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Aust manufacturers face tough environmental challenges

27 September, 2007

A new study carried out by the Australian Industry Group has found that many Australian businesses are concerned about how they are going to cope with the growing demands to reduce greenhouse emissions whilst remaining globally competitive. By Rodney Appleyard.

Heather Ridout, the chief executive for the Australian Industry Group, says that despite the attention being given to this issue by the Government, media and the community, there has been little research done into environment management practices by the industry.

Environmental Sustainability and Industry, Road to a Sustainable Future is the largest study undertaken of industry practice in Australia. It was carried out by our organisation and it reports on the activity of over 800 manufacturers and commercial constructors, with a total turnover of around $41 billion, representing 10.5% of all activity within the two sectors.”

She adds that the report shows that the Australian industry is at the beginning of its journey towards environmental sustainability.

“Companies are deeply concerned about lowering greenhouse emissions and are taking steps to reduce their consumption of electricity, gas, water and waste. Industry shares with the wider community an understanding of its obligation to be socially responsible, even if it involves some additional costs. As the report highlights, there are many opportunities for companies to lower costs and improve competitiveness, by adopting environmentally sustainable practice. But there are other cost considerations, and we need to be mindful of their implications for industry competitiveness.”

Ridout adds that companies clearly need more information on how they can improve sustainable practices.

“They also need a better understanding of an emission trading scheme and they need better incentives, particularly for small to medium firms.”

Sustainability Victoria supported Ai Group in completing this important study, which Ridout hopes will prompt more businesses to take the journey on the road to environmental sustainability.

Geoff Mabbett, the chief executive office for Sustainability Victoria, says that Nicholas Stern’s 2006 review showed that it is possible for Australia to deliver significant reductions in greenhouse gas emissions at an affordable cost, whilst maintaining strong economic growth.

“For business to manage climate change, we need to maintain the flow of quality research and practical information, helping them adapt while simultaneously improving their competitiveness. The National Survey of Environmental Sustainable Practices and Industry is so significant because it provides us all with an insight into where Australian’s business community is today; what actions businesses are already taking and what opportunities exist. Not surprisingly, the report reveals that most companies are unsure about the implications of climate change on their bottom line; yet optimistically see climate change as an opportunity to promote their commitment to social responsibility while improving their energy efficiency and save on costs.”

Mabbet adds that alarmingly only 10% of companies said they were informed enough to manage risks associated with climate change.

“The report is a stepping stone for those organisations that accept the responsibility to contribute to the reduction of carbon emissions."

Out of the 810 companies in the manufacturing construction sectors that took place, they employed over 56,300 people between them.

Management Attitudes

The survey found that 26% of businesses regard the highest risk from climate change to be market risk, such as a loss of competitiveness from higher costs. In contrast, 56% of companies saw opportunities from climate change to promote their company as socially responsible and to improve energy efficiency and lower costs. About 45% of companies are undecided as to whether climate change is a net loss, gain or neutral for business.

Beyond disposal and recycling of products, most companies believe they were poorly informed about strategies and approaches to managing climate change and greenhouse gas emissions. Only one in ten companies felt they were well informed about managing the risks associated with climate change.

Companies identified the management of electricity to be the most critical priority, which is consistent with electricity being the largest resource consumed in the production process (relative to gas, water and fuel). 45% of companies agreed on this.

Interestingly enough, 78% believe they had a responsibility to contribute to a reduction in carbon emissions, even if it adds some costs to the business. However, only 14% of companies stated they understood the concept of an emission trading schemes (ETS) well or very well. Just under half of the companies had a poor understanding and around 40% had no understanding.

Management Practices

Around about 40% of companies interviewed indicated they had taken one or more actions to lower greenhouse gas emissions. In regards to large firms, about 70% had taken one or more actions to lower their emissions. About one in three firms have undertaken audits on electricity and other resources over the last three years.

In regards to action on electricity, the survey found that 15% of firms have initiated changes that have contributed to savings in electricity usage in 2005/6. The percentage of firms expecting to achieve savings in 2006/7 and the following year rises to 20% and 22% respectively. The savings in electricity usage was the equivalent to 5.8% of electricity costs in 2005/6 to 6.2% in 2006/7 and 6.6% in 2007/8.

These saving practices include:


·        Turning off lights and appliances when not in use.

·         Installing energy efficient globes; installing skylights and improved lighting systems.

·         Power factor correction.

·         Putting time clocks on heaters.

·         Acquiring more efficient equipment and plants.

·         Moving to a more eco-efficient site and exploring installation of a co-generation plant.

·        Lowering air conditioning use.

·        Rewiring of factory premises.

·        Reducing air leaks from compressors.

·        Changing manufacturing processes.

·        Using solar power and introducing off-peak manufacturing.


Gas was considered to be a less important energy source, with only two out of every three firms with installed gas. As a percentage of sales costs, excluding non-users, it averaged 0.5% of sales


Just over 4.8% of companies have initiated changes that have contributed to savings in gas usage. These saving practices include:


·        Introducing new technology and equipment.

·        Reducing steam loss from boilers.

·        Improving boiler efficiency.

·        Improving roof insulation to reduce heat loss.

·        Reducing bottle storage inefficiencies.

·        Reducing gas heating temperature.

·        Using waste heat from air compressors.

·        Ensuring industrial gas bottles are turned off.

·        Checking for leaks in bottles.

·        Monitoring consumption and switching from gas to more efficient electricity powered furnaces.


In regards to solid wastes, the cost of managing this is low relative to other energy and related resources, amounting to 0.3% of sales. On a national basis, solid waste management was calculated to cost around $96 million. Recylcing of solid waste is common practice among many firms, with one in every two companies undertaking recycling.


Just under 15% of companies have initiated changes that have contributed to savings in solid waste generated in 2005/6. The savings in solid waste generated was the equivalent to 7.5% in 2005/6, rising to 7.6% in 2006/7 and 8% in 2007/8. If applied nationally, these savings are calculated to be $1.1 million in 2005/6, rising to $1.4 million in 2006/7 and $1.7 million in 2007/8.


Examples of solid waste saving practices include:


·        Improved process control.

·        Lean manufacturing.

·        Recycling all waste.

·        Ordering goods bulk packed.

·        Returning all pallets and packaging to supplier.

·        Tracking wastes from building sites.

·        Waste sorted in paper, plastic, glass and metal.

·        Establishing a total waste management plan.

·        Filtering of acid wastes and improving the design of products.


So although many companies large and small have gone a long way towards reducing emissions in their individual companies, there is still a big need for education on the subject and action by further companies. As Ridout and Mabbett both said, it is good that some companies have taken the initiative, but there is still a long way to go in the journey towards meeting all of the targets. Hopefully this survey will prompt more companies to follow the example of those who have already taken action.  

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