Coles Logistics Pty Ltd (Coles) has engaged you as an independent consultant, and they are seeking your advice on several corporate governance, sustainability and risk management issues. You have just returned from a board meeting with Julia Reedy (the companys founder and the current Chair), Barb Wood (CEO), Martin Wood (COO) and David Wood (CFO). You have gathered the following information about this company: History Mrs Reedy established Coles Logistics in 1965 in Horsham, Victoria, providing state-wide logistics services to local businesses. The community supported Coles because of Mrs Reedys slogan, Go Local. The company grew steadily for the next 30 years and expanded its operations into VIC, NSW, and TAS. Mrs Reedy retired from day-to-day operations in 1997 and assumed the boards chair role. Since then, Mrs Reedys daughter Barb has taken on the company reins and has completely transformed the business. Coles now has 19% of the total market share and is Australias fifth-largest private logistics company. Coles has grown from 28 customers in 1970 to 650 in 1997 to more than 11,000 customers today (including a few ASX-listed companies). Current plans: expansion Coles needs additional capital to fund its expansion plans, and Mrs Wood has met with several potential investors and private equity groups over the last six months. The senior management team has prepared a very impressive prospectus highlighting Coless recent achievements and a business forecast for the next ten years. However, these investors are concerned that Coles doesnt have the proper operation and governance structure to justify the additional funding and expansion plans. Investor concerns: They have criticised that even though Coles is a large company, the business is still run like a family-owned business with limited oversight over management and a lack of operational controls and reporting. In addition, the various management positions, especially the executive positions, are held by family members and close friends. Therefore there is a lack of appropriate performance reviews and necessary succession planning. The investors also highlighted that Coles doesnt have any board committees. The board unanimously agrees that spending money on non-value-adding reporting, like a sustainability report, is unnecessary since they own most of the company. The committee acknowledges that regular reporting and performance reviews might benefit the company. Still, it is concerned about its impact on the family members after all, trust and patience are the most essential traits of a family-run business. Plus, it is the board's view that there is a reason why such reporting is optional and not mandatory at all. Mrs Wood has already notified these investors that Mrs Reedy will soon retire from the board, and Mrs Wood will nominate herself as the next Chair. She believes that the board will benefit immensely if the Chair and the CEO are the same people thats because this person will have much knowledge about the companys operations and, therefore, will be able to question and oversee the management more meticulously. The potential investors are also apprehensive about this company's lack of sustainability reporting. Coless carbon footprint is enormous their B-Double trucks alone consume almost a million litres of diesel annually. Anyone can guess how much fuel the company consumes in total because it has hundreds of sub-contractors along with its fleet of trucks. Mrs Wood is aware that all national banks oppose supporting a business that does not have a sustainability plan and target. The last primary concern of these investors is the need for more risk management initiatives at Coles. Recently, Coles has taken on much debt (by using their Victorian fleet as security), and therefore the board must constantly monitor Coless exposure to financial risk. The investors acknowledge that although Coless operations were not affected by COVID-19 (because the business is classified as an essential service), Coles needs to prioritise operational risk management and urgently draft a business continuity plan. Board/Management opinions Mrs Reedy completely dismissed the investors views on operational risk. She stated, Trucks are the backbone of Australia and will continue to work round-the-clock as they have done for the last 55 years. I cannot think of a simpler business buy a truck, get someone to drive it, and the customer settles the account a few days later. Involving lawyers and consultants in expensive suits will make matters unnecessarily complicated. The companys COO, Martin Wood (Mrs Woods 26-year-old son), is genuinely concerned about what these potential investors demand. He stated, Corporate governance always slows down the boards decision-making process and makes running a company unnecessarily complicated, hindering innovation and creativity. For example, I want to add autonomous vehicles to our fleet, and I am confident that a formal governance structure will delay such adaptation. As long as we arent in trouble with the tax office and the corporate watchdog, the boards only priority should always be on maximising shareholder returns. Therefore, we shouldnt be worried about compliance issues, which are unlikely to get audited. And even if we do get audited, it is better to pay a small fine instead of investing thousands, possibly millions, of dollars in meaningless and endless compliance and tick-the-box exercises. A family-run business should always Coles on performance rather than so much on conformance. We have to stop this madness. Martin is confident that Coless legal counsel, Melissa Wright (Martins childhood friend and a current law student), will concur with his views. Unfortunately, Melissa could not attend the meeting because she was on extended personal leave. The companys CFO, David Wood (Mrs Woods other son), has a different view. He said, For what its worth, I can understand where the investors are coming from. However, we are no longer a local business. A lot has changed since Nan started this business on her kitchen table, and Uncle Sam was the only truck driver. Today, we have operations across Australia and employ more than 2,000 people and I am not even counting the 3,000+ contractors we have on our books. There was a recent ruling whereby businesses like ours are more responsible for looking after our employees, especially our sub-contractors. When Melissa is back, Im sure she will be able to shed some light on this. Plus, we should endeavour to go beyond the mandatory requirements. Wouldnt it be great if our peers recognised us as pioneers in corporate governance and sustainability practices? After all, we consume a crazy amount of fuel every year, and with climate change being a pressing political topic the last thing we want is to be boycotted. These investors will own 12% of our company and probably get a seat at the board table. So, we have to be careful about making any throwaway comments. We might be a private company, but the business media and journalists are very well aware of our operations and ownership structure. It is impossible to hide when you are this big. In social media and Twitter, information travels much faster than we can imagine. Mrs Reedy concurs with Davids views. She said, I want to continue looking after our loyal customers and faithful employees who have supported us all these years. We already do a lot for the community, and it would be great to consolidate all the information about our various programs in one easily accessible location. But I am unsure about preparing these fancy reports, which no one will ever read. Surely, we can put our money to use better?. Towards the end of your meeting, Barb said, Honestly, we are just testing the waters with these private investors. We want an accurate company valuation and want to see whats it like to work with a private equity group. Even though we will go ahead with this equity sale, Coless ultimate goal is to be an ASX-listed company by the end of next year.

REQUIREMENTS You must write a report to Coless board summarising your views on corporate governance, sustainability and risk management practices. In your report, you must address the following three areas: 1. Discuss at least four good corporate governance practices and the importance of good governance for a large private company such as Coles Logistics that wants to transition into an ASX-listed entity.

2. Summarise the significance, benefits and challenges of producing a sustainability report for Coles Logistics, especially for a business within the logistics industry.

3. Summarise the benefits and challenges of sound risk management practices for Coles Logistics.