Supply chains, regulators struggling with net zero goals: KPMG

The ‘rapid acceleration in ambition’ in the move towards net zero in Australia at government level has left both supply chains and regulators ‘struggling to keep up’.

Businesses in Australia need to step up their actions if the country is to achieve its net zero targets, KPMG said, warning supply chains and regulators were “struggling to keep up” with the pace of change required to hit green goals.

The latest KPMG global Net Zero Readiness Index, released on Thursday, says Australian businesses need to go “further faster” to get to net zero.

The co-leader of KPMG’s Global Climate Policy Advisory business, Barry Sterland, said there had been a “quantum leap” in Australia’s legislative architecture” to achieve the country’s net zero targets since the election of the Albanese government in May 2022.

This included targets to reach net zero by 2050, and interim carbon reduction targets with supporting laws, targets, regulations, and initiatives.

But he said the “biggest challenge” for Australia was now the speed of change required to meet those targets.

Mr Sterland said delivering on goals required would be challenging given the starting level.

“You would not start from here,” he said.

The “rapid acceleration in ambition” in the move towards net zero in Australia at the government level had left both supply chains and regulators “struggling to keep up”.

More work would be needed to deliver on the government’s plan to have specific emission reduction plans for six sectors as part of the process for developing new targets for 2035.

“These plans are likely to herald further targets and changes in the policy framework,” Mr Sterland said. “Firms with strong decarbonisation plans are likely to fare better in this evolving framework.”

The report examines the progress in 24 countries in reducing the greenhouse gas emissions that cause climate change and discusses their preparedness to achieve net zero emissions by 2050.

“The report captures achievements during 2021 and 2022, a period which has seen many countries – including Australia – taking steps in the right direction towards net zero, even if globally there is a long way to go,” Mr Sterland said.

“We are seeing positive action towards net zero in 2023 and the ultimate target of 2050, but as the report shows, there is an urgent need to build on this action.”

Australia was among a number of countries which had announced “significant new policies” to support decarbonisation in recent years, including the Inflation Reduction Act in the US and REPowerEU in Europe.

Mr Sterland said Australia was now considering whether it would follow the European Union’s move to introduce a carbon border adjustment mechanism.

KPMG Australia’s partner in charge of Climate Change and Sustainability Services, Adrian King, said the proposed introduction of mandatory climate reporting in Australia was “reinforcing the need for business to improve their net zero planning”.

The report notes that the International Energy Agency is predicting that clean energy will receive $US1.7 trillion of investment globally in 2023.

Mr Sterland said the EU’s proposed carbon border adjustment mechanism (CBAM) was “an important step towards net zero”.

“It will require affected companies importing specified goods into the EU to buy certificates with prices based on the EU ETS weekly auction price, adjusted for any recognised mandatory carbon price effectively paid in the country of origin.

“The intention is that importers will pay the same for the carbon emissions required to produce goods as producers within the EU, creating a level playing field and preventing carbon leakage. Over time, border adjustments will reinforce the importance of low carbon production as a source of competitive advantage.”

The report notes it is unlikely Australia will introduce nuclear electricity generation.

While Australia is planning the development of offshore wind projects, it says they are unlikely to contribute significantly to the energy mix until the 2030s.