17 November 2017
Yesterday afternoon, consumer staples giant Wesfarmers held their annual general meeting (AGM) in Perth. The AGM saw a big turn-out of more than 2000 shareholders who questioned the board on issues ranging from accountability, risk disclosure, human rights, climate change and executive remuneration.
Wesfarmers identifies climate change as a key business risk and considers it the most material environmental and social sustainability issue relevant to their businesses, but the company has yet to adopt the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD recommends companies disclose the risks that climate change poses on the financial stability of their business to inform prudent decisions for shareholders, lenders and insurance underwriters. In response to a shareholder’s query about if and when Wesfarmers will implement the TCFD recommendations, Non-executive Chairman Michael Chaney failed to provide a concrete timeline.
All Talk, No Action!
Wesfarmers has committed to support the Paris Agreement aim of limiting global warming to 1.5°C-2°C above pre-industrial levels by improving its greenhouse gas (GHG) efficiency. But the company’s actions don’t seem to mirror that commitment.
Wesfarmers Resource is invested in large-scale, open cut coal mines – Curragh (100% owned by Wesfarmers) and Bengalla (40%). The company increased coal production in FY2017 by 13.7%, contributing to an increase in year-on-year total emissions from mining activities by 32%. Although the coal business only accounts for 2.6% of the Group’s total revenue, it generates a sixth of Wesfarmers’ total emissions. Worryingly, the group’s combined emission intensity (total GHG emission in proportion to total revenue) is worse than last year.
Last year, Curragh made a non-cash impairment loss of $850 million and there have been reports of both Curragh and Bengalla mines being up for sale. But the sustainability page on Wesfarmers’ website is dedicated to justifying the company’s investment in coal. Clearly, Wesfarmers is yet to demonstrate its commitment to the Paris Agreement through concrete action.
Human Rights in the limelight
Shareholders at the AGM also raised concerns about labour exploitation, including modern slavery that exists on Australian farms in Wesfarmers fresh food supply chain. In a recent report that scores Australian companies’ responses to human rights risks, Wesfarmers ranked amongst the worst, scoring less than 20%. In response to shareholder’s question about the various risks – reputational, legal, compliance, and labour supply – that human rights breaches pose, and what measures the board is taking to address the situation, retiring CEO Richard Goyder commented, “Unfortunately it’s never perfect because we are dealing in some cases with third and fourth parties.”
Shareholders pressed for direct answers from auditors Ernst & Young about how much of these risks relating to labour exploitation are materialised and accounted for in the financial bookkeeping. Instead of allowing the auditor to answer, Chaney replied it would be inconceivable to quantify these risks into a financial bottom-line effect.
Poor accountability is further demonstrated by Wesfarmers failure to report to CDP’s Water and Forest Disclosures, which relate to stewardship and environmental impact on resources like cattle products, palm oil and timber. CDP scoring of Wesfarmers on Climate Change has also worsened, with the company rated well below its peers.
The vast majority of Australian super funds have shares in Wesfarmers, meaning that most Australians are invested in the company’s dirty coal mines. Click here to find out if your fund invests in Wesfarmers and take action to align your money with your values.