Lack of whistleblowing systems undermines ESG in Australia

Report It Now has raised concerns regarding the lack of robust whistleblowing infrastructure in Australian organisations, which it claims undermines commitments to Environmental, Social, and Governance (ESG) principles.

The company voices worries that many organisations are failing to support their ESG frameworks with essential whistleblowing systems, risking accountability gaps. As ESG frameworks become integral to business operations especially in Australia and the Asia-Pacific, independent ethics reporting is seen as fundamental according to Report It Now.

Craig McFarlane, Director of Report It Now, said, "Many businesses proudly showcase their ESG frameworks, but without robust whistleblowing systems, these commitments lack genuine accountability. Our data shows that organisations lose approximately 5% of revenue to fraud annually. This isn't just a financial issue – it's a governance failure that undermines authentic ESG efforts."

McFarlane highlighted the problems of relying solely on internal reporting systems. "When organisations rely solely on internal reporting systems, they create an inherent conflict of interest that can compromise anonymity and discourage reporting. True ESG compliance requires independent oversight and secure channels for ethical concerns to be raised," he explained.

Research by the Association of Certified Fraud Examiners supports the need for independent whistleblowing systems, indicating that 43% of occupational fraud detections result from tip-offs. Nevertheless, the dependence on internal systems that may discourage reports by compromising anonymity persists within many organisations.

Fellow Director Greg Dunn pointed out the oversight organisations have regarding the significance of safeguarding whistleblowers. "We're seeing organisations make substantial investments in ESG consultants and sustainability reporting, but completely overlook the importance of robust, anonymous ethical infrastructure. Strong governance needs both strategic vision and practical implementation," said Dunn.

Dunn further noted the necessity of independent reporting systems: "The reality is that boards are increasingly focused on ethical practices, but may not realise the critical role of independent reporting systems that allow employees and other stakeholders to speak up about an issue they encounter in the workplace. When we review internal reporting systems, we often find opportunities to significantly strengthen confidentiality and trust."

He added that the stakes are particularly high for listed companies: "Investors are becoming more sophisticated in their evaluation of ESG credentials, which is encouraging. A robust whistleblowing system isn't just about compliance—it's a clear signal to stakeholders about an organisation's commitment to genuine governance."

The implementation of robust whistleblowing systems can reportedly reduce fraud losses by up to 50% through enhanced early detection and prevention, proving crucial as companies face increasing pressure from investors to uphold true ESG commitments.

Recent changes in Australian whistleblowing laws impose greater responsibilities on business leaders to offer safe channels for employees wishing to report wrongdoings anonymously. Illustrating the demand for such systems, reports to the Australian Securities and Investments Commission have surged from 278 to 817 over recent years.

In emphasising tangible benefits, McFarlane remarked, "Time and again, we see how early detection through proper reporting systems helps organisations address issues before they escalate. It's an essential component of modern governance that supports and validates broader ESG initiatives."

Report It Now offers solutions such as their EthicsPro platform, which includes confidential 24/7 reporting hotlines, enterprise case management, and comprehensive support for ethical reporting, aiming to maintain transparency and integrity across workplaces.