Skip to content
News update

National Conference 2022 day one: Key takeaways, ideas and tips from our experts

It was a packed agenda for day one of Governance Institute of Australia’s National Conference.

Here we share a news wrap of all sessions, highlighting the key takeaways, expert tips and ideas.

International keynote: The stakeholder capitalism debate

Chair: Megan Motto FGIA, Chief Executive Officer, Governance Institute of Australia
Professor Edward Freeman, Elis and Signe Olsson Professor of Business Administration, Darden School of Business

The choice between stakeholders and shareholders is a false choice and both must be considered to build a great company, says Professor Edward Freeman.

Prof Freeman’s seminal work on stakeholder capitalism and business ethics, Strategic Management: A Stakeholder Approach, has influenced corporate thinking since the mid 80s.

“I have never seen it as a choice between stakeholders and shareholders – that’s a false choice. To me, I’ve always tried to show how stakeholders and shareholders are connected … and you have to think about both if you want to build a great company,” Prof Freeman says.

“One way to think about it is the value you create for shareholders is a testament to the value created for stakeholders and vice versa.

“These things go together. Seeing them as ideological enemies, which is what many of the critics want to do, is a road to nowhere.”

Prof Freeman says human ingenuity often only truly kicks into gear when trade-offs become unacceptable. He tells the story of a chemical plant manager that threatened to shut a plant when told that its environmental impact could not be improved, only for staff to find better ways to run the plant that not only improved impact but also saved costs.

“Without that drive to create something together than no one of us can do alone, business doesn’t work that well.”

He says the idea that business is all about money has passed: “We need to get rid of that story.”

Instead, focusing on outcomes for stakeholders becomes critical to generating value for shareholders.

“If all you care about is creating value for shareholders, how are you going to do it?

“You better have some products and services that customers want, that they’ll pay for.

“You need suppliers who are going to work with you and make you better.

“You’re going to need employees who show up and hopefully don’t just show up for a paycheck.

“You need communities who want you there.

“And if you do all those things, and maybe you get lucky, you might make money.

“It’s the simplest idea in the world.”

One way to implement stakeholder capitalism in business is to move away from traditional incentives towards offering employees purpose and mastery.

“It’s trying to replace those ‘if-then’ incentives with stuff that matters,” he says, recalling a company that reset bonuses to align with stakeholder impressions of how they were doing.

“The company pretty much turned around and it wasn’t because of the incentives, it was because the people and executives led by the chairman believed in the values and believed in the purpose.”

Finally, Prof Freeman offered some advice to boards and management struggling with these concepts.

“It’s not a contest. It’s not stakeholders versus shareholders. It’s not purpose versus profits. We have to craft a business model to see how we can put them together.

“And if you don’t want to work hard enough to do that, I am not sure you’re up to being a director.

“Of course, it’s difficult to put these things together – that’s why it’s worth doing.”

Societal leadership imperatives for business – Ukraine and beyond

Kate Spargo, Non-executive Director, Sonic Healthcare, Adairs and Sigma Healthcare

How does a board’s ethical responsibilities interact with its fiduciary duties? Do they sit alongside each other or are they one in the same?

“The key fiduciary duty is to act in the best interest of all shareholders but that has not ever been just maximising profits at the exclusion of everything else. … That just doesn’t make sense because it’s a very short-term strategy,” says Kate Spargo.

Managing the interests of staff, customers, suppliers and investors is likely to maintain a more successful and profitable company in the long term and should be done in the shareholders interest, she argues.

Ethical responsibility is also critical to a company’s reputation and standing.

“It’s challenging to maintain a great reputation and it’s very easy to lose a good reputation,” Spargo says. “All companies have a personality … and attributes. A large part of that is the values and ethical approach a company takes on.”

Spargo says reputation has several attributes – transparency, trustworthiness, reliability, a long-term perspective, sound treatment of people, which has risen in importance recently, an even handedness, equity for all people, and being responsible as well as being smart and profitable.

“The principles of board behaviours about ethics and moral behaviour are the same as those that make up for a sound business. They are the one and the same thing.”

There have been significant changes for boards in recent years.

