Climate governance & reporting trends of the ASX50 in 2024: Consumer Discretionary & Consumer Staples

Preparing for mandatory climate reporting

2024 was a year of refresh for many consumer entities as they prepared for the introduction of mandatory climate-related financial disclosures.

However, these preparatory steps look different between these entities as some report that they:

• refreshed their climate scenario analysis;
• commissioned a gap analysis to guide future work and assess preparedness for mandatory reporting;
• refined their scope 3 emissions inventory to help identify achievable and measurable reduction opportunities;
• adopted a double materiality assessment lens to identify risks and opportunities related to activities and value chain;
• consolidated their sustainability strategy and initiatives; and
• reviewed their scope 1, 2 and 3 emission reductions targets.

We also observed significant variations in the scope and detail of reporting provided by these entities in 2024. Some entities provided detailed reports on a wide range of climate-related topics which reflected their large-scale operations and diverse product offerings. By contrast, other entities clearly had a more specific operational focus or only emphasised specific issues which were pertinent to their business and considered critical to climate resilience. Examples of climate issues raised in these entities’ climate reports included: responsible stewardship of natural resources, supply chain disruptions and building a circular economy.

Reporting on emissions

Unsurprisingly, emissions reporting was again a strong feature of reports this year. Specifically, we observed that:

• scope 2 emissions form a significant part of these entities’ operational footprints, largely associated with electricity consumption. While nearly all entities reviewed across this sector reported a reduction in scope 2 emissions, one entity disclosed a 55% increase in their scope 2 greenhouse gas emissions partly attributed to the identification of new properties within the entity’s operational control; and
• scope 3 emissions remain material and significant for most of the businesses within this sector. While most entities itemised sources of upstream and downstream scope 3 by percentage, some entities reported that they were still in the process of conducting an inventory of their scope 3 emissions.

Example sources of scope 3 emissions

Reducing emissions

Recognising the importance of emissions reduction, all entities had set targets to reduce scope 1 and 2 emissions, with most aiming for substantial reductions by 2030 and net zero by 2050.

However, some entities went a step further and made public commitments in relation to their scope 3 emissions: one retailer has committed to having 75% of their suppliers adopt science-based emissions reduction targets by the end of FY27 while another has committed to developing a supply chain council to partner with key suppliers on emissions reduction strategies.

Switching to renewable energy

Many entities within this sector also recognised that switching to renewable energy is an effective way to tackle emissions with more resources and partnerships being dedicated towards facilitating this transition. Actions taken included:

• adopting specific targets for sourcing 100% renewable electricity by 2025;
• generating on-site electricity from solar and/or waste heat sources; and
• reducing overall electricity use through LED lighting and efficient heating.

Nature activism

With its consumer focus and long supply chains, this sector faces scrutiny from many fronts. In 2024, that included the ‘Save the Skate’ campaign against the major supermarket retailers by a new activist – SIX. SIX’s campaign was aimed at protecting the Maugean Skate, an endangered species in Macquarie Harbour. The campaign was a focus at both retailers’ annual general meetings (AGMs), as we wrote about in our report on 2024 AGMs.

Engaging other stakeholders

The sector had a mixed approach to engagement with the Australian and state governments. This has taken various forms including active collaboration with the state governments on policies and actions to support climate change.

Participation in industry associations also featured prominently in reporting this year with several entities noting continuous engagement, collaboration and partnerships with industry associations to draft submissions to governments and to develop and test new technology.

Global developments

Consumer discretionary and consumer staples entities globally are integrating sustainability into their core operations, product development, supply chain management and investments. This shift may be attributed to a mix of growing demand for sustainable products, regulatory pressure and the need to mitigate climate-related risks.

For example, IKEA’s parent company announced a €1 billion investment in entities focused on enhancing recycling infrastructure, aiming to increase the availability of recycled materials and reduce emissions.^[1] Similarly, IBM and L'Oréal have launched a collaboration to use generative AI technology to develop more sustainable cosmetics, aiming to reduce energy and material waste while enhancing product formulation processes.^[2]

The sector has also seen significant legal action aimed at holding companies accountable for their environmental claims, including the Washington-based Environmental Working Group’s lawsuit against Tyson Foods alleging that the company misled consumers by claiming it would achieve net-zero emissions by 2050 and marketing ‘climate-friendly’ beef without substantial plans to meet these goals.^[3] In 2024, it was also reported that the ten largest food companies in the UK produce more carbon emissions than the aviation industry, prompting general calls for greater action to address the climate emergency.^[4]

To learn more about climate governance and reporting trends in 2024 across other ASX50 sectors, click on the relevant sector below:

Otherwise, for further advice on navigating the Australian mandatory reporting regime, please contact a member of the King & Wood Mallesons or Owl Advisory team.