Corporate Australia’s social licence to operate: the case of Dan Murphy’s in Darwin

Jun 21, 2021

Woolworths has copped a right shellacking by Sydney-based lawyer Danny Gilbert’s Independent Panel Review into the proposed Dan Murphy’s development in Darwin. As did the Northern Territory Government. The damning Review report excoriates both Woolworths and its booze arm Endeavour Drinks for their conduct in relentlessly pursuing development approval for this big-box booze barn against the wishes of the local Indigenous community.

The report states:

“The clear evidence of the effects of overconsumption of alcohol on the wider Northern Territory community informs much of the opposition to the Dan Murphy’s proposal.

“After considering the issues covered in detail in this report, the Panel has come to the view that Woolworths Group should not proceed with the Dan Murphy’s Darwin development. The bases for this recommendation are fundamentally the concerns expressed about the proposal by many stakeholders – most importantly, but not only, Aboriginal and Torres Strait Islander communities – and the negative impact on Woolworths Group and its reputation.” (p.125)

In late April Woolworths announced that it had received the Panel’s report and that it would not be proceeding with the development in Darwin. On 9 June 2020, it released the Independent Panel’s report and further announced that it had surrendered the licence to the NT Government. This is good news because it makes it difficult to resurrect the development in the future.

In the wash-up, the question is whether the decision not to proceed was about a risky liquor outlet or more about Woolworths’ current and future relationship with Indigenous Australia in light of rising community sentiment towards the need for reconciliation. There is plenty to suggest it is about the latter, especially as Woolworths is in the process of hiving off its alcohol and gambling businesses into Endeavour Drinks. The equivocal public statement by the Endeavour Drinks’ Chairman-elect, Peter Hearl, supports this view.

This is important for two reasons. First, because it goes to the heart of Woolworths’ social licence to operate and second because while Woolworths have forsaken the Darwin licence its behaviour around Australia over many years towards communities opposed to similar developments has been just as relentless and unyielding.

Gilbert’s report includes nothing about Woolworths’ behaviour in securing approvals to establish Dan Murphy’s stores in Maylands (WA), Coogee (NSW), Cranbourne (Victoria) and over the use of ‘shopper dockets’ in NSW. In these cases, Woolworths has employed the classic bully-boy tactics of the big end of town in pursuit of its commercial interests.

When the review was announced in December, shortly before the approval by the NT’s Director of Liquor Licensing and following the Government’s reprehensible special legislation that circumvented the Government’s own liquor laws, most were sceptical about how independent this review would be.

Would it be a mechanism to put distance between the circumstances of the approval and allow a cooling-off period before pressing on with the development, or would it be genuinely independent?

But Gilbert and Woolworths have surprised everyone with a genuinely independent review. A review that is deep, extensive and thorough, revealing plenty of dirty linen and making recommendations that must have been painful for Woolworths’ directors and management to swallow.

To Woolworths’ credit it fully cooperated with Gilbert and his team of experts acted decently and conceded: “we have clearly failed to meet our expectations and we deeply regret our insensitivity to critical stakeholders in Darwin and beyond, and our own external Indigenous Advisory Panel, whose advice we did not seek. For that, we unreservedly apologise”.

It is this focus on the Indigenous community that leaves me concerned. After all, Woolworths is Australia’s biggest retailer of addictive products – alcohol, tobacco and gambling – and there is no suggestion in the Panel’s report or Woolworths’ reaction to it that things are about to change in this regard.

In fact, Woolworths’ published comments about alcohol point to this soon being Endeavour Drinks’ responsibility, and we are left to conclude Woolworths’ primary motivation in deciding not to pursue the development of the Dan Murphy’s store has been, not unexpectedly, protection of its supermarket business reputation.

Either way, Gilbert has certainly surprised. His report has set a new standard for corporate social responsibility which will be difficult for Woolworths, let alone any other corporation, to ignore when issues like the development of a booze barn in the midst of a highly disadvantaged community come to the fore.

Gilbert’s opening chapter focuses on corporate purpose, citizenship, reputation, legitimacy and trust and is as good a discussion of social licence as you would find anywhere. It reviews the literature and assesses Woolworths’ many failures, commenting: “It has become evident that the range of issues informing and impacting sustainable economic value have shifted beyond a narrowly defined short-term pursuit of profit to include moral obligations and social responsibilities” [p.19]. Gilbert concludes by saying Woolworths “has not met all of the aspirations and standards” it had set itself in relation to social purpose [p.20].

It would be disappointing if this discussion of social licence does not become required reading in the head offices of corporate Australia, especially given high-profile failings such as Rio Tinto’s destruction of the 46,000-year-old Juukan Gorge caves in the Pilbara.

