May has brought major shifts in sustainability regulations and corporate expectations. Businesses operating in mining, construction, and heavy industry must quickly adapt to new climate reporting mandates, clean energy investments, and stricter supply chain transparency requirements. This month’s key developments include:
- Mandatory Climate Reporting: The Australian government has introduced new climate disclosure laws aligned with Task Force on Climate-Related Financial Disclosures (TCFD)
- Green Hydrogen Expansion: Several large-scale hydrogen projects have been announced, strengthening Australia’s role in the clean energy economy.
- Supply Chain Due Diligence: Companies face increased legal obligations to assess and disclose environmental and social risks in their supply chains.
Mandatory Climate Reporting: The New Compliance Standard
On 1 May 2023, the Australian government passed legislation requiring large corporations to disclose climate-related risks, mitigation strategies, and emissions data. These rules, which apply to ASX-listed companies and businesses with revenues over $100 million, bring Australia in line with international standards like TCFD (Australian Treasury, 2023).
The legislation mandates:
- Scenario analysis of climate risks (e.g., physical risks like extreme weather, transition risks like carbon pricing).
- Scope 1, 2, and 3 emissions reporting for major emitters.
- Board-level oversight of climate governance, with legal consequences for non-compliance.
Case Study: Rio Tinto has already adopted TCFD-aligned reporting, integrating climate risk into financial decision-making. In its latest disclosure, the company outlined a $7.5 billion decarbonisation plan, including investments in green energy and process efficiency (Rio Tinto Sustainability Report, 2023).
Green Hydrogen Expansion: New Projects and Investments
Australia’s green hydrogen industry is gaining momentum as companies ramp up investment in hydrogen production and export infrastructure. Hydrogen is seen as a critical fuel for decarbonising heavy industry, particularly in steelmaking, transport, and energy storage.
Key announcements in May 2023:
- Fortescue Future Industries (FFI) secured government approval for a 5 GW hydrogen production hub in Queensland, targeting exports to Asia (FFI, 2023).
- BP Australia confirmed a $3 billion green hydrogen facility in Western Australia, with an annual production target of 500,000 tonnes of hydrogen (BP Australia, 2023).
- Woodside Energy announced a feasibility study for hydrogen-based ammonia exports, positioning Australia as a leader in clean ammonia production.
Case Study: The Pilbara Hydrogen Hub is a collaboration between industry leaders and the Western Australian government, aiming to supply low-carbon hydrogen to mining operations and reduce emissions in remote regions (WA Government, 2023).
Supply Chain Due Diligence: New Legal and Market Pressures
Global regulators are tightening supply chain transparency requirements, forcing companies to assess environmental, social, and governance (ESG) risks across their supplier networks. The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD), which came into effect in May, has direct implications for Australian companies exporting to the EU (European Parliament, 2023).
Key requirements include:
- Mandatory ESG risk assessments for suppliers, particularly in industries with high deforestation, human rights, or pollution risks.
- Carbon footprint tracking across entire supply chains (Scope 3 emissions reporting).
- Penalties for non-compliance, including fines and trade restrictions.
Case Study: BHP has introduced AI-powered supply chain monitoring, allowing real-time tracking of emissions, ethical sourcing, and supplier compliance with ESG standards. This has improved transparency and investor confidence (BHP Sustainability Report, 2023).
Strategic Imperatives for Executives
- Enhance Climate Reporting: Align with new climate disclosure laws and integrate financial risk assessments into sustainability reports.
- Invest in Green Hydrogen: Explore partnerships or projects leveraging hydrogen as a long-term decarbonisation strategy.
- Strengthen Supply Chain Governance: Implement ESG due diligence tools and ensure supplier transparency to comply with global standards.