The influence of the large superannuation funds is one, Spargo says. So too the rise of social media and the attitudes of younger Australians and how they want to work. Also, geopolitical issues from the war in Ukraine to cyber security.

“Companies and their board are operating under a much bigger and brighter spotlight … and need to deliberate on issues that were never considered before,” Spargo says.

While sometimes a response from the board is obvious, there are other times where the solution is not clear cut.

What does a board do if they find out a supplier engages in various aspects of modern slavery?

“Do we just cut them off? Do we work with the supplier to help them develop their systems to improve their approach. How long do you do that for?” Spargo asks.

There are many issues boards now need to consider that they haven’t had to consider before.

Spargo uses bullying and harassment as an example. So too dealing with countries with records of bribery.

“At a board level, it is about anticipating the sorts of behaviour that might occur and understanding different ethical practices in different countries. It’s about training staff and making no exceptions in terms of poor behaviour.”

Other issues board need to consider include gender equality and data rights and privacy.

“On these issues my personal preference is to err on the side of conservatism,” Spargo says. “Practices that might have been seen as acceptable … can [now] by quite unacceptable.

“A board’s call must be made in the context of today’s current, social and ethical morays.”

Regulatory Plenary

Chair: Pauline Vamos FGIA FCG, Chair, Governance Institute of Australia
Sean Hughes, Commissioner, Australian Securities and Investment Commission
Peter Crone, Commissioner, ACCC

A profound transformation as the physical economy and digital economy merge into one is creating challenges for regulators, says the ACCC’s Peter Crone.

“It’s very important to get an overall, overarching regulatory coherence,” he says. “And as we do that, I think it’s really important to include policymakers in that compact as well.

“Regulating innovative industries is hard. You need agencies with sufficient resources. You need protections but not at the expense of promoting the innovation that you need to keep driving the productivity story.”

Crone says the ACCC is working on building the internal capability to handle digital industry matters.

“We’ve got a quite well-functioning strategic data and analytics unit. One of the things that they did … was unpick an algorithm that actually helped the ACCC win a case against Trivago.”

ASIC’s Sean Hughes outlined the regulator’s core priorities for the next four years, including new design and distribution obligations that he calls a “game changer in securities markets”.

The obligations aim for “a model which is designed to ensure that financial products meet the needs of consumers and seek to reduce the risk of harm by poor product design, poor distribution and poor marketing,” says Hughes.

“We’re undertaking targeted risk-based surveillances across specific sectors to identify and disrupt poor conduct.”

This includes superannuation, credit cards, buy now pay later providers and the managed funds sector.

Hughes says ASIC expects licensees to manage cyber risk, calling it a “core obligation under a financial licence”.

“Where we see egregious failures to manage and mitigate the risks of cyber-attacks, we will of course take enforcement action.”

He says new technology is helping identify cyber scams at an early stage and prevent them being operational.

Separately, he says ASIC recently released research on investor behaviour which shows high levels of risk taking by unfamiliar or unsophisticated investors in relation to their crypto asset holdings.

“We think that crypto assets are highly volatile, inherently risky and complex.”

Asked about the new Financial Accountability Regime, Hughes says it should not involve a significant uplift in changes around documentation or process.

The Consumer Data Right – which gives people the right to share their data between service providers – is a big reform but will be a slow build, says Crone.

“Because it’s a very new and innovative policy, it’s going to be a slow burn. It’s also a little bit of a chicken and egg situation because you can make consumers aware of it, but then they need to be able to see what the products and value propositions are, and that’s up to the fintechs.”

Innovation, inclusiveness and inequity

Chair: Diane Smith-Gander AO FGIA FCG, Chair, ZipCo, HBF Health and CEDA
Adam McCurdie, Co-founder and Co-CEO, Humanitix
Sue Thomas, Non-executive Director, Temple and Webster

It has long been accepted that companies that have a more diverse workforce and inclusive culture performed better than those that are homogenous – and startups have chance to begin as they plan to finish with a more diverse and more inclusive workplace, says Diane Smith-Gander.