Gilbert’s examination of Woolworths’ relationship with Indigenous Australia is compelling and important. It focuses on the gap between the stated corporate intent as exemplified in Reconciliation Action Plans (RAP) and the reality on the ground. The report finds “RAPs have laudable aspirations and commitments.

However, many do not have the embedded systems and processes to help drive organisational culture that ensures full compliance with those aspirations and commitments. This is reflective of the Panel’s observations of Woolworths Group, in the issues around the Dan Murphy’s Darwin development” [p.31].

It is easy to see that given the likely trajectory towards reconciliation Woolworths would be more activated by the need to be on the right side of history for both moral and commercial reasons. It is the behaviour of a rational actor. It is also fair to observe that Woolworths has handballed the question of a future Dan Murphy’s in Darwin to its hived-off venture Endeavour Drinks – albeit, in doing so, making the morally responsible decision to surrender the ‘hard-won’ licence.

The findings of how Woolworths and its agents went about securing the licencing approval are shocking. Even though the application for the store was rejected by the Northern Territory’s Independent Liquor Commission, which said “approving the application would lead to a significant increase in the level of alcohol-related harms which already exist in this community,” Woolworths never conceded defeat. It ignored the wishes of locals, failed to acknowledge the negative impact alcohol has on the Northern Territory’s Indigenous population and refused to recognise the recent history of alcohol control policy as encapsulated by the Riley Review.

The Independent Panel found “misalignment between the strategic intention of Woolworths Group’s leadership and the actions of the Endeavour operational team progressing the development. In particular, when reports were provided to the Woolworths Group Board about the Darwin Dan Murphy’s proposal the focus was on the community support for the development. The concerns of opponents to the development were not sufficiently aired or adequately explained until much later in the process” [p. 111]. This sounds like a lawyerly condemnation of a group obsessed with prevailing over its opponents no matter what. From my past dealings with these types – entirely the case.

It was these failures that drew the strongest condemnation from the Independent Panel:

“Woolworths Group did not engage with the less palatable fact that, in comparative terms, Aboriginal and Torres Strait Islander communities in the Northern Territory face many challenges. \These communities suffer from severe overcrowding, over-representation in the criminal justice system, high levels of violence and youth suicide, and a lack of meaningful employment opportunities. Along with cultural imperatives, these issues encourage greater First Nations population mobility into Darwin, with all the attendant resulting challenges. In short, Woolworths Group failed to understand the size and nature of Aboriginal and Torres Strait Islander communities in Darwin.” [p.125]

In some ways, it is a footnote to the overall story, but Gilbert’s exploration of the NT Government’s facilitation of the licence approval and the role of the Director of Liquor Licensing in this approval is shameful.

Chapter 8 reads like a court judgement and is a devastating critique of the Gunner Government’s appalling behaviour. The exploration of the Director’s decision-making is described variously as “problematic”, “deficient”, unsatisfactory and “leads the Panel to question whether or not the Director asked himself the right questions in determining the application” [p. 89].

If the review had been conducted by, say, the NT Auditor General heads would surely have rolled. There is nothing right about it and as Gilbert observes:

“While it is entirely legally defensible for Woolworths Group to rely on the Director’s decision, the question remains whether Woolworths Group can be satisfied that the standard set by community expectations will have been met given the significant problems associated with alcohol and the high-water mark set by the Riley Review. Certainly, the standards displayed by the Legislature and the consequent decision of the Director of Liquor Licensing were serious departures from the recommendations of the Riley Review and as subsequently adopted in legislation.” [p.82]

Woolworths’ behaviour throughout this entire episode, until the denouement, has been no more egregious than in other instances mentioned, but it was nonetheless as shocking an example of ruthless corporate pursuit of business (private) interests over the public interest – in this case, the interest of Indigenous people in Darwin – as you are likely to see.

Fortunately, because of a concerted campaign of opposition by Australia’s Indigenous community, public interest organisations and the 150,000-person petition, Woolworths paused, thought about it and decided not to proceed.

There can be no guarantee that an application for a Dan Murphy’s will be reactivated sometime in the future, but for now, Woolworths’ decision to commission this independent review and give Danny Gilbert a free hand to investigate the circumstances of the Dan Murphy’s has been a good thing.

It has facilitated a hard look at the meaning of a social licence to operate and what this entails for the reputation of corporate Australia. It has also allowed an exploration of the difficult issue of corporate Australia’s role in the ongoing efforts to achieve reconciliation with Indigenous Australia.

The irony of course is that, had Gunner not subverted his own legislation, we would never have had this review. The worry is that Woolworths will learn from this, but its soon to be independent pure-play alcohol business Endeavour Drinks will not. Time will tell.

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