MBA402 Case Study: Governance, Sustainability at Focus Logistics

This case study examines the corporate governance, sustainability reporting, and risk management practices of Focus Logistics Pty Ltd. It highlights the importance of establishing a robust corporate governance structure, including building trust with customers, creating value through logistics, managing related party transactions, and working responsibly within the environment and society. The study critiques the views of the company's COO regarding corporate governance and emphasizes the need for sustainability reporting to address environmental, social, and governance goals. It identifies key risks faced by Focus Logistics, such as improper operations, biased management, irregular reporting, and lack of control over sustainability issues, and suggests mitigation strategies. The analysis underscores the significance of transparency, accountability, and stakeholder engagement for the long-term success and reputation of the company, especially as it considers listing on the ASX. Desklib provides access to this and other solved assignments for students.

MBA402 Assessment 3 Case
Study

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Corporate Governance:................................................................................................................3
Sustainability Reporting:.............................................................................................................5
Risk Management & Key Risks:.................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1
APPENDIX......................................................................................................................................2

INTRODUCTION
Corporate governance is the governance or control and direction of the corporate which is
exercised by the board of directors over the company. Such board of directors are elected by the
shareholders along with the appointment of the auditors of the company thus ensuring that an
appropriate structure of the corporate governance is put in place to be able to address the issues
of the shareholders leading to an optimum corporate governance. Now, along with corporate
governance, risk management and sustainability report is also essential for an efficient working
of the company which will involve identifying the risks, how will the company get affected by
the risk, looking for solutions and measures to address the risk, implementing the solutions and
monitor their success.
MAIN BODY
Corporate Governance:
For a logistics company like Focus Logistics Pty Ltd setting up of corporate governance is
very essential unlike the views of the company’s COO, Jacob Gardner who thinks that
implementation of corporate governance will slow down the processes and make them more
complicated (Adnan, Hay and van Staden, 2018). Now, to support such an argument following
are some of the good practices of corporate governance which the company shall follow to be
able to be answerable to the management and stakeholders at large-
a) Relationship of trust with customers – For any business whether small or big, listed or
unlisted, relationships with their customers is the most important aspect of the operations
of the business. This involves building of sense of trust among the customers by
providing variety of goods and services to the customers as per their requirements so that
the customers are satisfied and both the customers and business work as the best partners
of each other.
Jacob Gardner of Focus Logistics Pty Ltd is of the view that as they do not fall in
the tax complications therefore, their main objective is maximization of the shareholders’
returns and thus there is no need to adhere to compliance issues and the company can pay
small fines and penalties if legally required rather than following such tedious methods to
follow the compliances.
Such a view is irrational and not following the good corporate governance
practices and thus will lead to degradation of the company’s image in the market as the

company is now growing and has the objective of getting listed on the ASX because after
listing the company will be more accountable and responsible to the public at large and
shall keep the betterment of stakeholders on priority.
b) Value creation by logistics – Every business needs to create value for its customers in
the field in which it is operating. Thereby achieving its objective of building good
relationship with the customers and developing a sense of trust and partnership with each
other. Naturally, value creation comes from experience and knowledge gained first hand
by working in the industry. Such knowledge and experience will lead to gaining expertise
over time and achieve the targets of market share and market stability in the long run.
For the Focus Logistics Pty Ltd, it can be seen that, it was established in 1965 by
Mrs. White and had a slogan of ‘go local’ which attracted the customers and community
at large and supported the company to grow and develop in the community (Kovermann
and Velte, 2019). It is said that for the next 30 years, company showed a steady growth
and also expanded its operations in multiple locations.
After Alice took over, the company grew by leaps and bounds i.e., accounting for
19% of market share in total resultantly, being the Australia’s fifth, largest company in
logistics. Also, customer base increased from 28 to 650 in the year 1997 as compared to
the year 1970 and currently operating at the customer base level of 11,500 customers
along with some listed companies as well. Also, effective financial disclosures are
necessary as the potential investors are of the view that the Focus Logistics cannot avail
further funding as it does not possess proper structure of governance and operations to
support such funding and expansions.
c) Related party transactions – All the related party transactions are to be disclosed and
approved by the board of directors of the company and shall be kept at minimum to be
transparent in its transactions and operations. In the case of Focus Logistics Pty Ltd, it
can be observed that the business is still run like a family business with most of the
management positions being occupied by the family and close friends. Such an issue is a
concern for the investors as they are of the view that there is limited control on the
operations and the reporting along with biased management reviews of the performances
and also the board committees are lacking. Such biasedness can be seen in the decision of