Smith-Gander says McKinsey research shows the business case for diversity remains robust and has strengthened over time. Deloitte shows organisations with inclusive cultures are six times more likely to be innovative and agile, she says.

But how can companies build offerings that are innovative and inclusive at the same time?

Temple and Webster’s Sue Thomas says we need to start with a culture of inclusion, equity, and dynamism.

She says there is a willingness in Australia to act in a less-than-honourable manner because the court system is expensive and slow.

“Therefore, companies have been used to acting to achieve their desired financial result and if necessary, asking for forgiveness or entering into out of court settlements,” she says.

But “if companies operate without respect for the law, with poor treatment or lack of respect for people, staff, and stakeholders, without ethics, eventually the outcry will be so great, the cost so high, that the persons risking their company’s reputations for short term financial benefits will lose their positions and the very survival of the company will it be risk.”

Humanitix, which offers an events and ticketing platform, has been structured as a charity and offers an alternative model for business, says Adam McCurdie.

“There are no shareholders in the Humanatix model.

“Instead, what we’ve done is teamed up with fantastic research houses to advise us on the most impactful local children’s charities that are doing some of the best work to alleviate disadvantage in real in a whole range of different communities. And those organisations – those partner charities – are ultimately who receives 100 per cent of all of the profits.”

He says the model posed challenges at the start.

“Can we attract the right talent to compete with the likes of VC-backed tech companies?

“Can we capture market share in a market that’s highly competitive?

“Can we offer a competitive service?

“Ultimately, can we be sustainable? Can we fund our own operations, cover all of our costs and achieve that kind of holy grail in the non-profit sector, which is not having to go out and ask for donations?”

Smith-Gander says diversity has two dimensions.

“You can have diversity because you are a diverse person … but you can also acquire diversity by making sure that you involve others.

“Organisations that have [both] have a 70 per cent better chance of identifying new products.”

Thomas discussed the difficulties finding female engineers.

“Temple and Webster, as you would guess, has a significant proportion of female customers. Our staffing is more dominantly female… but we trail on the technology side.”

Humanatix, which unusually has enjoyed zero staff churn in recent years, has similar issues.

“It’s very, very difficult… there’s a supply issue,” says McCurdie.

He says Humanitix tries to solve this by donating to charity Room to Read which promotes female literacy in Asia and Africa.

“It’s interesting to think about how far back down the chain you have to reach,” says Smith-Gander.

“You can set all the diversity targets you’d like, and you can have retraining in your own company, but it’s not really going to make much of a difference until we reach way back down the education pipeline.”

Thomas says the government has a responsibility to fix the childcare system to enable women to work after having children.

“The juggle to work when you’ve got young children is enormous. And even though you might be on a good salary, the cost of childcare in after-tax dollars means that you become very poor.

“It needs to be fixed. To me it is one of the biggest issues.”

AI: the ethical dilemmas

Chair: Greg Dickason, Managing Director Pacific, LexisNexis
Sue Keay, Robotic Technologies Lead, Oz Minerals and Chair, Robotics Australia Group Stela Solar, Director, National Artificial Intelligence Centre, CSIRO

Nearly all businesses are becoming data driven businesses but with that comes many ethical dilemmas, says Dickason. And the ethical debate around artificial intelligence is relatively immature.

CSIRO has just held a listening tour to understand AI adoption across industries, Solar says.

“Whenever we talked about AI, ethics always came up. The two are very linked,” Solar says, adding there were three factors that kept recurring.

  1. The definition of AI. While currently only “narrow AI” is available, and that refers to learning by repetition, people think more about general AI, whereby robots have the same intelligence as human, and super AI, where robots have greater intelligence.

“When we think of the spectrum, this is where fears spiral … because we think of Terminators,” Solar says. “Practically today the only AI that exists is narrow AI so it’s important for businesses to think about …. what can be done today.”

  1. The scale of AI. Many ethical conversations occur because AI can achieve human biases at scale.

“Some of the objections and ethical dilemmas are about ourselves and are human ethical dilemmas,” Solar says. “AI technology is built on the patterns … and legacy data has biases.”

