8 January 2019

Australian firms see financial rewards from making supply chains and operations greener

  • Four out of five of Australian businesses want to meet common industry standards for sustainability
  • Two-thirds of believe environmental factors are the most important operational issues facing their business
  • One quarter are reappraising their supply chains to be more sustainable, driven by expectations of financial rewards

Two-thirds of Australian businesses believe environmental factors are the most important operational issues facing their business

Australian businesses are making sustainable changes to their operations and supply chains to create an advantage over competitors and boost financial performance, according to new research from HSBC.

Navigator: Now, next and how for business reveals that businesses recognise the commercial opportunities sustainability can bring. Additionally, with regulators and investors putting more pressure on companies to disclose their sustainability practices, four out of five goods exporters (83%) and slightly fewer services exporters (77%) want to meet common industry standards for sustainability that apply to their respective sectors.

“As well as taking action on the very real threat of climate change, a firm’s transition into more sustainable ways of operating can offer real financial benefits,” said Steve Hughes, Head of Commercial Banking, HSBC Australia.

“Companies are changing vendors to find an environmentally-friendly product, for example, or acting to minimise waste. This is helping them to innovate, reduce costs and even connect to the growing base of consumers who expect companies to offer ethical or sustainable goods and services.”

With around 80% of a company’s environmental impact found in its supply chain1, the green credentials of strategic suppliers and partners are critical factors in a firm’s performance and reputation.

The research shows that a quarter (24%) of Australian companies plan to introduce additional sustainability-related changes to their supply chains over the next three years.

Of the firms making ethical or sustainable changes to their operations, goods exporters are primarily motivated by the desire to improve revenues and financial performance (84%), while services exporters are driven by the prospect of increased cost efficiencies (86%).

In a separate report2, HSBC found that almost two-thirds (63 per cent) of Australian companies believe environmental factors are the most important operational issues facing their business, compared to a global average of 49 per cent.

Environmentally-sustainable management of natural resources and land use (22 per cent), along with energy consumption and its associated carbon footprint (18 per cent) were identified as the main sustainability issues facing business.

“Some of the main barriers that prevent Australian firms from introducing sustainability to their business or supply chains include the extra work and time involved to implement changes, a lack of understanding of what changes to make as well as access to capital,” said Mr Hughes.

“To promote the benefits of sustainability, we’re working with clients to introduce financing options for sustainable projects, offering advisory services or facilitating introductions to existing clients who’ve been on a similar journey,” he added.

1 CDP Supply Chain Report 2016 | 2017

2 The HSBC CMB Sustainability report 2018 examined the views of 1980 business decision makers across 13 markets, including 101 from Australia, and was conducted by TNS Kantar from June to September 2018. The report was designed to provide current context on companies’ level of engagement with sustainability and its commercial importance.