Transitioning the ASX
With the ASX 300 staring down the barrel of a 4.5-degree temperature rise, it is critical that Australia’s largest leading companies incorporate more sustainable practices into their business operations. At the RI Australia Conference 2023, representatives from ASX listed companies Mirvac, Wesfarmers and the A2 Milk Company unpacked ‘Transitioning the ASX: Company Insights into Progress towards Net Zero’ with Nathan Parkin, Investment Director and Co-Founder of Ethical Partners Funds Management.
The need for decarbonisation
Parkin, stated that many ASX 300 listed companies prioritise long-term investment in stranded assets. Unfortunately, the risks associated with this practice are still too often ignored in the pursuit of long-term profits. It is clear is that we need genuine decarbonisation to be enacted right across the economy, especially in areas like property, retail and food production.
Mirvac’s commitment to reduce Scope 3 emissions
Sarah Clarke, Group General Manager Sustainability at Mirvac, pioneered the incorporation of sustainability-driven goals in the property sector. In 2014, Mirvac set goals for net positive Scope 1 and 2 emissions, without relying heavily on offsets. These goals were revised in 2019 to completely phase out fossil fuels and transition entirely to renewable energy sources. Mirvac still intends to use a small number of offsets in the process. Mirvac aims to reach net positive Scope 3 emissions by 2030. The company plans to collaborate with its key supply chain partners to conduct research and development (R&D) to help reduce the impacts of concrete waste and prioritise in-house design to improve construction processes. Mirvac also plans to establish strict takeback agreements to reduce waste production, costs and risks associated with reduced onsite production times.
Clarke explained that Mirvac’s intentions are supported by the organisation’s culture and core values of being curious and bold, and putting people first. This means listening to, understanding and responding to customers and treating all people with respect. These values are shared across the organisation, with 93% of employees agreeing that the company is aiming to be a force for good.
A2 Milk Company’s plan to reduce greenhouse gas emissions
David Akers, Group Head of Investor Relations and Sustainability at A2 Milk Company, a prominent organisation in the dairy industry, discussed A2’s sustainability goals. The organisation’s business practices are heavily associated with an externality in greenhouse gas (GHG) emissions. In 2021, the A2 Milk Company set sustainability measures to achieve net zero Scope 1 and 2 emissions by 2030, and Scope 3 net zero by 2040. Backed by a supportive board and leadership group on climate action, the organisation was able to adopt more ambitious targets than its original 2050 Scope 3 net zero goals, whilst further supporting the company’s purpose to pioneer the future of dairy for good. “This emphasises our intentions to invest in the planet, people and leadership,” said Akers.
A2’s most notable and recent contribution to this was through a $270 million investment in the National Broadband Network (NBN), which was integrated into its climate policy. This investment has enabled the company to honour its ESG and sustainability commitments through its due diligence process by allowing the company to recognise any potential ESG-related risks and opportunities before conducting any future business activities. Also, similar commitments were integrated into A2’s revenue streams, allowing it to identify risks that may arise in future investment opportunities. Scope 3 emissions pose the biggest challenge for A2, given that 95% of its total emissions come from Scope 3 as the company does not directly own the cows or the farms. Thus, it is critical for A2 to work closely with its supply chain partners to take a holistic approach to reduce GHG. This would assist in transitioning towards more sustainable investment streams like its farmer grant programs, feed supplier partnerships and biomass boiler production.
Wesfarmers’ emission reduction methodologies and targets
Naomi Flutter, Executive General Manager Corporate Affairs at Wesfarmers, provided insights into diversified sustainability considerations for a conglomerate. Wesfarmers’ activities span across multiple industries such as retail, health, chemicals, industrial and safety and the company adopts divisional autonomy for its climate policies. This will allow Wesfarmers to work closely with its business divisions to establish standards that govern their respective climate policies. This in turn creates divisional adoption of these sustainability practices.
Wesfarmers’s most ambitious sustainability goals comes from its hard to abate sectors, such as chemical, energy and fertiliser (WesCEF). The organisation has encountered roadblocks in finding viable commercial decarbonisation methods. However, Wesfarmers does intend to reduce emissions by 30% in this field. With the implementation of piloted ESG policies and a mass adoption of carbon capture initiatives, supported by Government policy, Wesfarmers believes that it can achieve net zero emissions by 2050 for this sector. The biggest challenge that awaits Wesfarmer’s, in a Scope 3 sense, is their need to improve their emissions in the production of goods and services distributed to their customers. To reach Wesfarmers’ Scope 3 needs, Flutter spoke about the importance of revising production methods, including product design and use of recyclable material, recognising the incorporation of longevity repair and treatment for end-of-life.
Summary
These three companies exemplify the efforts necessary in working towards sustainability integration in business-as-usual practices. The methods required are multifaceted. Each company has encountered challenges in striving towards a net zero target. But they have set ambitious goals and targets, and assigned responsibility to individual leaders. They have also reorganised cultures within the organisations to continue the transition to net zero.
By Marco Polidori, Intern at RIAA.
If you attended the conference, please check your email for a link to view session recordings, to continue taking valuable learnings from RI Australia 2023, year-round.