  1. Trust in AI. Australians have a higher benchmark on trust.

“That could slow down our innovation and we’ve seen that in Australia. But on the flipside, if we’re aware of the higher benchmark for trust … we can use that to lift our standards,” Solar says

Keay, a robot enthusiast, says creators of AI and robotics often find themselves in an ethical minefield. Part of the challenge is that AI includes previous biases, including around gender, and that needs to change to improve AI and robotics outcomes.

“Diverse voices bring different perspectives to the problem. The range of problems we look to solve are limited by the people who identify with those problems,” Keay says.

The panellists agree that Australians must be aware of the changes that are “inevitable and unstoppable” as a result of AI and robotics.

Keay says there are high levels principles for AI and robotics. “[But there’s not a plug-in] for people developing high level algorithms … to overlay the models that are being built. And that raises questions of who is responsible.”

Solar says much legislation is already relevant in areas around privacy, anti-harassment and corporate governance legislation, so questions around ethics need to include the legal framework as well.

“AI systems are built with legacy data. That means there’s biases from the data and how much do we trust it into the models predicting the future,” she says. “How do we build and guide our systems to be created with visions of a better future rather than replicating the biases of the past?”

Concurrent 1A: Who is the new leader?

Chair: Charitee Davies, Associate Director, Grosvenor Performance
Martin Curtis, Director, Google Partners and Agencies AUNZ & AFR BOSS Young Executive 2022
Deidre Wilmott, Non-executive Director, Australia Post

What does modern leadership look like?

It comes in two phases, says Google’s Martin Curtis – a personal philosophy and the application of that philosophy in the day to day.

“There are three attributes I look for in leadership at the moment. One comes from humility, the other is authenticity and the other is recognition and appreciation,” he says.

He says Google analysed thousands of leaders to try to understand how teams were built.

“They landed on four elements … psychological safety, dependability, team structure, and the mission and purpose that that team has.

“If you’re a leader in Google, you’re constantly evaluated against that as a measure of success.”

Australia Post’s Deidre Wilmott says leadership is about vision and purpose.

“If a leader can get a team of people to align behind that vision and purpose and bring … values of integrity, trust, commitment to people, safety first … then you’ve got an organisation that people really want to be part of.”

Wilmott says this is not just a role for the leaders.

“If you’ve got a group of empowered people, they’re all leaders. They are the people who are engaging every day with your stakeholders.”

But how does leadership differ across organisations?

And how has it changed over time?

Wilmot, who chairs the people and sustainability committee at Australia Post, spoke of the transformation at the 200-year-old mail group.

“Australia Post is undergoing a huge transformation from a letters business … to parcels.

“What became really clear during the pandemic was the need to focus on our ability to manage that transformation.”

Leading change, coaching people and communication became the essential leadership attributes, she says.

“That’s very much something that we are working on at the moment: future culture, future of work and the capabilities of the leaders.”

Curtis says Google has been coaching leaders to deal with global macro-economic headwinds.

“Each of our success is probably going to be more predicated on what do we say no to, as much as what we say yes.”

He says Google is also experimenting with different models and working situations as it adapts to more flexible working.

“How are we actually going to organise a flexible working company in the future? Do people need to be at a desk?”

The panel discussed the importance of diversity and inclusion.

“It’s incredibly important to recognise that there are some things in history that don’t just happen, so you need to focus on making sure they happen,” says Wilmott.

“We have no gender pay gap at Australia Post; we have 50% women in our leadership team.

“We have 3% Aboriginal employment and we’re looking to grow; 5.7% of our employees have a disability.

“These things don’t just happen.

“There’s just so much more that we can do to say: ‘not only do we want you at the party, we want you to dance’.”

Google also sees diversity as a strategic advantage.

“If you are creating products for billions of users, you have a responsibility to create a workforce that is representative of those billions of users,” says Curtis.

But he says leaders have work to do to extend diversity beyond gender, including ethnicity and neurodiversity.

“Diversity isn’t a nice to have, it is a strategic competitive advantage.”

