The new reality for Australian supply chains

As global sustainability regulations tighten globally, Australian businesses, especially those classified under Group 1, 2, or 3 entities, are navigating significant changes due to new mandatory climate-related disclosure regulations. While these regulations might initially seem like another compliance headache, they present a unique opportunity to transform supply chains for the better. Procurement and ESG leaders are now tasked with the dual challenge of ensuring sustainability and compliance while also delivering value.

With a strategic approach, these changes can be leveraged to build more resilient, transparent, and future-ready operations.

Why supply chains are in the spotlight

Supply chains are at the heart of sustainability reporting. In many industries, Scope 3 emissions—those generated by suppliers and logistics partners—account for more than 90 per cent of a company’s total carbon footprint. That means procurement, logistics, and supplier engagement are now central to regulatory compliance.

Additionally, companies are increasingly being held accountable for the actions of their suppliers. This shift requires a new level of visibility, collaboration, and governance across the value chain.

Understanding the impact of increasing sustainability regulations

From the EU’s Corporate Sustainability Reporting Directive (CSRD) to Australia’s own climate disclosure mandates, regulations are evolving rapidly. For Australian companies, especially those with global supply chains, this means navigating a complex and often overlapping regulatory environment.

According to Gartner® (2024), “outlined below are some key characteristics for the three types of sustainability regulations and how they impact supply chain leaders.”

“Disclosure regulations require the enterprise to report its impact on material issues, and to report the impact of material issues on the organisation.”

These regulations focus on transparency, requiring companies to report on their environmental and social impacts. Examples include climate-related financial disclosures and Scope 3 emissions reporting.

For supply chain teams, this means:

Collecting and aggregating data from suppliers, e.g. emissions, labour practices
Reporting on progress toward sustainability goals
Ensuring data quality and audit readiness.

While these rules don’t mandate operational changes, they do require a robust data infrastructure and supplier engagement to ensure accurate reporting.

“Due diligence regulations require enterprises to assess and improve the impact of the enterprise and its suppliers on society and the environment.”

These go a step further, requiring companies to identify, assess, and mitigate risks within their supply chains, particularly those related to human rights, environmental harm, and ethical sourcing.

Implications include:

Conducting supplier risk assessments and audits
Embedding ESG criteria into procurement processes
Establishing escalation and remediation protocols for noncompliance.

This shifts responsibility from passive reporting to active risk management, with procurement and legal teams playing a central role.

“Operational mandates require the enterprise to take action in its operations, pay a tax or financial penalty for its impact, or provide an incentive for contributing to environmental benefit.”

These are the most direct and prescriptive, requiring companies to change how they operate. Examples include regulations on packaging materials, emissions caps, and circularity requirements.

For supply chain leaders, this may involve:

Redesigning packaging to meet recyclability or material use standards
Modifying transportation modes to reduce emissions
Investing in circular economy practices, such as product take-back or reuse programs.

These mandates often require capital investment, cross-functional coordination, and long-term planning.

Strategic implications for Australian supply chains

For Australian companies, the challenge is not just compliance—it’s managing the cumulative burden of these regulations across jurisdictions. Many supply chain leaders are responding reactively, addressing each regulation in isolation. But this approach risks draining resources and creating inefficiencies.

Instead, Gartner states that supply chain leaders “should consider a long-term approach to sustainability regulations that minimises the impact on existing resources, while still ensuring compliance and turning sustainability into a competitive advantage.”

Gartner also recommends:

“Build a foundational understanding of sustainability regulations affecting the supply chain by reviewing disclosure, due diligence and mandate regulations.
Turn sustainability into a competitive advantage and preserve resources by creating a long-term, intentional strategy for sustainability regulations.”

Embedding sustainability into supply chain strategy

To meet these challenges, leading organisations are taking a proactive, strategic approach. Here’s how:

1. Obtain a clear view of the regulatory landscape

Start by sorting the relevant regulations you’re dealing with, grouping them by type (like disclosure, due diligence, or operational), and where they apply. Then, pull together a simple matrix or tracker that shows what each one requires, when it’s due, and which teams are involved. This is a great way to spot duplication, avoid double-handling, and keep everything aligned across your supply chain.

2. Build cross-functional governance

Sustainability reporting is no longer just a finance or legal issue. It requires input from procurement, operations, IT, risk, and sustainability teams. Use a RACI framework (Responsible, Accountable, Consulted, Informed) to clarify roles and streamline decision-making.

3. Invest in digital infrastructure

Manual compliance processes are unsustainable. Leading companies are adopting compliance management platforms that automate data collection, track regulatory changes, and generate audit-ready reports. These tools not only reduce risk, but they also free up teams to focus on strategic initiatives.

4. Engage suppliers early

Suppliers are critical partners in achieving sustainability goals. Start by setting clear expectations, communicating your sustainability priorities and providing tools or resources to help suppliers align with them. Also, embed sustainability into your procurement process. This means going beyond price and quality when evaluating suppliers. For example, you might include environmental or social performance metrics in your supplier scorecards, or seek disclosures on emissions, labour practices or material sourcing.

5. Treat compliance as a value driver

Rather than viewing regulations as a cost, treat them as a catalyst for innovation. Companies that lead on sustainability are better positioned to attract investors, win customers, and build resilient supply chains.

The bottom line

Sustainability regulations aren’t going anywhere, and they’re only getting more detailed. But with the right approach, you don’t have to just keep up; you can get ahead.

By embedding sustainability into everyday supply chain decisions, using the right tools, and getting teams working together, you can turn compliance into something that actually adds value.

Not sure where to start? Our team can help you figure out how ready you are for the latest sustainability reporting requirements and what to do next. Contact us today.

Gartner, How Sustainability Regulations Are Impacting the Supply Chain, 13 December 2024