In their 2024 sustainability reports, industrials entities were focused on addressing their scope 1 and 2 emissions, and developing strategic ways to indirectly reduce scope 3 emissions through their own operational processes.
While there are differences in short and medium-term targets, in the long-term, these entities generally have consistent goals of reaching net zero for scope 1, 2 and 3 emissions by 2050 or sooner. The industrials entities also aimed to accomplish this by employing similar strategies to achieve those goals, including transitioning to renewable energy, optimising operations to reduce fuel use, and engaging stakeholders in reduction efforts. They also support policy initiatives for sectoral decarbonisation, for example, by collaborating with government, business, and industry to develop sustainable emissions reductions solutions.
Structure of reporting and assurance
Each industrials entity incorporated some climate and sustainability metrics and information into their annual report. Some had also produced standalone sustainability reports, or sustainability reviews and plans.
Industrials entities obtain different forms of assurance over their climate reporting, for example:
- reasonable assurance for scope 1 and 2 emissions;
- limited assurance for sustainability information and materiality assessments;
- limited assurance for environmental indicators, health and safety indicators, and environmental qualitative claims; and
- limited assurance for supply chain impacts and collaboration initiatives.
Reducing emissions
Strategies deployed across this sector to meet emissions reduction targets included:
- transitioning to 100% renewable energy;
- collecting and analysing emissions data both internally and throughout the value chain;
- reducing waste by adopting sustainable materials in production and customer service;
- optimising designs and operations to decrease fuel consumption, such as optimising flight routes to reduce flight time, electrifying forklifts to eliminate the need for fuel, and designing roads to be flatter and less fuel-intensive; and
- engaging with consumers/customers where possible to support reductions efforts, including engaging with customers and retailers for reuse of products, and to advocate for electric vehicles.
A high level timeline summarising targets of different entities in the sector is below:
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Target
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INDIVIDUAL
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Example
uses 2
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2025
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100% renewable electricity in operations |
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|
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2027
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Zero single-use plastics (excluding medical / safety items) |
|
|
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2030
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Reduction of scope 1 and 2 emissions reduction ranging from 25% to 50% Reduction of scope 3 emissions ranging from 17% to 55% |
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|
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2040 - 2050
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Net zero emissions in operations and value chains Zero general waste to landfill by 2050 (with certain waste excluded) |
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Engaging stakeholders
Entities in the industrials sector also reported on the policy initiatives that they supported and those which they anticipated would support them in meeting their sector targets. These included:
- engaging with regulators to advocate for sustainability-related legislative changes that support sectoral decarbonisation;
- reiterating support for government initiatives including National Greenhouse and Energy Reporting, and the Safeguard Mechanism;
- collaborating with government on industry initiatives, including road development and commercial-scale sustainable aviation fuel; and
- contributing to discussions and strategies around climate response, including the Business Council of Australia’s Net Zero Project 2035 and the Parliamentary Friends of Electric Vehicles and Future Fuels Transport.
Organisational structures and climate oversight
These entities also reported that they had embedded climate into their internal structures and systems. In particular, we observed:
- an emphasis on the role of the audit and risk board committee in overseeing climate-related risks and opportunities;
- in one case, an entity had established a board committee with responsibility for environmental matters, among other things;
- 2/3 of the entities in this sector reported that they had a designated chief sustainability officer; and
- 2/3 also reported that they had established management governance bodies to support the sustainability agenda, including one entity which had formalised a steering committee chaired by its chief financial officer to oversee its readiness for the upcoming mandatory reporting regime.
Emerging physical risks
Due to the nature of their businesses, entities in the industrials sector were especially aware of how physical climate-related risks would impact their business operations as part of their scenario analysis. While the impact of these risks varied, all identified the significant impact of weather activities on aspects of their businesses, including on:
- operational efficiency;
- the viability and safety of certain operations;
- the ability and desire of customers to use certain products and services; and
- prices across the supply chain.
Evaluating transitional risks and opportunities
Meanwhile, key themes of these entities’ transition risk and opportunity analysis included the impact of evolving social, governmental, and stakeholder attitudes and responses to sustainability efforts, shifts in consumer behaviour and market disruptions. Some entities also identified risks associated with delayed or limited renewable supplies, technologies and markets, as well as rising costs of sustainable products and supplies.
Nonetheless, these entities also highlight the opportunities, such as:
- strengthening partnerships with customers, communities, and the government;
- leading in climate-risk management and exploring new market opportunities; and
- enhancing resilience throughout the supply chain.
Investing in technology
Entities in this sector all highlighted steps they were taking to integrate technology to improve operational efficiency and bolster their climate resilience, including:
- taking steps to enhance and integrate data technologies, including integrating AI, data simplification, and predictive analytics technologies into climate responses;
- developing a decision support tool that allows the entity to define and test how much effort is required to reduce particular greenhouse gas emissions;
- developing a tool to identify exposures that the entity’s supply chain has to climate-related risks;
- expanding predictive technologies and analytics to enhance safety and viability of operations, including supporting the use of emissions modelling tools; and
- investing in new low-emission technologies as they become available that reduce fuel consumption and optimise services.
A spotlight on green finance and funding solutions
Green finance and funding climate solutions are becoming a cornerstone of sustainability strategies in this sector.
One entity issued its inaugural green bond in FY23 to support the entity’s circular business and sustainability agenda. Another established a climate fund to invest in innovative solutions in support of its climate targets.
This funding is crucial for driving large-scale sustainability projects and fostering innovation.
Considering nature
Entities in this sector have also begun to consider and integrate nature-related disclosures and targets as part of their climate strategies. This included, for example:
- taking steps to begin publishing and reporting TNFD aligned disclosures;
- considering issues of freshwater use, land use and pollution in operations; and
- setting forest positive and waste positive targets as part of climate strategy.
Global developments
The industrials sector globally faces significant challenges in reducing its carbon footprint. Air freight operators globally, for example, have reportedly increased their greenhouse gas emissions by 25% compared with 2019, driven by increased flight volumes and changing consumer expectations for rapid delivery in the post-pandemic economy.[1] This highlights the need for comprehensive strategies to reduce emissions across the entire supply chain. Global responses have included entities such as DHL and Lindt & Sprüngli working together to reduce greenhouse gas emissions in ocean freight through the use of biofuels derived from waste and residues.[2] Similarly, Mercedes-Benz and Kuehne+Nagel have also partnered to use sustainable aviation fuel in air freight transport, saving approximately 11,000 tonnes of CO2 emissions over the past year.[3]
A number of investments have also been made into electrifying vehicle fleets and installing solar panels. One innovative example is in Buttes, Switzerland where Sun-Ways, in collaboration with Switzerland’s Federal Office of Transport, Viteos and DG-Rail, is set to install a pilot solar project consisting of 48 removable solar panels between railway tracks.[4]
What’s next?
For future progress towards meeting sector-targets and reporting standards, entities in the industrials sector have flagged some of the following as priorities:
- harnessing the power of data and digital insights to identify new sources of value;
- simplifying technology and adaptation processes to make them more efficient and effective;
- developing new technologies and ways of working to increase productivity and sustainability;
- optimising processes to better reduce emissions;
- identifying and investing in projects outside the industry;
- accelerating uptake of lower carbon-materials, and continuing to develop sustainable fuels and resources; and
- continued integration of climate into business operations.
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.
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