the board of not preparing sustainability report declaring it to be non-value adding
reporting.
Acknowledging the importance of regular reporting and reviews, board says that
trust and patience are most vital in a family business. All the views of the board are
leading to degradation of the public image of the company and thus shall be addressed for
the long run image of the company.
d) Working within the environment and with the society – Since every company
functions and operates in the environment and with the society affecting the operations of
such entity therefore, it is obligated towards the conservation of such environment and
society. In case of logistics company, the major issue is of vehicles which run to
accommodate the business of logistics (Zaman and et.al., 2022). Such vehicles shall be
able to achieve the objective of green logistics of the company and for such green
logistics initiative, environment friendly measures shall be devised and implemented.
Concerns of the investors are also regarding the reporting of sustainability by the
Focus Logistics Pty Ltd. Investors observed that carbon footprint is huge and specially
the B-Double truck shows consumption of almost 2 million litres of diesel annually and
additional consumption of fuel by the sub-contractors is still unknown (Holmatov,
Hoekstra and Krol, 2019). Mrs. White dismisses such a concern but David Rose is
genuinely concerned about the effects of such an issue on the future of the company. He
argues that the company shall be pioneers in the corporate governance and sustainability
methods looking at the current standing of the company in the market.
Sustainability Reporting:
Sustainability reporting as the name suggests includes reporting by any entity on its
sustainability issues namely – environmental, governance, social and economic goals. Such
issues are needed to be handled with utmost care and are non-financial aspects of the
organization on which reporting is to be done (Aifuwa, 2020). Through such a reporting the
company explain its goals and objectives regarding the non-financials and responsibility of the
company towards its stakeholders and towards the environment in which it is operating
(Gnanaweera and Kunori, 2018). There is no legal obligation of the company to report
sustainability but it shall be done to emphasize on both financial as well as non-financial
information.

Such a reporting is obviously beneficial for the company as it will help outline the areas on
which the company needs to focus on, such reporting is also a kind of compliance of various
regulations devised by the government applicable on the company, reporting of non-financial
activities of the company and that too those which are undertaken specially for the betterment of
the environment and the society draws more customers towards the company, attract employees
and with genuine talent as the employees will be more interested in the company sensitive
towards the climatic changes, rights of human in general, and social equity, investors are
obviously more interested in the company which is fulfilling its societal obligations along with
other obligations because in this way, it will have a more positive image in the market in the long
run and true and fair sustainability reporting by the company in the long run will provide the
operations of the company with transparency, accountability and credibility as the company will
be held responsible for the sustainability activities it undertakes and the effect of such activities
on the goodwill of the company (8 Benefits of sustainability reporting. 2022.).
Key elements that should be included in the sustainability report of the logistic companies are
enlisted as such:
 Stakeholders’ Insights – A sound sustainability report is the one which will include the
disclosures relevant to the requirements of the stakeholders and assist them in the
decision making regarding the company (Boiral and Heras-Saizarbitoria, 2020). Focus
Logistics shall also prepare such sustainability report to assist the stakeholders like
potential investors to make decisions regarding investment in the company.
 Visual Presentation – The sustainability report is already based on the non-financial
information of the company and therefore, pure text in the whole report will make the
report tiresome to read and no one will be actually interested in the report therefore, use
of graphs, charts, diagrams, etc. shall be done to make it more attractive.
 Benchmarking and relevant Progress – Naturally, any report shall include certain
standards and benchmarks decided by the management and the relevant progress with
respect to such benchmarks if any or failure to meet the benchmarks and degree of failure
to be specifically disclosed (Opferkuch and et.al., 2021). For Focus Logistics, carbon
footprints shall be aimed to be reduced and targeted to be kept at the standard allowed as
per the industry of logistics.

 Established Frameworks – There are various frameworks established within the country
and even globally regarding sustainability reporting and compliances. And compliance of
such frameworks is an evidence that such reporting is being done as per the applicable
rules and regulations and thus can be trusted and followed. Some of the frameworks may
be Global Reporting Index (GRI), Sustainability Accounting Standards Board (SASB),
etc.
Risk Management & Key Risks:
Risks are a part of any business and such risks are to be duly addressed and solved for to
manage the risks so that the risks are not hindering the operations of the entity (Amarasena, Haag
and Peres, 2019). There are numerous risks in each and every business organisation but
likelihood or probability of happening of such risks depends upon the nature of such risks i.e.,
some risks are less likely to occur while some risks are most likely prevalent in the system of the
organisation and thus will need action plans to combat their effect (Willumsen and et.al., 2019).
Such risks of the Focus Logistics Pty Ltd are as follows:
 Improper operations and governance structure – the likelihood of such a risk is likely
i.e., the entity needs to develop action in response to such a risk to seriously mitigate and
this can be done by comparing with the industry standards and providing for the further
improvement wherever needed.
 Biased management and lack of controls – it is a possible risk in the entity and thus can
be mitigated by improving the composition of the management and appointment of
unbiased and unrelated personnel in the management.
 Irregular reporting and review of performance – the risk of such irregular reporting
and untimely performance review is very likely and shall be managed by following
relevant rules, regulations and policies for such reporting and adhering to requirements of
stakeholders along with stakeholders’ analysis.
 No control over sustainability issues – this risk of not addressing the sustainability
issues has the probability of possible in the entity and such non-control shall be addressed
to avoid long term degradation of the goodwill of the company by reporting such issues
in the sustainability report.
 Other issues involve errors in shipment, shipment of the items damaged, late delivery of
the items and theft of such items in transit or from the store (What Is a Risk Matrix?

