ESG Impact: What you need to know - April 2025
This month Westpac IQ’s ESG Impact explores measures to reduce embodied carbon from buildings and infrastructure, a new net-zero framework for the global shipping industry, an innovative recycling initiative for aluminium cans, plus the latest plan for soft plastics, and more.
POLICY
Cutting embodied carbon
A new report from the Australian Sustainable Built Environment Council (ASBEC) provides a policy framework for reducing upfront embodied carbon emissions, driven by site activities and materials used during buildings and infrastructure construction. ASBEC’s report states that to achieve national net-zero commitments, the Australian built environment will need to reduce its embodied carbon emissions by at least 60 per cent by 2035, advising a systemic approach across the sector is needed to achieve this.
Why does it matter?
Embodied carbon from buildings and infrastructure currently accounts for 10 per cent of Australia’s national emissions and the rapid decarbonisation of the electricity sector means that up to 85 per cent of a building’s lifetime emissions will be from embodied carbon by 2050 if no action is taken. While strategies to reduce emissions in the built environment have previously focused on operational emissions, which accumulate over time, ASBEC’s report focuses on upfront embodied carbon due to its measurable, verifiable and significant impacts.
The report continues the work already underway by NABERS (National Australian Built Environment Rating System). Together with the Green Building Council of Australia (GBCA), NABERS recently developed an embodied carbon rating tool. The tool enables eligible new buildings and partial rebuilds to measure, verify, and compare their upfront embodied carbon with similar buildings.
New net-zero framework sets sail
The International Maritime Organisation (IMO) has taken an important step toward reducing the environmental impact of the global shipping industry with the approval of net-zero regulations. With measures including a new fuel standard for ships and a global pricing mechanism for emissions, the IMO Net-zero Framework is the first in the world to combine mandatory emissions limits and greenhouse gas (GHG) pricing across an entire industry sector.
The framework is expected to be formally adopted in October this year before coming into force in 2027. It will be mandatory for large ocean-going ships over 5,000 gross tonnage. These ships emit 85 per cent of the total CO2 emissions generated from international shipping.
Under the draft regulations, ships will be required to reduce, over time, their annual greenhouse gas fuel intensity (GFI), which refers to how much GHG is emitted for each unit of energy used. Ships with emissions exceeding GFI thresholds will need to acquire units in the form of Flexible Compliance Units (FCU) that can be exchanged by operators, or GFS Remedial Units (GRU) which are units representing one ton of CO2e provided by the IMO. Those using zero or near-zero GHG technologies will be eligible for financial rewards.
Why does it matter?
A heavy emitting industry, shipping contributes approximately 2 per cent of annual global GHG emissions and the net-zero regulations aim to reduce its environmental impact. In addition to the measures to reduce GFI, the framework includes a carbon pricing mechanism, with funds aiming to support innovation, research, infrastructure and transition initiatives in developing countries.
Australia has an opportunity to play an important role to support the IMO’s regulatory developments. The Federal Government is examining future opportunities for green shipping corridors and international partnerships as part of its Maritime Emissions Reduction National Action Plan (MERNAP). In addition, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Maritime and Port Authority of Singapore (MPA), on behalf of the governments of Australia and Singapore, have recently selected 8 projects for funding as part of a $20m initiative to help reduce emissions in the maritime sector. The eight projects selected for funding cover a range of activities, including innovations in the supply, transport, storage, dispensing and maritime utilisation of hydrogen, ammonia and methanol, as well as safety and environmental monitoring, and electrification.
INDUSTRY
Cans to cut carbon
A new industry alliance is seeking to highlight the recycling potential of aluminium cans by trialling new packaging that contains a higher recycled aluminium content low-carbon primary aluminium. Byron Bay-based Stone & Wood Brewing Co has teamed up with its supply chain partners Visy, Novelis and Rio Tinto on the project, which aims to produce an estimated 15 million specially-marked ‘Re-In-Can-Ation’ cans over the next 18 months. Stone & Wood estimates that this is the equivalent of reducing carbon emissions by 1,235 tonnes when compared to the same quantity of their cans produced in 2023.
The brewery estimates that the new cans, which will contain an average of 83 per cent recycled aluminium, will generate 59 per cent lower carbon emissions than its previous 375ml cans. The new cans will also contain low-carbon primary aluminium sourced from Rio Tinto’s Bell Bay aluminium smelter in Tasmania.
Why does it matter?
The global aluminium industry contributes approximately 2 per cent of GHG emissions, which is equivalent to about 1.1 billion tonnes of CO2. Modelling from the International Aluminium Institute (IAI) predicts a demand growth rate of 2 per cent per annum and predicts a 20 per cent increase on today’s primary aluminium production rates by 2050.
