Acknowledgements
I would like to acknowledge:
- David Lawrence, President of the ACI;
- Martin Tolar, Chief Executive of the ACI; and
- ACI Members and the 2011 ACI Accreditation Graduates.
Introduction
Thank you for your warm welcome.
I would like to thank the Institute for kindly inviting me to Brisbane to address this 15th annual conference.
Two years ago, when my colleague Senator Sherry addressed your conference, the world was examining the causes of the global financial crisis, and many countries were considering and implementing reform in the area of prudential regulation.
As was demonstrated during the global financial crisis, when markets fail, regulatory solutions are sought.
Such calls for regulation can reflect a lack of confidence in markets to solve problems that they were partly responsible for creating.
For example, many feel that the genesis of the GFC - the Lehmann Brothers collapse, and the complex debt instruments that brought financial markets to their knees - came about because of a lack of sustainability, transparency and accountability in some markets.
The GFC has also led to a general reassessment by participants in global financial markets of value and acceptable risk.
Shareholders increasingly want to be confident that not only is their company performing well financially, but that it is also addressing its social and environmental obligations as well. They want to know that their company is a good corporate citizen.
This is the bread and butter of compliance professionals.
Not only are you helping companies meet their legal requirements, but you are also assisting those organisations that want to demonstrate their commitment to meeting the expectations of their shareholders and, increasingly, the expectations of the local, regional and global communities within which those organisations operate.
Current initiatives
Here in Australia, we are leading the world in the compliance profession.
I am pleased to say that the Government has been able to help secure tangible financial support for the development, by Standards Australia, of an international standard on compliance.
I would like to acknowledge the enthusiasm shown by Martin Tolar [Chief Executive of the ACI] for advocating the development of an international standard.
This Government funding will aid the development of an international standard based on the Australian Standard for compliance programs. It will provide an opportunity for the Institute and other industry groups to further promote the importance of compliance, both domestically and internationally.
A best-practice international standard will help businesses to establish effective programmes to reduce the risks of non-compliance which will, in turn, increase the confidence of consumers, investors and across our markets more generally.
I look forward to seeing the fruits of this important work and I am confident that it will be yet another example of Australia leading the way for the rest of the world.
Integrated reporting
The world is increasingly turning its mind to compliance issues, particularly integrated reporting.
Although governments around the world have been occupied with the short-term issue of maintaining macroeconomic stability, work on structural reform to address longer-term environmental and social concerns has progressively increased.
The push for integrated reporting, which encourages businesses to incorporate a sustainable approach in their reporting, has gained real momentum.
The global work on integrated reporting is addressing the growing view that the value of a company and what it produces may not just be measured by the short-term interests of shareholders, but also by their impact on the environment, consumers and even the broader community.
Indeed, shareholders are increasingly taking into account the reputation of the company and its leadership in the context of broader community expectations when making their investment decisions.
This is especially the case for larger companies with large market shares of widely consumed goods and services or widely traded shares.
While a number of organisations have over the past decade encouraged the adoption of similar ideas, it is clear that there is now strong support for the ideas behind integrated reporting.
Much is happening at both a national and global level that can be expected to have a real impact on how Australian businesses operate and consequently on the priorities likely to face executives and boards achieving best practice compliance.
For example, the International Integrated Reporting Committee, launched in 2010, has agreed to a program to develop the integrated reporting framework. It is also engaging G20 countries on changes that need to be put in train to integrate mainstream financial reporting with information relating to governance, remuneration, business models, and environmental and social issues.
In Australia, the Financial Reporting Council (FRC) has formed a taskforce to consider the issue of integrated reporting and to coordinate an Australian response to the Committee's proposals.
The FRC has conducted consultation on this issue, with the main theme from discussions with stakeholders being questions about how integrated reporting could work in practice, including how to ensure critical information is clearly presented and is consistent with reporting requirements globally.
The Government will continue to watch with interest the developments in this area. Responsible and sustainable business practices will have an important role in the future prosperity and international competitiveness of Australian businesses and Australia more broadly.
Pricing carbon and compliance
The Government's climate change policy is also about responsible and sustainable business practices. It is about ensuring the sustainability of the Australian economy, now and into the future.
Last week, the Clean Energy legislation passed through the House of Representatives. Pricing carbon is one of the most significant reforms of our generation that will transition Australia to a low-carbon economy and help stimulate the growth of the clean energy jobs we need for our future.
The introduction of a carbon price will bring about a better alignment between the commercial interests of those companies responsible for the majority of our country's greenhouse gas emissions and the national and global interests of reducing harm to our environment. By creating a framework based upon the principle - the less a company pollutes, the less they pay - we will be ensuring that compliance with the law will support better commercial and improved environmental outcomes.
Around 500 of the country's biggest polluters will pay for their pollution under the carbon price mechanism, and this will create a powerful incentive to reduce pollution in the most economically efficient way.
The compliance impacts resulting from the reforms will be minimal, with a limited number of companies being directly affected.
Most of the participants in the scheme will already be covered by the existing National Greenhouse Energy Reporting requirements. The vast majority of Australian businesses will not have any direct compliance obligations under the carbon price.
For the first three years, the carbon price will be fixed to provide stability and predictability. This will give businesses time to get used to the new system, to understand their obligations and smooth the transition to a flexible price emissions trading scheme.
As the Government has decided that the means of implementing a carbon price will retain consistency with Australia's existing commitment to international standards in accounting and auditing, compliance costs for reporting under the carbon price legislation will be minimised and the financial reporting community will not need to learn new systems.
Looking ahead, the Australian Accounting Standards Board is working with similar bodies internationally towards developing consistency in accounting standards for emissions trading schemes.
The Auditing and Assurance Standards Board is engaged in seeking international consistency in audit and assurance arrangements for Greenhouse Gas Statements, so as to minimise uncertainty for Australian businesses.
So the overall picture painted by initiatives such as integrated reporting and the carbon price is one where governments, international and domestic regulatory agencies, and businesses are developing processes to address concerns over sustainability.
Central to the practical application of these processes will be the willing compliance of stakeholders, and the role of the regulatory agencies in promoting and enforcing the processes.
In promoting compliance for sustainability, these regulatory agencies would do well to consider the model provided by the Australian Securities and Investments Commission (ASIC) which lies within my portfolio responsbilities.
ASIC delivers a wide range of compliance programs aimed at ensuring companies, schemes and various individuals and entities meet their obligations under the Corporations Act.
ASIC's focus is on achieving voluntary compliance, which it facilitates via providing information and education programmes to the business community. Enforcement strategies, such as obtaining Court orders or taking criminal action against company officeholders, come into play where voluntary compliance may have been willfully ignored or inadvertently overlooked.
The Government supports this approach, which recognises that the vast majority of businesses want to, and will, comply with requirements, and should have little excuse not to be aware of the risks associated with non-compliance.
I expect that you will hear more detail from ASIC itself about its compliance role later at this conference.
Conclusion
Integrated reporting and the implementation of a carbon price reflect the changing priorities of the global community and will be key features of the compliance agenda moving forward.
Many policy challenges face the Government in seeking to create an environment which balances sustainability with growth and profitability by fostering responsibility in the Australian business and investment communities.
The Government is committed to working with businesses to find this balance.
Compliance professionals will continue to assist in guiding the strategy and operations of businesses and will be key to fostering a business culture that recognises the important and positive impact that flows from meeting financial, social and environmental obligations.
I thank you for your work and thank the ACI for its initiative in developing standards for your profession.