Skip to main content Skip to main navigation
Skip to search input

Growing the links in sustainable supply chains

How are organisations making their supply chains future-fit on the pathway to a more sustainable future? A recent Women in Sustainable Finance panel event at Westpac’s Melbourne HQ uncovered some innovative ideas.

Supply chains are emerging as the new frontier for social and environmental sustainability. With stakeholders demanding greater transparency and performance, how can you build a business case for improving supply chain sustainability? And what are the emerging trends?

 

These were just some of the questions raised at a recent Women in Sustainable Finance (WISF) panel discussion, hosted by Westpac at its Melbourne headquarters. An industry initiative backed by the Clean Energy Finance Corporation, WISF aims to promote and support women in the sector through a range of networking, educational and leadership opportunities for industry participants.

 

Moderated by Westpac Institutional Bank’s Director of Sustainable Finance Kirsty McCartney, the discussion included insights from corporate and industry sustainability experts and investors: Jessica Storer, Sustainability & External Affairs Manager at renewable energy generator Pacific Blue; Sonya Rand, Head of Sustainability at retailer Bunnings; Andrea Makris, Head of Business Engagement, Infrastructure Sustainability Council; and Daniela Jaramillo, Head of Sustainable Investing – Australia for global investment and asset manager, Fidelity International

 

Each shared their thoughts on the opportunities and challenges across supply chains.

 

Exploring the supply chain

The event kicked off with Storer, Rand and Makris discussing supply chain sustainability in their roles and how they address the most material areas.

 

Storer explained that while the renewables industry is quite progressive, Pacific Blue’s workforce of engineers, accountants and lawyers tends to be conservative and risk averse.

 

“So, what has worked for us is trying to back-solve those sustainability issues by framing them through a lens that resonates with our business and key stakeholders, which is cost control, risk mitigation, efficiency and good governance,” she said.

 

For Bunnings, the supply chain is a significant part of its overall sustainability strategy.

 

“We look at supply chain through two different lenses,” Rand explained. “The parts that would impact the performance of our business, and the parts that would make an impact either on people or the natural or physical environment.”

 

Bunnings has a mature modern slavery and ethical sourcing program in its supply chain, which is largely driven by stakeholder expectations and regulatory controls, Rand observed.

 

“We’ve evolved beyond what you'd call compliance-focused to more of a people-centred or worker-centred focus. We support a number of programs in addition to compliance audits, monitoring and supplier assessments, to engage directly with the workforce in their own language, especially for international suppliers. Programs are administered in a way to scale that impact as well.”

 

Rand added that Bunnings is also seeking ways to improve the circular economy. “We're looking at the design of products from the very start working directly with our suppliers, and we think right through to the end of life for those products.

 

“We're also looking at the impacts of climate change and energy emissions in the production of goods that we buy,” she said. “We've got a lot of experience in managing the emissions intensity of our own operations, and that's a good opportunity for us to engage with our suppliers and share information on how best to reduce emissions as an industry.”

 

“Given the scale of the number of products we buy, the number of suppliers we have and where they're located, it's quite a significant challenge to try and grapple with that. But we need to face into it because it's part of our business.”

 

Makris explained the Infrastructure Sustainability Council’s role in connecting project teams with more sustainable options.

 

“We want to see infrastructure project teams get to a point of measuring and improving on their baseline, or achieving net impact, or even leaving a positive legacy through the way that they engage suppliers,” she said.

 

The decarbonisation challenge

The conversation moved to decarbonisation, with Jaramillo addressing its intersection with supply chain sustainability.

 

“Fidelity International is a global asset manager and this positions us in a very privileged place, because we're able to think about every company we invest in and how they fit in the value chain,” she said. “When it becomes really interesting is when we're able to identify companies that we hold who are suppliers to other companies that we hold.

 

“We really try to take a systemic look at all our holdings, whether it’s when we're thinking about investments or our stewardship activities”

 

Rand outlined the challenges in measuring decarbonisation risks and opportunities in Bunnings’ supply chain. While the business has a good understanding of emissions associated with the goods and services it purchases, the way customers use its products also impacts its decarbonisation efforts.

 

“That was a significant light bulb moment for us,” reported Rand. “Yes, we need to focus on decarbonising our logistics supply chain – the shipping, the trucks, the transport, all of those things – but our product range [also] is dictating our emissions profile due to customer use.”

 

Pacific Blue’s Storer added that as the renewable generator’s Scope 1 and 2 emissions are low, Australia’s impending mandatory climate reporting will ensure a greater focus on its Scope 3 emissions.

 

“It’s a good thing, and it's going to be highly complex,” she said. “I do think that data integrity around Scope 3 emissions is something that we all have to wrap our heads around.”