Recycling and resource efficiency is one of three pathways identified by the IAI to decarbonise the aluminium value chain. In Australia, only 64 per cent of aluminium cans are being recycled, but the metal has the unique benefit of being able to be recycled almost infinitely. IAI data shows that, on a global average, the recycling of aluminium products emit 0.6 tonnes of carbon dioxide equivalent (CO2e) per tonne compared to 15.1 tonnes of CO2e per tonne for primary aluminium.
INNOVATION
Collaboration may bring circularity to soft plastics
Soft-plastic recycling has presented challenges in recent years, but a collaboration between Viva Energy and waste management and resource recovery company Cleanaway may result in a circular solution.
The companies have completed a pre-feasibility study for the development of Australia's first large-scale advanced soft plastics recycling facility using Cleanaway’s collection infrastructure and Viva Energy’s refining and polymerisation capabilities. A Memorandum of Understanding, signed this month, will see the project move to a 12-month feasibility and engineering study for both the sorting of plastic and its transformation into pyrolysis oil, which will be used as a feedstock for food-grade plastic resin.
The Front-End Engineering and Design phase is expected to start next year, once details of the Australian Government’s packaging regulation reform, including Extended Producer Responsibility (EPR) scheme, have been finalised.
Why does it matter?
In 2018, Australia set 2025 National Packaging Targets to create a sustainable pathway for managing packaging. The Australian Packaging Covenant Organisation (APCO) is responsible for delivering these targets, which apply to all packaging made, used, and sold in Australia. Despite advancements towards some targets, plastic packaging recovery continues to be a challenge, with only 19% of plastic packaging being recycled or composted in 2022-2023, compared to the 70% target set for 2025.
Based on statistics provided by the Australian government, “if all landfilled packaging had been recycled in 2020–21, we could have reduced national greenhouse gas emissions by about 2.2 million tonnes. This is equal to removing 740,000 cars from the road per year.” With this in mind, the Australian Government is working to reform the regulation of packaging by 2025, to ensure packaging in Australia is designed in-line with circular economy principles. The collaboration between Viva Energy and Cleanaway could provide an important solution to support the achievement of Australia’s objectives for plastics recycling going forward.
Science among the vines
Australia's largest wine company, Treasury Wine Estates (TWE), has teamed up with CSIRO to develop a new breed of climate-resilient and mildew-resistant grapevines.
Like much of the agriculture sector, the wine industry is vulnerable to changing weather patterns, which can create favourable conditions for mildew outbreaks. The new grapevines, planted at Wynns Coonawarra vineyards in South Australia, combine genetics from TWE’s heritage vines in Coonawarra and Barossa Valley with mildew-resistant traits developed by CSIRO.
Powdery and downy mildew costs the Australian wine sector an estimated AUD 160 million a year in management expenses and production losses. CSIRO scientists say that breeding mildew resistance into grapevines may give future grapes a genetic advantage to withstand these disease-causing pathogens.
Why does it matter?
Australia is home to more than 2,000 wineries and the wine industry contributes more than AUD 45 billion annually to the Australian economy. Climate change is already impacting the industry through changes in grapevine growth and development stages, as well as changes in harvest dates, and it faces significant challenges in managing grapevine disease sustainably while also dealing with the increasingly variable growing conditions.
In addition to mildew-resistance, the new vines planted at Wynns are also expected to require fewer inputs, such as the application of fungicide sprays. This innovation serves as inspiration for how science can be used to bolster climate adaptation for the broader agricultural industry.
WESTPAC IN ACTION
Carbon market progress
Some of Australia's leading minds share their views in the 2025 Carbon Market Institute (CMI) Westpac Carbon Market Report, which outlines the challenges facing hard-to-abate industries and how banks can support them. The report also tracks the progress and impact of carbon markets as policymakers, governments and businesses seek to address climate change, biodiversity loss and social impact. Read the report here.
Westpac joins Nationwide House Energy Rating Scheme
Westpac has become the first major Australian bank to join the Australian Government’s trial of the Nationwide House Energy Rating Scheme (NatHERS) for existing homes, which offers home energy ratings to help Australian households better understand their home’s energy performance, identify cost-effective upgrades and reduce energy bills. Select Westpac customers applying to refinance or top up their mortgage may be invited to take part in the trial. Participants will receive a free home energy rating certificate from an expert assessor to identify where energy efficiencies can be made and to inform home improvement plans for energy savings and increased comfort.
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