Concurrent 1B: The S in ESG – risk and opportunity

Chair: Rachel Riley, Co-Founder and Head of Strategic Operations at Ansarada
Kate Brown FGIA FCG, Group Governance Counsel, SEEK
Måns Carlsson-Sweeny OAM, Head of ESG Research, Ausbil Investment Management

It’s difficult for businesses to maintain profits and purpose concurrently, says Ansarada’s Riley.

“It is difficult for companies to take that journey with so much information and so much misinformation… It’s all about bringing business performance and ethics together… The S of ESG focuses on that harmonisation.”

Brown says in SEEK’s case the S in ESG is everything that impacts people – the hirer, employees, and suppliers.

“We are looking at what impacts people,” she says.

Ausbil’s Carlson-Sweeney says from an investors’ perspective there had been more focus on the E and G. But more recently there has been more focus on the S, due to corporate scandals in recent years impacting share prices and board and management turnover.

“Traditional a company was priced on net tangible asset, but now they are prices on much more than NTA,” he says.

“In the investor community, modern slavery has been a game changer… and that has increased the importance of S in ESG… If you have a supply chain that relies on modern slavery, then earnings can’t be sustainable.

“Having said that, we don’t split out the S – we take a holistic view but there is definitely an increase in interest in the S from investors,” Carlson-Sweeney says.

ESG is not only about risk, but also is an opportunity.

“For SEEK that’s about tidying up the jobs that are on offer…. and getting to candidate to protect them… We’ve had to automate the weed out the bad job ads,” Brown says.

“How we decide what’s important – we do through a materiality process. What are the key issues [that impact stakeholders],” she says, adding that cyber security and data trust are both key considerations.

“It is good when companies decide what’s material for them… and embeds that in the strategy… and then reports on that,” Carlson-Sweeney says. “I’m all for disclosure but only if it drives better behaviour.”

Carlson-Sweeney adds that many ESG risks are intangible and includes subjective assessment.

“It’s hard to turn ESG into data sometimes,” he says.

Greenwashing and rainbow-washing are major issue for investors, and one challenge is that no-one is policing it, Carlson-Sweeney adds.

Brown says anyone that follows reporting standards shouldn’t be greenwashing.

“But there is, for example, no standard for indigenous relations,” she says. “It’s about balanced reporting saying what the risks are and what the opportunities are.”

Embedding ESG is about embedding three areas of activity in a business strategy. Brown says a positive impact on SEEK, due to a focus on the S of ESG, is looking after the group’s reputation.

Concurrent 2A: What’s wrong with boards

Chair: Simon Pordage FGIA, Company Secretary, Australia and New Zealand Banking Group
Helen Clark, Sales & Marketing Executive, Azeus Convene
Professor Fred Hilmer AO

Governance of listed companies has not changed since the Cadbury review of 1992 and is due for an overhaul, says Professor Fred Hilmer.

“The publicly listed company is an absolutely key institution in an economy. It’s got two sides of its role. One as a provider of capital… the other is providing investment opportunities to quite a big group of society,” says Hilmer.

“And at the moment, all is not well in public company land.”

He points to high turnover of leaders and a too crowded agenda, with inadequate time spent on strategy and performance.

“And the position of the public company is being threatened by competition from other sources of capital” like private investors, putting public companies in decline.

Hilmer says there are two parts to the issues faced by public companies.

First, “a surprising number of boards will accept marginal performance,” he says.

“We call it can-kicking.”

The second issue is ethical and legal failures: “Just because we can do something doesn’t mean we should.”

He says governance of listed companies still follows the tenets of the Cadbury review, which recommended independent directors, non-executive chairs and transparent and relevant disclosures.

“These are still the central tenets of governance. But they’re increasingly under pressure.

“The reality is if you look at the data, the companies that are led by an active founder, who is the chair, tend to consistently outperform the companies where the chair is a truly independent non-executive.

“So, the data is not supporting what is supposed to be a good practice.”

Hilmer questioned the very concept of “best practice”, saying it has drifted away from its original meaning of effective practice to encompass faddish and trendy activities.

“People talk about fund managers who hug the index, well now we have governance managers who hug the guidelines.”

He criticised the growth of board activities like audit and remuneration committees: “There’s a whole different flavour in that and it’s not a flavour about building a great business. It’s a flavour about ticking boxes and not running afoul of the regulator.

