Broader insights

Signalling and legitimacy theories assert that companies achieving strong performance in sustainable practices are motivated to signal this to the market through disclosure, as it helps them obtain the social license to operate. Additionally, stakeholder theory suggests that disclosing sustainable practices can serve as a means for companies to communicate and enhance stakeholder confidence. However, the fact that only 19 out of 182 (11%) companies have reported 80% or more of the 32 GRI disclosure items clearly indicates a misalignment between theory and practice in the Australian context. This suggests either (i) there is a low level of awareness regarding GRI items in Australia, and/or (ii) implementing and monitoring sustainable procurement practices is low, as this type of reporting is not mandatory. The situation improved significantly in 2024, with 132 out of 244 companies (54%) reporting on 80% or more of the 32 GRI disclosure items, reflecting a sharp increase in awareness and commitment
to transparency.

By reflecting the transparency and quality of disclosure, the proposed RMIT SPDI empowers sustainability-conscious consumers to exert pressure on corporations, encouraging them to choose socially and environmentally responsible suppliers. Consequently, the index can influence consumer purchasing behaviour, potentially impacting a company’s competitiveness or even its survival. Moreover, the index can bring significant benefits to various stakeholders. It serves as a valuable risk management tool, contributes to reducing business operating costs, as well as social and environmental costs. Furthermore, it functions as a mechanism to promote adherence to national regulatory guidelines, build trust among stakeholders, raise public awareness, and foster the adoption of sustainable practices throughout society.  

The disclosure framework we have proposed for benchmarking the transparency of SP practices is firmly rooted in ethical and moral philosophical principles. These principles encompass key concepts such as stewardship, justice, legitimacy, and deontology. We carefully selected indicators based on their potential to reflect an organisation’s value system, aspects of social justice, and the responsibility to care for and preserve the environment and its resources for future generations. The framework also encompasses the actions undertaken by organisations, which are evaluated against a clear set of moral rules and principles that prioritise the well-being of both people and the planet. The SPDI approach considers the deontological dimension of moral theory, which implicitly or explicitly incorporates intrinsic morality, the duty of care, and the moral consequences of actions

Long-term, the project team hope the Index has the potential to catalyse a policy shift in procurement practice disclosure by fostering cultural transformation and a paradigm shift. As a planning tool aimed at supporting the achievement of the UN’s Sustainable Development Goal No. 12 on Responsible Consumption and Production, it is hoped that the SPDI will receive a positive reception from the Australian Government and major companies across various industries. In fact, the Australian Government introduced the Environmentally Sustainable Procurement Policy in July 2024, shortly after the launch of the SPDI. This policy mandates that the construction industry must achieve and report on climate, environmental, and circularity outcomes in government-funded projects. This development underscores the relevance, timeliness, and strategic alignment of the SPDI with national priorities. By expanding the focus beyond financial and economic performance, the SPDI encourages a more holistic approach to sustainability reporting. The comprehensive structure of the framework offers organisations a systematic and universally guided framework to improve organisational governance, and review and reassess their reporting and disclosure practices against a set of sustainability indicators and established standards.  

Sector-specific standards and industry-focused indicators in reporting are closely linked to the principle of materiality. Materiality, a fundamental accounting concept, assesses whether an omission or misstatement could influence a reasonable user’s decisions. In sustainable reporting, an indicator is material if it critically reflects the sustainable practices relevant to a specific industry.

Following the release of the 2023 SPDI, industry feedback raised concerns about materiality. Some sectors indicated that certain GRI indicators included in the SPDI are not material to their operations, leading to lower scores on those indicators and negatively impacting their overall SPDI performance. To ensure the SPDI remains a credible and accurate benchmarking tool, it must adhere to the principle of “comparing like with like”, meaning only GRI indicators material to each industry should be included.

While this feedback is valid, the challenge lies in identifying the appropriate set of material GRI indicators for each sector. Future enhancements of the SPDI will involve developing sector-specific standards, supported by GRI and informed by empirical analysis of annual data, to create key sector-based indices. 

The SPDI is calculated as an average score that reflects both the number of GRI indicators (from a selected set of 32) a company reports in its sustainability documents, such as sustainability reports, corporate websites, and other relevant materials, and the extent to which it fulfills the reporting requirements for each indicator. The accuracy of the index depends heavily on the validity of the reported data.

While the current “what you see is what you get” approach, which relies on trust, is effective in many cases, incorporating validity-checking mechanisms would significantly enhance the index’s credibility. Such measures are essential to verify the authenticity of companies’ sustainability disclosures and mitigate the risk of greenwashing. Future improvements to the SPDI will include third-party audits and certifications, cross-verification with publicly available data, and technology-driven, data-based validation methods to ensure the reliability of companies’ sustainability reporting.