Manufacturing businesses are currently dealing with a number of significant changes, including navigating tariffs1.
The vast majority of manufacturing businesses, according to ABS data, will fall below the thresholds for mandatory sustainability reporting in Australia. With so many competing demands for manufacturing businesses, business owners want to know what is the benefit of sustainability reporting?
Our first article in this insight series, Sustainability reporting: The business case, outlined 10 reasons that organisations should implement sustainable business practices, adopt sustainability reporting, and obtain sustainability assurance.
For manufacturing businesses specifically, there are a number of factors to consider.
1. Generating opportunity from compliance
Manufacturing businesses are already covered by both State and Federal regulations that impose stringent requirements relating to the environment. These regulations require manufacturing businesses to have robust processes, controls and information systems in place to monitor compliance and report on any breaches. Manufacturing businesses are incurring costs to maintain these, but not typically leveraging them to demonstrate their credentials to stakeholders more broadly including consumers, talent, suppliers, providers of finance, or ratings providers.
Adopting sustainability reporting gives manufacturing businesses an opportunity to use the systems they already have in place to generate opportunity from it, rather than simply as a mechanism for compliance.
2. Addressing multiple priorities with a single change
Some of the most important business priorities for manufacturing industries include:
- Improving supply chain resilience and agility
- Improving manufacturing and supply chain visibility
- Investing in sustainable manufacturing practices to reduce carbon footprint
Each of these priorities requires investment – in both time and cost – from manufacturing businesses. Adopting sustainability reporting enables manufacturing businesses to progress each of these priorities with a single change, as sustainability is inherently linked to resilience, and seen as key to supply chain resilience more specifically. This level of understanding may also enable manufacturing businesses to be better placed to access sustainability grants.
3. Navigating complex export markets
Manufacturing businesses account for 16 per cent of Australian exporters. As data from the World Bank shows, carbon pricing instruments have become increasingly common around the world – increasing from just four examples of these in 1990, to 110 in 2024. The worldwide adoption of carbon pricing shows no signs of reversing. For Australian manufacturers, developing a greenhouse gas inventory will provide them with a detailed understanding of their emissions and carbon usage. This information enables manufacturing businesses to pinpoint the areas where carbon pricing costs can be minimised when exporting, and areas of intensity where changes can be made to have a disproportionate impact.
4. Meeting consumer expectations
Manufacturing businesses in Australia predominantly sell goods to other businesses, domestically and internationally, who in turn sell them to end consumers. The consumer for manufacturers is typically another business. These businesses are increasingly being captured by sustainability reporting requirements, both locally and internationally. For these businesses, their suppliers – the manufacturing businesses – will be one of their main sources of greenhouse gas emissions. Those businesses are increasingly requesting information about emissions associated with the manufacturing process and factoring that into their decision-making process about who to do business with.
For manufacturing businesses, the most cost effective way to address these requests is to proactively develop processes, controls and systems to measure and validate the information so that it can be provided in a consistent, standardised manner. This can help avoid repeat ad-hoc costs of responding to information requests and minimises any damage to consumer relationships due to inaccurate or untimely information.
Grant Thornton’s Manufacturing Benchmarks report discusses paving the way for sustainable growth. Manufacturing businesses understand the need for investment to improve productivity and reduce costs, demonstrated by their consistent investment of approximately 3 – 4 per cent in capital expenditure every year. Implementing sustainable business practices, adopting sustainability reporting and obtaining sustainability assurance needs to be seen in the same way; an investment in improving productivity and reducing costs.
Investing in this area means investing in your people, and with Grant Thornton’s ‘education-first’ approach, this is a single investment which can have a disproportionately positive impact on manufacturing businesses.
Learn more about how our ESG, sustainability and climate reporting services can help you
1 https://www.grantthornton.com.au/insights/audio/the-current-economic-landscape-tariffs-and-impacts-on-australian-manufacturing-businesses/
