March 2023 has brought major developments that will directly impact mining, construction, and industrial businesses. Sustainability is now an unavoidable requirement in procurement, insurance policies are increasingly tied to ESG risk management, and new climate legislation is setting higher expectations for emissions reductions.
This month’s updates focus on:
- ESG Requirements in Procurement: Many government and corporate contracts now include strict sustainability criteria, reshaping the bidding process.
- ESG in Insurance Coverage: Insurers are adjusting premiums based on environmental and social risk factors, with companies facing higher costs if they lack strong ESG performance.
- Climate Legislation Updates: Australian states are implementing new emissions reduction targets and carbon reporting obligations, demanding urgent compliance from businesses.
ESG Requirements in Procurement
Procurement policies across Australia have evolved to include rigorous sustainability benchmarks. Both government tenders and private-sector contracts are requiring businesses to demonstrate environmental responsibility, carbon reduction initiatives, and ethical supply chain practices before they can be considered.
For example, the New South Wales government has updated its Sustainable Procurement Policy, mandating that all infrastructure projects over $50 million must include a minimum 15% reduction in carbon emissions through sustainable materials and processes (NSW Government, 2023).
This shift means companies that cannot prove their sustainability credentials will be at a competitive disadvantage. Businesses that invest in greener practices, such as low-carbon concrete, renewable energy use, and waste minimisation strategies, will have a better chance of winning contracts.
Case Study: Lendlease, a leading construction firm, successfully secured a $600 million contract for a major Sydney infrastructure project by meeting the government’s ESG procurement criteria, including using 50% recycled construction materials and 100% renewable energy on-site (Lendlease Sustainability Report, 2023).
ESG in Insurance Coverage
Insurance providers are increasingly incorporating ESG factors into their risk assessments, influencing premium costs and coverage eligibility. Businesses with weak sustainability strategies, poor climate risk management, or exposure to social controversies are facing higher insurance costs—or, in some cases, refusal of coverage.
Several major insurers, including IAG and QBE, have introduced ESG-adjusted premiums, rewarding companies with lower climate risk exposure. This means businesses that fail to meet sustainability standards may see insurance costs rise by up to 20% annually (QBE ESG Risk Report, 2023).
Case Study: A large Australian mining company saw its insurance premium increase by 30% after failing to meet climate adaptation and biodiversity conservation expectations. The insurer cited the company’s lack of a clear net-zero strategy and increasing exposure to water-related risks as key factors (Australian Financial Review, 2023).
Climate Legislation Updates
Several Australian states have introduced more aggressive emissions reduction policies, affecting mining, construction, and heavy industries.
- Victoria: The state government passed new legislation requiring all businesses emitting over 100,000 tonnes of CO₂ annually to submit detailed decarbonisation plans (Victoria State Government, 2023).
- Queensland: The state introduced higher penalties for environmental non-compliance, with fines increasing by 40% for businesses failing to meet emissions targets (Queensland Government, 2023).
- Western Australia: A new carbon offset policy requires mining companies to offset at least 30% of their operational emissions using accredited projects (WA EPA, 2023).
Case Study: Rio Tinto has announced a $1.5 billion investment in decarbonisation initiatives to comply with these updated regulations. This includes transitioning mining sites to solar and wind energy and integrating electric haul trucks into operations (Rio Tinto Sustainability Report, 2023).
Strategic Imperatives for Executives
- Revise Procurement Strategies: Ensure your business meets updated ESG procurement criteria to remain competitive in tender processes.
- Assess Insurance Risks: Engage with insurers early to understand ESG-based premium adjustments and mitigate rising costs.
- Prepare for New Climate Legislation: Align operations with new emissions reduction laws and invest in sustainability initiatives to ensure compliance.