Manufacturing businesses constantly face the dual challenge of driving growth while meeting stringent environmental standards. With rising interest from both consumers and regulatory bodies, adopting sustainable operational practices has never been more crucial. Staying proactive not only positions your manufacturing business ahead of the curve but also brings about potential cost savings, mitigates risks and boosts stakeholder confidence. As new regulations loom, embracing sustainability has shifted from being a choice to an imperative.
Measuring sustainability poses significant challenges due to its complex, multidisciplinary and often subjective nature. However, with the support of Environmental, Social, and Governance (ESG) indicators, a company’s sustainability performance can be more accurately assessed. There’s no universal strategy when it comes to ESG indicators, so businesses need to identify those that align most closely with their specific operations. Given the rapid advancements in climate change, manufacturing businesses are gearing their sustainability focus toward measuring and managing their carbon output.
Carbon accounting
Accurate carbon accounting allows organisations to analyse their carbon footprint by source and identify the areas of their operations or supply chain that contribute the most to emissions. This can facilitate decisive action to mitigate these impacts and prepare for upcoming regulatory requirements. Middle-market businesses are increasingly adopting a focus on the climate impact of their organisation’s activities as a critical factor in their supply chain management and stakeholder communications.
To be certified as carbon neutral, your entity must comply with the Climate Active Carbon Neutral Standard. This process begins with applying for and maintaining a license agreement with Climate Active. Then calculating your organisation’s GHG emissions to determine your carbon footprint. Next, developing and implementing an emissions reduction strategy. Any remaining emissions can be offset by purchasing carbon credits. Your carbon neutral claim is then independently validated by a third party. Finally, once Climate Active has assessed all reporting documents, certification is granted.
Why is it key to business strategy?
Governments worldwide are implementing various policies such as emissions trading programs, energy taxes, and emissions and energy efficiency regulations to reduce carbon emissions. In Australia, mandatory climate-related financial disclosure for manufacturing businesses will begin in phases starting on 1 January 2025 for large entities, with smaller and middle-market businesses required to report from 1 July 2027. Even if your business in Australia isn’t directly facing carbon emission regulations, your supply chain partners likely are or will be soon. These regulations will have significant operational impacts, making it critical for manufacturing businesses to be prepared.
Stakeholders and investors are also becoming increasingly interested in how organisations are positioned in this area relative to their competitors. To remain competitive and succeed in the long term, Australian manufacturers are starting to better understand and manage their carbon emissions for several reasons, including:
- Managing carbon risks
- Identification of carbon reduction opportunities
- ESG reporting
- Preparing for upcoming regulation
- Positioning as leaders in combating climate change
Managing and reporting your emissions is crucial to maintaining partnerships and staying competitive in a world where sustainability is increasingly critical.
Undertaking a Carbon Accounting Assessment
When assessing a business’ carbon output, the approach should address the following four key factors:
- Scope: Establishing a baseline and defining operational boundaries including the identification of direct and indirect emissions.
- Measure: Collecting and reviewing datasets based on well-established practices and Carbon Protocol standards.
- Strategy: Minimising your climate impact including operational efficiencies, supply chain, procurement and waste reduction improvements.
- Reassess: Ongoing reporting for performance evaluation, regulatory compliance, and strategic realignment opportunities.
Integrating sustainable practices is essential in today’s eco-conscious world, especially with impending regulations. Managing your carbon footprint not only aligns with global standards but also positions your manufacturing business as a leader in sustainability. This approach enhances your brand, satisfies stakeholders and ensures compliance. Contact your local William Buck advisor to learn how our Carbon Accounting services can help you navigate the complexities of carbon accounting and sustainability reporting and support your journey toward a sustainable future.
