Hard Pants & Hard Truths

Greetings from humid Singapore!

I didn’t achieve much during the COVID lockdowns, but one thing that certainly stuck with me was the reframing of chinos and other more formal trouser options as ‘hard pants.’

To this day, it has to be a pretty good reason for me to put on the hard pants.
And that’s when it’s a mild autumnal day.

Crank the humidity up to 100% and you get almost a complete inversion on the Hard Pant Index.

Yet, here I am. Hard pants on. Sweltering.

It must be for a good reason.

And it is. I’m here for Impact Week, which is a week-long festival celebrating and accelerating the pursuit of wellbeing and sustainability across every sector. 

Can a focus on impact shape better policy, improve product-market-fit, and drive better community programming? Well, hundreds of people, from Prime Ministers and Presidents to Popstars and this Pale Blue employee, have converged on this corner of the world’s most populous region, because they believe it can.

I’ll share some more over on Linkedin in the coming weeks.

I’ve written and re-written the intro to this conversation about a dozen times.
Sometimes it sounds too sappy, sometimes, not sappy enough. 

The truth is, today’s conversation with Tim Costello AO, formerly Chief Executive Officer at Australia’s largest international development organisation and formally one of Australia’s 100 National Living Treasures, is a special one to me.

Outside of my immediate family, few people have made more impact on me, personally and professionally, than Tim. 

Tim has been at the forefront of impact in Australia for decades. During his time at World Vision Australia, he led a doubling of their programming, and a tenfold increase in people impacted, from 10 million to 100 million globally. He is now Chair of the Community Council of Australia, Executive Director of international aid coalition, Micah Australia and Advocate for the Alliance for Gambling Reform. 

I sat down with Tim to talk about the current place of social impact in Australia’s major corporations. He shares what regret he hears most from retired CEOs, and how we can keep pursuing impact alongside traditional business metrics.

Little Tim: You’ve spent decades challenging business to take social responsibility seriously. Have we actually moved beyond CSR being just reputation management and philanthropy, and being integrated into modern business, or is it still mostly window dressing?

Big Tim: You’re right, it goes back decades. We’ve had Elkington’s ‘Triple Bottom Line,’ we’ve seen CSR, ESG, and Michael Porter’s idea of shared value; all aiming to embed social purpose into business. 

But I’ve always had a quiet doubt: if doing social good genuinely improved the financial bottom line, wouldn’t every company already be doing it?

Corporates are very good at recognising profit. If social impact guaranteed returns, I guess you wouldn’t need people like me advocating for it. But it is more complex than that.

I was involved with NAB’s early moves toward ‘social licence’ while chairing their community fund. We were tasked to give away 1% of pre-tax profits. But even then, most metrics focused on measuring reputational outcomes rather than meaningful community impact.

Of course, financial outcomes are easy to measure, brand metrics have been in place for decades. Then looking at ESG; environmental impact, carbon emissions, energy use, is getting clearer. Governance is made tangible in legislation. But the ‘S’ in ESG? It’s always been the fuzziest bit.

I certainly think conditions are shifting. More consumers are looking to connect more deeply with businesses, and neglecting community impact is becoming a greater risk - the question is whether businesses are willing to lead, or if they need to be led there.

There are enough examples of companies who have dived in wholeheartedly and made it a differentiating factor, like Patagonia in the USA, or closer to home, groups like Canva. And I’ve even recently heard ads from McDonalds talking about their impact in regional communities. More and more it is becoming a differentiator, but it’s from organisations who truly see it as part of their identity, part of their story and their whole reason-for-being - not just as a sub-page on a website.

Take it further, and you get businesses like Thankyou and Who Gives A Crap, great Australia stories of business models being oriented around purpose, not the other way around. So yes, progress has been made, and is still being made. And we’re learning that the more mature and authentic forms of impact in business are the ones that work best.

Little Tim: You’ve worked closely with vulnerable communities, both in Australia and globally, from gambling reform to global humanitarian efforts. When we think about the biggest companies in Australia, their decisions have real-world social impacts. What’s one social risk you think business leaders are currently blind to, whether through wilful ignorance or just genuine oversight?

Big Tim: The key question I’d put to any business is this: are your most profitable activities contributing to the common good, or quietly damaging it?

That’s often hard for companies to reckon with. During my time chairing the community advisory council at NAB, I pushed for us to remove ATMs from Crown Casino and other pokies venues. And to their credit, NAB agreed. 

But once the story broke, the backlash was swift, and the decision was quietly reversed.

That experience revealed something bigger: businesses don’t always anticipate the social consequences of their products or where they operate.

Australia has the highest gambling losses per capita in the world. I worked with Anna Bligh and the Australian Banking Association to get credit betting banned, because it’s gambling with someone else’s money. That fight was long and difficult. Why? Because so much money was at stake for gambling companies.

And when you raise these issues inside a corporation, the default response is: “Well, it’s up to the regulators. We’re within the law.” 

But that’s not leadership. That’s box-ticking.

The harder truth is that shareholder primacy still dominates corporate law in Australia.
Directors are judged on their ability to deliver financial returns, not on social licence. 

So when leaders are asked to go beyond what’s legally required, to truly embed social purpose into their decision-making, or even just to mitigate social harm, many push back. Because doing so might conflict with what they believe they owe shareholders.

I mentioned Patagonia before. I’m not sure if you followed the ownership transfer of Patagonia, but would recommend your readers looking into the note on the decision from its founder, Yvon Chouinard to make ‘earth’ the only shareholder of the business. 

But, back to the question, I think there is inherent risk in a system that allows decision makers to put blinkers on and chase one outcome, in this case profit. Because, like ATMs at a Casino, they may be wonderfully profitable in the short-term, but from a longer view or a wider view, they are contributing to more harm than good - the profits they make for one company are more than outdone by the economic, social and personal harm at a broader scale.

Little Tim: If you could sit down with every ASX200 CEO; what’s one step you’d urge them to take to embed authentic social impact into their business strategy?

Big Tim: Over the years, I’ve spoken with many former ASX-listed CEOs, and I’m constantly struck by how often they express deep regret. They say things like, “I wish I had taken our social licence more seriously” or “I wish I had thought more about the long-term impact we were having.”

What they’re really saying is: “I missed the opportunity.”

These are people who were consumed by the pressures of quarterly reporting cycles and investor calls. They were captured by the short-termism of the market and the performance expectations of analysts. And while they may have been well-remunerated, they come out the other side of their careers feeling like they didn’t use their influence to do something that truly mattered.

Now, in retirement, they’re talking about wanting to give back.
They’re thinking about climate change, about their grandchildren’s wellbeing, about legacy.

My advice to today’s CEOs would be: don’t wait until you no longer have the levers of power to start caring about the things that really matter. Start now. Reflect on what kind of legacy you want to leave; not just in terms of profit and shareholder value, but in terms of your impact on people, communities, and the planet.

Because no one ever leaves their retirement party wishing they’d spent more time tweaking the investor presentation. But many will leave wishing they’d used their influence to lead with purpose.

It’s always a pleasure to chat with Tim, and learn from him. Reading over the transcript makes me wish I had’ve recorded it as a podcast - but you live and learn!

Well, there’s one more interview in this broken up series on ESG coming your way - a conversation with former Assistant Secretary-General of the United Nations and former President of the Australian Human Rights Commission, Gillian Triggs AC, on all things Governance.

Cheers,

Tim

PS: This is the second in a 3 part series interviewing some great leaders about the current state and future trends of the E, S and G of ESG.

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