ESG Wrap June 18

Soft drink industry pledges to cut sugar overall, but is it just a diversion from the real issue?

• The Australian Beverages Council, representing the non-alcoholic beverage industry in Australia, recently announced a Coalition-backed commitment to reduce its sugar use by 20 per cent by 2025. 
• The reduction will be an average across the company’s portfolio of products. This means that a company could cut its overall sugar just by producing more low-sugar soft drinks or bottled water instead of actually reducing the sugar content in any single soft drink product.

So what?

• Globally, concerns about the impacts of obesity and poor nutrition continue to grow, with sugar consumption still a key focus due to its links with obesity, type 2 disabilities, fatty liver disease, heart disease, etc.
• It seems the soft drink industry is responding to this mounting public pressure. However, some believe this new sugar reduction commitment is an attempt by the industry to circumvent real change. 
• The big concern is that health policy is being shaped by food and drink manufacturers and industry bodies, such the Australian Beverages Council. Companies like Coca-Cola, Pepsico, Unilever, Nestle and Kelloggs all have a seat at the table setting the policies that shape consumption of their own products. 
• The investment impacts of obesity are far reaching, with the rising associated healthcare costs – particularly in relation to type 2 diabetes – steering governments towards the introduction of sugar/soda taxes or similar disincentives to curb sugar consumption. These regulatory interventions, combined with the burgeoning wellness trend, pose a significant risk to the earnings of a large number of food and beverage companies if they fail to act.

'Women have the right to be safe': Inquiry to examine sexual harassment in workplace

• In response to growing social pressure, the Australian Human Rights Commission has commenced a national inquiry into workplace sexual harassment. 
• The inquiry will cover the drivers of sexual harassment in the workplace, the use of technology and social media and the legal framework, including a review of complaints made to agencies.
• The MeToo movement and sexual harassment cases against well-known celebrities like Harvey Weinstein have drawn attention to the pervasiveness and harmful effect of sexual harassment, both on individuals and companies. 
• The inquiry will use findings from national surveys to understand the full financial and social cost on Australian companies and the economy.
• Shockingly, over 20 per cent of people above the age of 15 in Australia have experienced sexual harassment, with 68 per cent of these occurring in the workplace. 

So what?

• It is well known that workplace sexual harassment can have a negative effect on an individual’s emotional wellbeing and career. However, organisations can also be severely impacted, with higher staff turnover and absenteeism, lower engagement and productivity, and increased compensation claims and complaints.
• Under the Workplace Gender Equality Act 2012 organisations with more than 100 employees are required to report on the gender composition of employees, equallity of remuneration, availability of employment terms, and gender equality training. Many organisations have gone further by committing to gender equality targets and linking these targets with the remuneration packages of the management team.
•  While progress has definitely been made on the gender diversity front, most organisations are yet to tackle the issue of sexual harassment in the workplace. How a company responds to issues such as these, will tell you a lot about its governance frameworks, the quality and openness of the board and company culture.  

Medical appointment booking app HealthEngine sharing clients' personal information with lawyers

• The Federal Minister for Health, Greg Hunt, announced an “urgent review” of HealthEngine, Australia’s largest online medical appointment booking platform.
• In evidence received by the ABC, HealthEngine was found to be sending users’ private medical data to law firms, including Slater and Gordon, who were using the data to target clients for personal compensation claims.
• HealthEngine is a Perth-based startup which is partly owned by SevenWeat Media and Telstra and currently has 15 million annual users.
• The company claims that it only shares user data after consent is given which is stated in the fine print, however, the app doesn’t provide the functionality to opt-out. It has also boasted in the past that it can modify advertising based on a patient’s symptoms and medical history.
• Furthermore, it was also revealed that of the 50,000 customer reviews on the HealthEngine website, almost half had been edited by the company to hide complaints and make the comments more positive. 

So what?

• Parallels can be drawn with Facebook’s business model - the platform gathers data to profile people, uses this data to target people for advertising and then allows third parties to use the data to target users as well. 
• While what HealthEngine did may not be illegal, it is unethical and will likely lead to a general distrust in the platform. The risk for HealthEngine is that more and more people will turn away from the platform, which will adversely impact the revenue it can bring in from advertising fees and the fee they charge medical practices.

MPs to examine environmental footprint of UK fashion industry

• An investigation has been announced into the environmental impact of the fast fashion industry in the UK.
• The House of Commons environmental audit committee will focus on the carbon emissions from the industry, resource, water and land use and impact on climate change throughout the clothing lifecycle and supply chain.
• A report from the Ellen MacArthur Foundation estimated that landfill of clothing and household textiles was costing the UK economy about £82m each year. The report also revealed that if current usage rates continued, the global fashion industry would chew through a quarter of the total global carbon budget by 2050.
• Further, it has been estimated that 300,000 tonnes of fashion waste gets sent to landfill each year
  

So what?

• In the last few years, people have started to recognise the devastating social impact that the fast fashion industry can have, including human rights abuses.
• However, few people realise the huge environmental impact the industry also has. The process of sourcing, producing, transporting and discarding of clothes requires an enormous amount of land and water and produces carbon emissions and toxic wastes at a rapidly increasing rate. New research has also found that plastic fibres are released each time clothes are washed which can end up in water ways and eventually in our food chain.
• It is encouraging to see Millennials are driving the demand for sustainable clothing lines and asking companies to be transparent about their supply chains. Unfortunately, at this stage, ‘sustainable’ clothes may only mean garment workers receive above the minimum wage and working conditions are reasonable. Environmental issues are often left out of the equation.
• Consumers should also be asking brands to explain where the raw material is sourced, what chemicals are used, how waste is disposed of, what targets they have set to reduce water and resource usage and what the company is doing to slow down the fashion industry.