“Put another way, it’s a focus on conformance versus performance.”

And he criticised requirements for boards to create a “skills matrix”: “It came out of nowhere and went from a bright idea to now being a requirement”.

So, what’s the way forward?

Move away from best practice that has no support in proper research and move to the idea of “best fit”, says Hilmer.

This may include having directors with a depth of understanding and executive experience in the business rather than independence or even having employees on the board who can hunt down information and ensure audits are effective.

“You ought to drop the idea that unless you are non-executive, you are breaking the rules. I think there should be a tolerance of executive leadership.”

Another suggestion is for boards to focus in on the issues that matter – and delegate other matters.

And a third is to improve the process of selecting chairs by being more specific and prescriptive, “rather than the informal discussions around the table of it’s now my turn to have a go”.

“We need to look at the way we regulate publicly listed companies and ask is that regulation actually adding value?

Or is it just “creating hurdles that drive good people away?”

Concurrent 2B: The risk team as the nerve centre for strategy and decision-making

Catherine Maxwell, General Manager, Policy and Advocacy, Governance Institute of Australia.
Beau Murfitt, Chief Strategy and People Officer, Camms.
Gideon van der Westhuizen, Chief Risk Officer, Bendigo and District Aboriginal Cooperative

Why should risk management have a more prominent place in business?

“We live in a high degree of uncertainty. Risk management … has an ability to address uncertainty,” Beau Murfitt says.

“We are living a dynamic environment from a technological point of view and when we look at the impact on business, we see that in a reduction in the lifespan of organisations.

“That’s from a technology standpoint. Then we are being challenged by changes in the natural environment, such as the two years of the pandemic… There is the war in Ukraine and that has an impact.

“There’s a whole range of different drivers of uncertainty. Risk management can address that uncertainty.

“Risk management is extremely well placed, to have an impact on… enabling organisations to be more successful,” Murfitt says.

Gideon Van der Westhuizen, who has a history in South Africa during apartheid, says strategy is the leading plank in the risk field.

“It’s about the individual you engage to make a meaningful impact,” he says, suggesting chairs and CEOs as people to target.

“It all comes down to culture and that comes from the board room,” Murfitt says.

Risk and strategy teams must anticipate the future and undertake scenario planning to prepare for change, he says, adding that most companies would now have pandemic plans.

Communicating these plans are important within organisations, Van der Westhuizen says.

Murfitt says it’s important to be pro-active in contributing to risk management processes and working with strategy and planning departments to map out scenarios.

“I’ve seen that done very well,” he says. If done well, it can be pushed down within an organisation to an operational level.

Democracy at the crossroads

Dennis Gentilin, Head of Enterprise Risk, UniSuper
Dr Catherine Williams, Research Director, Centre for Public Integrity
Paul Hubbard, Commonwealth Department of Finance, Assistant Secretary, Regulatory reform division

For the first time since 2014, there are more autocratic states than democracies. Dennis Gentilin says it is a very complex topic.

“What we are essentially seeing is a lot of polarisation. We are seeing the rise of people with extreme views,” he says, adding it was evident in the most recent election in Australia where minor parties and independents did well compared to the Labor and Liberal parties.

“I think this traditional divide between the right and left is falling apart,” Gentilin says.

What’s driving these trends and the decline of democracy? Is it about public trust?

Paul Hubbard says that COVID has shown a split between capability and deliverability.

“A lot of the story about getting and maintaining trust is to be trustworthy and show you have the capability to do what you say you will do.

“You need to keep up with expectations and keep up with technology and society,” he says.

Hubbard says autocratic states are more able to control the message but may not actually get things done any better than a democracy.

“In a liberal democracy everything hangs out and we know what is happening. In other political systems the story isn’t always so [available].”

Catherine Williams says public trust, and trust in politicians, is in decline.

“That’s a serious problem. It matters because it has a deleterious impact on social cohesion,” she says. “We all have an interest in seeing this decline in public trust arrested.”

A foundational principle is public trust and public power needs to be exercised in the public interest, says Williams.

