Sustainability in manufacturing is no longer nice-to-have. It is core risk management

Somewhere along the way, "sustainability" got filed in the wrong drawer. For years, manufacturing businesses simply did not think it was relevant to them. It was relegated to the fluffy end of corporate social responsibility: volunteering days, tree planting, a feel-good page in someone else's annual report. Not something that touched the factory floor, the order book or the balance sheet. That view is now not only out of date, it is actually dangerous.

If you are a mid-sized manufacturing business, here is the reality. Flood, fire, heat and storm exposure at your sites. Concentration risk in your supply chain. Rising energy and insurance costs. These affect your cash flow, your margins and your ability to win work, whether the word sustainability ever crosses your desk. Sustainability should be treated the same way you already treat safety, quality and credit risk.

What has changed is that the questions are no longer optional. Australia's new climate reporting rules, and the big customers already subject to them, are now forcing every serious business to answer them.

Sustainability asks the same questions a good operational review asks

Since 2025, Australia has had mandatory climate reporting. The AASB S2 issued by the Australian Accounting Standards Board (AASB), requires companies to report on four areas: governance, strategy, risk management, and metrics and targets, including greenhouse gas emissions. 

Strip away the compliance layer, and the questions are ones any sharp operator should want answered anyway. 

Where does our energy spend go, and where is it wasted? 

Which suppliers could leave us exposed after one bad weather season? 

Which sites carry physical risk we have never priced? 

Who in the business actually owns these risks?

This is a risk management exercise wearing a compliance badge. And businesses that work through these questions properly tend to find money, not just risk. In practice, that looks like energy efficiency projects that cut overheads, better freight and logistics decisions, stronger negotiating positions with insurers and lenders, and eligibility for contracts with large customers who now screen suppliers on this. 

Some manufacturers find new revenue too, through lower-emissions or product lines or simply by being the supplier who can hand over clean data while competitors scramble.

Resilience is the real prize. A business that understands its climate, energy and supply chain exposure is a more durable business, full stop.

The rules just moved a step closer to you

On 1 July 2026, Australia's mandatory climate reporting regime reached its second phase. Group 2 companies, generally those with consolidated revenue of $200 million or more, gross assets of $500 million or more, or 250 or more employees (any two of the three), must now prepare climate reports for financial years starting on or after that date. If you run a manufacturing or industrial business turning over between $50 million and $200 million, you might think that has nothing to do with you. Don’t dismiss it too quickly. 

First, some of you will be captured directly. Group 3, which starts reporting for financial years beginning on or after 1 July 2027, applies to companies meeting two of three thresholds: $50 million in revenue, $25 million in gross assets, or 100 employees. A manufacturer turning over $80 million with 120 staff ticks all three boxes. 

Second, and more immediately, your biggest customers are now reporting, and they need information from you to do it. Their reports must cover what are called Scope 3 emissions, meaning emissions across their value chain, including their suppliers. Your emissions are part of their numbers. Scope 3 reporting gets a one-year grace period, then becomes mandatory from a company's second reporting year.

Your customers are already asking

This is not a prediction. Emissions requirements are already written into procurement rules and supplier programs across government and the private sector.

The NSW Government's Decarbonising Infrastructure Delivery Policy has been operational since April 2025. It requires agencies to build carbon reduction targets into tender documents for major projects, with bidders invited to compete on carbon.

In construction, the Australian Constructors Association has told subcontractors and suppliers plainly: emissions data is required for supplied materials, and tenders are now judged on carbon as well as price.

Retail is no different. Coles requires 80 per cent of its suppliers, by spend, to set their own science-based emissions reduction targets by the end of the 2029 financial year. That goes beyond asking suppliers what their emissions are. It asks them to commit to reducing them.

If you cannot answer these questions when they land in a tender or supplier questionnaire, that is a commercial risk you cannot afford to ignore.

The honest picture on timing

The Group 1 companies that have reported (or are reporting now) spent a year or more building the data systems, governance and capability needed to produce a credible report. Emissions data in particular takes time, because it comes from energy bills, fuel records, freight data and supplier information most businesses have never pulled together in one place.

While ASIC has placated industry with a promise to take a pragmatic and proportionate approach while the regime phases, pragmatic does not mean optional. 

The risk is in waiting too long means having to do a rush job on what took larger companies years, at a higher cost and with less choice of advisers.

What to do this quarter

You do not need a sustainability department. You need a starting point and a sequence.

1. Start with an initial scan. A short, structured review that establishes where you stand: which reporting group you fall into and when, what data you already hold, what your key customers are likely to ask for, and where your obvious exposures sit.

2. Then go deeper with a diagnostic. A proper deep dive that maps your compliance obligations, your physical risks such as weather exposure across sites, and your supply chain vulnerabilities. Just as importantly, it flags the opportunities: cost savings, lower overheads and potential new revenue streams.

From there, you have a prioritised roadmap instead of a vague sense of dread. If you are captured by Group 3, you have a full financial year to prepare. If you are not, you will be ready when your biggest customer's supplier questionnaire lands, which may be sooner.

Sustainability stopped being a nice-to-have the moment it started deciding who wins contracts. Treat it as risk management, because that is what it is.

Want to know where your business stands? Get in touch with me to book an initial scan.