Katelyn Adams

More than half of global company leaders are looking to redefine ESG goals and become more purpose led, according to a recent survey of business leaders by HLB International.

The annual survey of business leaders found 15 per cent of respondents said their businesses already identified as purpose-led businesses and a further 37 per cent said they attempted to meet wider stakeholder expectations in their ESG goals.

According to HLB Mann Judd Adelaide corporate advisory partner, Katelyn Adams, this reflects the increasing need for business leaders to recognise that investors, customers and employees are demanding strong ESG principles.

“They know it is the right thing to do but they also know it can potentially put them ahead of their competitors. As an example, one survey respondent told us they want to be more aggressive on progress towards ESG because they believe it will give them a competitive advantage,” she said.

The survey was conducted during September and November 2022 and HLB International collected 575 survey responses from business leaders across 60 countries and a range of industries and sectors.

But there is still some work to be done on ESG, with 40 per cent of respondents saying they only complete the ESG actions required by regulators, rather than treat the wider themes of sustainability as an opportunity for innovation. A further eight per cent do not have any established ESG goals at all.

While ESG commitments can be overlooked amid ongoing market turmoil, it is important that companies remember that sustainability and profitability aren’t mutually exclusive.

“Wider commitments to ESG practices, social welfare, and good governance can actually help leaders weather disruption and emerge stronger from it with a more sustainable and profitable business model.

“Many investors are finding companies that have strong ESG practices in place more attractive. A company that can clearly communicate its ESG objectives demonstrates a commitment to acting as a good corporate citizen.

“Presenting investors with an ESG framework outlines a company’s commitment to continuous monitoring and reporting on those objectives, something investors now expect as standard from companies and their leaders,” she said.

The survey also highlighted the challenging period ahead which has been deemed the ‘permacrisis’, which identifies eight major risks facing global businesses.

Over half of respondents now feel acutely concerned about the impacts of inflation (82 per cent), economic uncertainty (79 per cent), geopolitical risks (74 per cent), rising resource costs (71 per cent), rising interest rates (64 per cent), access to talent (61 per cent), exchange rate volatility (60 per cent), and cybersecurity issues (60 per cent). Climate risks and social instability were also of concern, at 58 per cent and 49 per cent respectively.

In terms of the technologies that will be of most importance to business over the next five years, artificial intelligence was the highest ranked at 50 per cent, followed by cloud computing at 47 per cent, and renewable energy technologies at 40 per cent.

“A permacrisis is defined as an extended period of instability and insecurity and the next five years are certainly going to be very interesting.

“However, it’s not all doom and gloom, and companies that can get on the front foot, particularly when it comes to ESG policies and practices, are going to be those that find success during this volatility,” Adams said.

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Katelyn Adams

Mandatory ESG reporting is becoming increasingly likely for listed entities with company boards now readying themselves for new regulation, according to HLB Mann Judd Adelaide corporate advisory partner, Katelyn Adams.

In recent months, the Australian Securities and Investments Commission (ASIC) has issued information on the practice of greenwashing, in which a company overstates their green credentials through misleading marketing or advertising.

Ms Adams believes such developments could precipitate the introduction of mandatory ESG reporting, with some listed companies – namely those in the small cap sector – ill prepared to adopt such a framework.

“With mandatory ESG reporting no longer a matter of if, but when, many smaller companies are likely to be unprepared for increased ESG regulations,” she said.

The measuring of ESG has to date been a source of confusion for investors, however Ms Adams said the introduction of mandatory ESG reporting could provide more clarity on the ESG credentials of a company.

“Institutional investors in particular are increasingly placing a greater emphasis on ensuring companies are satisfying environmental, social and governance pillars before investing in the stock.

“While many larger cap companies are already reporting on the environmental pillar, it is equally as important for all listed entities to demonstrate their adherence to the social and governance pillars.

“There is a strong desire from company boards to do ‘social good’, an absence of which is increasingly considered a financial and reputational risk. These areas have moved beyond an annual mention at company board meetings, to being a key agenda item each month and also through the formation of ESG and sustainability committees,” she said.

Ms Adams also said the recent underperformance of ESG or impact-based funds shouldn’t deter potential investment in these products, insisting the widespread adoption of ESG funds in the coming years will likely result in improved returns.

“As we see companies transition across to a stronger ESG focus I would expect some performance indicators to take a back step during that transition phase but in the medium to longer term, performance will rebound.

“We’re seeing a lot more impact investing – some investors will only invest in companies that have a strong ESG focus, and its equal parts the environmental, the social and a company’s status in being a good corporate citizen. Company boards therefore have a very important role to play,” she said.

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HLB Mann Judd Australasian Association chair, Tony Fittler, said the appointments of both Mr Di Giallonardo and Ms Adams will provide their respective teams and clients with reassurance during such a critical period for businesses.

“The appointments demonstrate the strength of the HLB Mann Judd firms. Even during these unprecedented times, we continue to focus on the future needs of our clients, and support our firms’ business and growth strategies,” he said.

Mr Di Giallonardo has been with HLB Mann Judd Perth for the past 34 years, progressing to partner within the corporate and audit services division in 1993. He specialises in audit services, management and advisory services, prospectus preparation, investigating accountant’s reports for IPOs, expert reports and due diligence reviews. In line with the firm’s managing partner policy, he will replace outgoing Norman Neill, who will shift back into a full-time partner role in Perth’s Corporate & Audit Services Division.

According to Mr Fittler, Di Giallonardo was a natural successor having previously served as managing partner from 2010 to 2014 and brings both technical expertise and leadership acumen amid challenging operating conditions.

“Lucio has been a loyal member of the HLB Mann Judd Perth partnership, so the ability for the WA firm to benefit from such an experienced set of hands will be invaluable as it navigates the ‘new normal’,” said Mr Fittler.

Mr Di Giallonardo is a member of the national board of the Leukaemia Foundation of Australia, including being the former chair of the Foundation’s Finance, Audit and Risk Management Committee. He will also now join the HLBMJ Australasian Association Executive Committee, and is currently a serving member of HLB International’s Audit Committee.

Ms Adams joined HLB Mann Judd Adelaide in 2007 and has built up extensive knowledge in company secretarial duties, governance and risk management, ASX listing rule requirements, IPOs and capital raising processes. She is also the Company Secretary of various ASX listed companies as well as other unlisted companies.

Mr Fittler said that Ms Adams’ passion to deliver superior and practical advice makes her a valuable asset to the Adelaide firm.

“We congratulate Katelyn on her well-deserved promotion, particularly during these challenging times. Katelyn’s measured approach to work makes her a valuable addition to her clients and their businesses, and a trusted sounding board for her network,” he said.

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