 

Makris touched on the significance of infrastructure’s embodied carbon and the challenge of reducing carbon emissions “when an asset is already built and you're operating it”. 

 

“That's when you have the least opportunity to do anything,” she pointed out. “The greatest opportunity exists in the planning stage. We encourage the industry to experiment with low-carbon materials and, when alternatives are not possible and you can't completely decarbonise, then think about offsets.”

 

Jaramillo turned to the importance of investing in future technologies and inputs that support decarbonisation.

 

“The demand for critical minerals is not only going to increase, it will be transformational for some minerals and metals, this is because the metal intensity for clean technologies is much higher for low carbon technologies,” she said. “For example, an internal combustion vehicle has six times less the amount of minerals requirements than an EV. To produce the same amount of energy at the utility level from gas it takes 11 times less minerals than with a wind turbine”.

 

“Looking at this data, there can be important opportunities here as there is structural demand. The challenge is understanding which are the minerals that are likely to benefit from this transformation. This involves not only understanding demand and supply dynamics in this cyclical industry, but also understanding new technologies, permitting and social license risks, as well as geopolitics and different regulatory regimes.  

 

The business case for supply chain sustainability

As the panel discussion moved on, McCartney turned the conversation towards positive business outcomes and the importance of being able to make arguments internally and to stakeholders about the positive impact on a business from improving supply chain sustainability.

 

“For example, are you looking at managing risk? Is it cost optimisation? Or is it something completely different?” she asked the panel.

 

Rand noted that while Bunnings has seen cost optimisation and commercial efficiency gains since it set its procurement target for 100 per cent renewable electricity, it also considers risk management and mitigation, as well as broader opportunities, such as customer loyalty, brand reputation, employee retention and the culture of the organisation.

 

“When you make commitments around an initiative for a range of reasons, not just because it's going to save you money, it's seen as a value proposition for the long term. When cost optimisations are done, they’re done, so you need something to sustain it beyond that, and that's why we look for other indicators.”

 

Jaramillo added that the business case for supply chain sustainability is not always obvious.

 

“It’s not always a win-win,” she said. “And in those situations, it's important for regulatory bodies to step up. An example of this is with the EU Battery Legislation where the onus is not only on battery producers but also industries like the automotive to look down their supply chain and ensure proper due diligence on ESG issues such as carbon intensity and human rights. 

 

“From my perspective, it's great if we can find the business case, but there is a really important role for regulators and industry voices to help set where the floors    and minimum expectations are.”

 

Social inclusion and wider wellbeing

The importance of social procurement and stakeholder expectation was also raised, with Makris pointing to the Federal Government's Measuring What Matters Statement, which is the first iteration of Australia's national wellbeing framework. 

 

“It’s important that organisations look to that framework for guidance, but the beneficiaries of social value are local communities. Where infrastructure development is investor-led and policy driven, the beneficiaries are very much the local people.”

 

Storer added that local communities should also represent much of the workforce for renewable projects, but this can present challenges.

 

“The challenge we have found in trying to set targets around minimum workforce from local communities is the availability, capability and capacity of that community to feed into the project,” she noted. 

 

Priorities for future focus

McCartney concluded the discussion with a question about the next area of focus for supply chain sustainability.

 

Jaramillo hopes to see green or ethical premiums materialising, that way the business case for sustainable supply chains is strengthened. For Storer, decarbonisation will be a key focus for Pacific Blue as energy demand increases.

 

The circular economy is top of mind for Makris. “If you’re building something, what’s going to happen at the end of it? Think about that before you start.”

 

For Rand, biodiversity and natural systems are growing in focus for the retail sector. “We've already got our heads around mandatory climate-based reporting and I think it's quite inevitable that nature as a focus will follow quite swiftly – but that’s not the only reason that we should be thinking about it,” she insisted. 

 

“We're reliant on natural systems in a lot of our organisations and a lot of the lifestyles that we enjoy. So, I really see nature as the next big piece.”

Browse topics

Disclaimer

©2024 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”).  References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.

 

Things you should know 

We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.

This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.

 

Disclaimer

This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract.  To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements.  The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts.  Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.  

 

Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument. 

 

Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.

 

Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.

 

Additional country disclosures:

Australia: Westpac holds an Australian Financial Services Licence (No. 233714).  You can access  Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact.  To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.

 

New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .  

 

Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.

 

U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM.  All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269.   Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.

 

The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.

 

UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586).  The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request. 

Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation.  WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’).  WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483.  In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.  

This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”.  Westpac expressly prohibits you from passing on the information in this communication to any third party. 

This communication contains general commentary, research, and market colour.  The communication does not constitute investment advice.  The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.

Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.

To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.