2022.). Such issues can be addressed matching the destinations’ address from the log
book from the delivery slip, improving the quality of the items delivered and borne of
expenses on such damaged items, etc.
CONCLUSION
Concluding, the above report shows the importance of corporate governance, sustainability
report and risk management in the business entity. In the above report, first of all, good corporate
governance practices with respect to operations of Focus Logistic Pty Ltd are being discussed
and explained how these practices will be beneficial for the Focus Logistic Pty Ltd as it is on the
verge of listing on ASX. Next, it addresses the importance of sustainability report for logistic
companies like Focus Logistics and also explains the key elements that shall be the part of the
report and lastly, risk management is analysed along with a risk management table attached as an
appendix.

REFERENCES
Books and Journals
Adnan, S. M., Hay, D. and van Staden, C. J., 2018. The influence of culture and corporate
governance on corporate social responsibility disclosure: A cross country analysis. Journal of
Cleaner Production. 198. pp.820-832.
Aifuwa, H. O., 2020. Sustainability reporting and firm performance in developing climes: A
review of literature. Copernican Journal of Finance & Accounting. 9(1). pp.9-29.
Amarasena, N., Haag, D. and Peres, K. G., 2019. A scoping review of caries risk management
protocols in Australia and New Zealand. Australian Dental Journal. 64(1). pp.19-26.
Boiral, O. and Heras-Saizarbitoria, I., 2020. Sustainability reporting assurance: Creating
stakeholder accountability through hyperreality? Journal of Cleaner Production. 243.
p.118596.
Gnanaweera, K. A. K. and Kunori, N., 2018. Corporate sustainability reporting: Linkage of
corporate disclosure information and performance indicators. Cogent Business &
Management. 5(1). p.1423872.
Holmatov, B., Hoekstra, A. Y. and Krol, M. S., 2019. Land, water and carbon footprints of
circular bioenergy production systems. Renewable and Sustainable Energy Reviews. 111.
pp.224-235.
Kovermann, J. and Velte, P., 2019. The impact of corporate governance on corporate tax
avoidance—A literature review. Journal of International Accounting, Auditing and
Taxation. 36. p.100270.
Opferkuch, K. and et.al., 2021. Circular economy in corporate sustainability reporting: A review
of organisational approaches. Business Strategy and the Environment. 30(8). pp.4015-4036.
Willumsen, P. and et.al., 2019. Value creation through project risk management. International
Journal of Project Management. 37(5). pp.731-749.
Zaman, R. and et.al., 2022. Corporate governance meets corporate social responsibility: Mapping
the interface. Business & Society. 61(3). pp.690-752.
Online
8 Benefits of sustainability reporting. 2022. [Online]. Available through:
<https://sustainlab.co/blog/8-benefits-of-sustainability-reporting>
What Is a Risk Matrix? 2022. [Online]. Available through: <https://www.wrike.com/blog/what-
is-risk-matrix/#What-is-a-risk-assessment-matrix-in-project-management>
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APPENDIX
Risk Management Table:
Risk Identified Likelihood Impact Action in Response
Improper operations
& governance
structure
Likely Medium Proper controls over
the operations and due
emphasis on the
structure of the
governance of the
entity.
Comparing with the
industry standards and
provide solution for
the variances found.
Biased management
and lack of controls
Possible Medium Change of
composition of
management and
involving external
unbiased personnel.
Avoid related party
transactions
transacted in the
entity.
Irregular reporting
and review of
performances
Very Likely High The reporting shall be
as per rules,
regulations and
requirements of the
stakeholders.
Stakeholders analysis
shall be done to know
the weak points where
2

entity is lagging.
No control over
sustainability issues
Possible Medium Although not
mandatory, but
sustainability issues
shall be reported for
healthier operations of
the entity and
showing the best
image of the entity as
it can and should.
Shipment error Very Likely High Control over shipment
by checking the
address on the item
matches with the
delivery slip.
Such shipment of
items shall be shown
as out of the stores
within a reasonable
time from such
shipment.
Shipment damaged Very Likely High Control over the
quality of the
packaging of the
items shipped.
Expenses on such
damage of the
shipment by the cargo
who is delivering the
items.
Late delivery Likely Medium Shall adhere to the
3

regular delivery
schedule.
Control over the
cargo’s measures to
allow timely delivery.
Theft Very Likely High Security system of the
store shall be operated
continuously.
Unauthorized
personnel shall not be
allowed in the store
and the places where
such items are stored.
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