New Legislation Highlights The Importance of Resilience and Sustainability in your Supply Chains

There are new rules for Australian Businesses:

With mandatory climate-related financial reporting disclosures (CFRD) having come into force for Australian businesses from 1 July 2024, the focus on supply chain risk and resilience has never been more pronounced. Our understanding of environmental impacts and sustainability are becoming more complex and with that – the policies and requirements that businesses face are similarly deepening. It isn’t just the electricity you use when you flip on the lights, or even the carbon emissions created by delivery trucks that a business needs to consider. Scope 3 emissions – those generated throughout the entire supply chain process – are now becoming part of managing your emissions and carbon footprint.

Although larger corporations are hit by the new regulations at the outset, there will be indirect implications for all parts of the wider upstream and downstream supply chains of these companies. Consequently, all businesses need to be prepared for the growing requirements of emissions reporting.

What are the types of emissions?

Direct greenhouse gas (GHG) emissions from the resources a business owns (Scope 1) and the indirect emissions from the consumption of purchased energy/power used by that business (Scope 2) have been the focus of businesses and regulation requirements. The new CFRD, however, brings far more focus on the more nebulous Scope 3: indirect emissions that are generated by the entire supply chain of a business. Scope 3 emissions can be significant and inherently complex to understand – accounting for 65 to 95 per cent of most companies’ total emissions. As these Scope 3 emissions sit outside the direct control of a reporting entity, this is likely to drive an enhanced focus on environmental impacts for companies when they engage with their suppliers and customers.

What impact will the new regulations have?

Whilst the legislation acknowledges the difficulty in addressing Scope 3 emissions and provides time for companies to transition, the sooner companies start addressing these requirements, the better.

Moving away from traditional value chains and challenging them can unlock opportunity and efficiency – building better relationships with suppliers and customers. With supply chains becoming more complex and often spanning multiple jurisdictions, the role of technology will also continue to drive and enable management of sustainability risk, and obligations. 

Understanding your supply chain is crucial, but it’s not just about GHG emissions. This goes well beyond decarbonisation and extends to broader sustainability stewardship – addressing issues such as modern slavery, human rights, and social responsibility.

Rather than viewing these requirements as onerous, proactive companies are embracing the opportunity to better engage with their suppliers and customers. All these factors are critical to delivering business resilience as employees, communities, shareholders, and other stakeholders, demand more around increasing transparency and protecting reputational risks. 

Ultimately, positive climate action makes good business sense, regardless of the size or scale of your business. It is now a key part of business strategy to drive innovation, protecting business and opening new markets for growth. 

How Siecap Can Help

Siecap provides a range of services to support our clients with their supply chain resilience. This includes feasibility studies and business cases, procurement and contracting, data and analytics, carbon advisory, and assurance services. These services help clients better understand risk and opportunity within their supply chains, whilst navigating towards a more sustainable and efficient future. With new, uncharted regulation affecting Australian businesses, those that keep a keen eye on the horizon and stay prepared for what lies ahead will undoubtedly have an edge against their competition. As the field of play changes, successful Australian businesses are going to change with it. Contact Siecap today if you want to learn more about how we can help you tackle these changes.