So, how do we achieve this?

“First, we need this broad integrity framework that puts public interest at the centre of decision making. We also need codes of conduct… We need to ensure there are meaningful sanctions in place. We need to have adequate training. We need to have public interest journalism,” she says.

“If we have all these things then we can drive higher standards… and that will drive the higher expectations by the public… and hopefully that can arrest the decline in public trust,” Williams says.

The internet and social media have triggered an information tsunami and that could trigger a decline in trust of democracy.

Williams says in terms of elections several things need to happen to address this trend. They include donation caps and truth in advertising laws. She says we also need more disclosure and requirements about how parties are using data.

Globalisation tends to have impacted people outside the urban areas.

Hubbard says globalisation is similar, conceptually, to technology.

The same disruption that comes tech is the same as the shift from national markets and regulatory regimes to global markets which are not captive, he says.

“We need to regulate for the economy, for the demography, for the society, that we have now… Regulatory and governance institutions need to fit society,” Hubbard says.

Climate plenary: A vision for a liveable future

Chair: Kylie Porter, Executive Director, Global Compact Network Australia
Professor Greg Clark CBE, The UK Cities Climate Investment Commission
Dr Bronwyn Evans AM HonFIEAust, FTSE, Chair, Building 4.0 CRC
Patrick Gibbons, Partner, Orizontas

The energy crisis in Europe has the potential to accelerate the transition to renewables but there are emerging risks that the very necessity of change may retard progress, says Professor Greg Clark.

“You will hear every opinion in the spectrum around that debate around Europe,” he says.

“But I do think that there’s an emerging lobby to use this as an accelerator.

“The governments will revert to nuclear and coal and fracking… but I think you’ll find that in the private sector, there’ll be a massive investment in the alternative energy system there.”

Patrick Gibbons highlights the serious nature of Europe’s energy crisis, saying the UK will see a quadrupling of energy bills between now and early next year.

“This is unlike anything we’ve ever seen,” he says.

On top of that, there will be power shortages across winter which will threaten lives.

He says the government response is to re-open nuclear plants and lift coal-fired generation.

“This is almost an existential issue… Their options are pretty limited,” he says, demonstrating that the “energy transition does not occur quickly with the current energy market settings.

Still, Bronwyn Evans says constraints force innovation.

“Look at some of the technologies for grid stability when you have a very large volume of renewables in the grid… the rhetoric not so long ago was that that was an instant recipe for grid instability.”

Clark says cities will play a critical role in tackling climate change because they are the biggest emitters and will suffer the biggest consequences – but also because their innovation and network effects will be crucial to tacking the problem.

“That urban transition is in our buildings, it’s in our infrastructure, it’s in our utilities, it’s in our vehicles… it’s in all of the different ways that we manage our waste and our water, how we consume and how we recycle and circularize.

“This urban transition requires us to create cities that are clean, connected and compact.”

Gibbons agrees that the built environment is critical to solving climate change.

“How do you reduce emissions in a country like Australia?” he asks.

The focus so far has been on the electricity sector, which represents a third of emissions.

“That’s the easy part. How do you reduce emissions out of the other two thirds?”

Evans says recovering critical minerals and improving the circular economy were also important to solving the planet’s climate problems.

“Innovation [and] engineering solutions have to be part of our future,” she says.

Clark says a big emerging question is how to finance the transition.

“The problem is that the amount of investment required in the time that is required to retrofit our buildings, change our transport systems, circularise our utilities and everything else.

“It is way faster than any kind of public finance envelope really allows so we’re having to enter a new era [of] public and private financing.”

But does private capital see climate change as an opportunity?

“I think it’s already happening,” says Clark, pointing to $140 trillion of sustainable financing pledged at the Glasgow climate conference.

“On the financial system side, the change is beginning to happen.

“The big challenge is creating the pipeline of bankable and investable projects, and the kind of new partnership agreements about how blended finance will work.”

Gibbons agrees that with the Australian policy framework settled, the challenge now was getting the private sector involved without too many government subsidies.

Day two key takeaways

National Conference 2022 day two: Key takeaways and tips from our experts

Next article