Finally very recently we've seen proceedings filed in Federal Court where a super fund member is alleging that that particular super fund has "poor climate change disclosure practices" and is prepared to take that to court.
Now I've focused quite a bit on climate change but you can see that this is continuing to develop this responsibility on directors which is moving them, I would argue, further away from being responsible solely to the shareholders but becoming more and more responsible to that broader stakeholder group and having to consider corporate social responsibility as part of their own directors' duties.