Climate change has Australia's company directors worried

Ludovic Marin / AFP / Getty Images.
  • Australia’s company directors say climate change is the number one issue they want the federal government to address in the long-term.
  • The bi-annual Director Sentiment Index also shows directors rating the quality of public policy debate in Australia as poor.
  • And most directors support stronger penalties for corporate misconduct.

Australia’s company directors are worried about climate change, saying it’s the biggest issue they want the Federal Government to tackle over the long term.

And the directors have lost confidence over the past six months, according to the latest bi-annual Director Sentiment Index by the AICD (Australian Institute of Company Directors).

The second half 2018 Index reveals that while directors are generally confident about the current state of the Australian and global economies, they are much less optimistic about the outlook for the year ahead.

Sustainability and long-term growth prospects are the main issues keeping directors awake at night, followed by business reputation in the community and corporate culture.

While directors are more confident than they were this time last year, sentiment has taken a dip off the back of uncertainty in government policy, economic conditions globally and governance regulations.

The directors are increasingly pessimistic about Canberra’s impact on business decision making and consumer confidence.

For the first time directors also nominated climate change as the number one issue they want the federal government to address in the long-term, followed by an ageing population and energy policy.

They’re also focused on the need to regain trust in institutions – with 80% of directors supporting stronger penalties for misconduct, and 57% supporting an increase in funding for regulators.

The overall sentiment in the second half of 2018 became less optimistic, down 8.5 points on the last survey, but with the Director Sentiment Index remaining in positive territory.

AICD

The decline is largely due to directors feeling more pessimistic around regulation, legal issues and directorship conditions.

“Directors are concerned with the global environment, with rising global protectionism and global economic uncertainty rated as the top two economic challenges facing Australian business,” says AICD Managing Director CEO Angus Armour.

There’s also increasing pessimism around Canberra’s impact on business, with 54% saying the federal government’s performance has a negative effect on their business decision making and 79% perceiving a negative effect on consumer confidence.

“In this uncertain environment, directors are conscious that they need to drive change to enhance public trust in institutions,” he says.

More than 80% of directors support stronger penalties for misconduct and 57% support an increase in funding for regulators.

Almost 90% of directors are also working on cultural change within their organisation.

“Directors are certainly conscious of the lack of trust in society, and the results show that demonstrating respect for customers, clients and communities, trustworthy leadership and improving corporate culture were key areas of focus for rebuilding trust,” says Armour.

Other key findings sentiment index include that 84% of directors rate the current quality of public policy debate in Australia as poor and 69% say there is a risk-averse decision making culture on Australian boards.

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