Australia’s Coles Group 2026: From Operational Decarbonisation to Supply-Chain Transformation

Coles Group’s 2026 Sustainability Supplement shows a large food retailer moving from a broad corporate sustainability model toward a more structured system centred on climate, nature and circularity. The shift is significant because the company’s environmental footprint is dominated not by its stores but by the agricultural, manufacturing and logistics systems behind the products it sells. Coles operates more than 1,800 supermarkets and liquor stores, employs over 115,000 people and engages more than 8,000 suppliers, giving its sustainability policies potentially substantial influence across Australian food value chains.

FY2026 is the first reporting year under Coles’ FY26–FY30 Sustainability Strategy, organised around three strategic pillars: Climate, Nature and Circularity. The Sustainability Supplement sits within a wider reporting suite that includes the Annual Report, Corporate Governance Statement, Modern Slavery Statement and Economic Contribution Report, reflecting an increasingly segmented approach in which different sustainability matters are reported through specialised disclosure channels.

The regulatory significance of FY2026 is particularly evident in climate reporting. Coles published its first Climate Transition Plan and began mandatory climate-related financial reporting under Australia's AASB S2 framework. The Sustainability Supplement itself is prepared in accordance with GRI 1: Foundation 2021 and is supplemented by a GRI Content Index, UN Global Compact alignment and SDG mapping.

This creates two complementary reporting logics. AASB S2 focuses climate disclosure on financially relevant governance, risks, opportunities, transition planning and metrics, while GRI remains the principal basis for Coles’ broader impact-oriented sustainability reporting. Importantly, Coles should not yet be described as applying ESRS-style double materiality: its FY2026 materiality process is explicitly based on GRI and prioritisation of stakeholder concerns and actual or potential impacts rather than a formal ESRS double-materiality assessment.

Governance architecture and accountability

Sustainability oversight is integrated into Coles’ established corporate governance architecture. The Board approves strategic direction, including sustainability, while the Audit and Risk Committee assesses the adequacy of risk identification, prioritisation and management across both financial and non-financial risks. Management accountability rests with the Chief Commercial & Sustainability Officer working with the Executive Leadership Team.

Below this level, governance becomes more specialised. The Executive Sustainability Committee oversees implementation of the strategy and progress against external targets, the ASRS Steering Committee oversees Australian sustainability reporting requirements, and the Sustainability Steering Committee monitors sustainability performance.

This structure is relatively mature because it separates strategy execution, regulatory reporting and performance oversight. The next test is whether the governance architecture consistently drives difficult operational decisions when environmental objectives compete with affordability, sourcing availability or commercial performance.

Materiality approach and risk prioritisation

Coles conducts an annual materiality assessment in accordance with GRI 1. The FY2026 process combined a desktop review of internal and external information—including investor discussions, media analysis and customer feedback—with external stakeholder interviews previously facilitated by an independent consultant. The results were used to prioritise sustainability matters based on stakeholder views and evidence of actual and potential impacts.

Climate change remained the highest-priority issue. Other prominent topics included sustainable sourcing, healthy and affordable food, workforce health and safety, plastics and packaging, circular economy, human rights, biodiversity, food waste and diversity and inclusion.

The breadth of this list is appropriate for food retail, where sustainability risks extend upstream into agriculture and labour conditions and downstream into packaging, nutrition and consumer waste. However, as nature and supply-chain risks become more financially relevant, Coles may increasingly need to connect this GRI-based impact materiality process with the financial materiality processes used for statutory sustainability reporting.

Climate, supply chain, and social dimensions

Climate represents the most developed element of Coles’ sustainability framework. By the end of FY2026, combined Scope 1 and 2 emissions had fallen 82.6% from the FY2020 baseline, already exceeding the company’s target to reduce them by more than 75% by FY2030. The reduction reflects renewable electricity procurement, large-scale generation certificates, onsite solar, energy-efficiency initiatives and refrigeration upgrades; Coles states that it has not used carbon credits to achieve these reductions.

Yet this operational achievement represents only a small part of the climate challenge. Scope 3 emissions totalled 18.98 million tonnes CO₂-e and represented more than 90% of Coles’ total footprint, with 55.6% coming from Forest, Land and Agriculture activities. Beef alone accounted for 20.6% of Scope 3 emissions.

Coles wants 80% of suppliers by spend in specified Scope 3 categories to have science-based targets by the end of FY2029. At FY2026 year-end, 46.9% had Scope 1 and 2 science-based targets and 41.1% had targets covering Scopes 1, 2 and 3; the company explicitly acknowledges that progress is slower than anticipated and that it is currently not on track.

FLAG emissions also illustrate the challenge of translating targets into agricultural transformation. Coles targets a 30.3% reduction by FY2030 from FY2024, but in-boundary FLAG emissions increased 1.8% year on year, largely because of increased beef demand. Coles identifies data availability, supplier dependence and the limited commercial maturity of agricultural abatement technologies as constraints.

Nature is less mature but becoming more strategic. Coles identifies its principal nature dependencies and risks in upstream agriculture and seafood rather than direct operations, and its FY2026 seafood assessment considered elements of the TNFD framework. A more detailed seafood review identified biodiversity, water-quality, feed, bycatch, habitat and endangered-species risks and proposed strengthened due diligence in higher-risk supply chains.

Employment

Coles’ workforce strategy places significant emphasis on engagement and capability development. Its FY2026 employee engagement score increased by two percentage points from FY2025 and by 19 points since FY2019, maintaining a top-quartile position against the Australian benchmark, based on a survey with 67% participation.

Training is relatively operational and role-specific. During FY2026, 1,297 Department Managers completed the Leading Work programme, 117 Store Managers completed Leading Teams, more than 20,000 supermarket and liquor employees completed Foundation Skills training, and 6,756 specialist-skills completions were recorded.

Diversity disclosure is also relatively detailed. Women represented 42.4% of leadership roles, 3.4% of surveyed team members identified as Aboriginal or Torres Strait Islander, and 24.6% of leaders identified as culturally diverse. These metrics provide measurable indicators, although longer-term analysis should focus not only on representation but progression, retention and pay outcomes.

Health and safety

Health and safety is particularly material in large-format retail because risks range from manual handling and vehicle operations to psychosocial hazards and customer aggression. Coles’ SafetyCARE management system provides a group-wide framework, with safety performance reported monthly to the Board, Audit and Risk Committee, Executive Leadership Team and operational leaders.

The FY2026 Safety Index was 11.3% ahead of target, while TRIFR improved 8.8% year on year to 13.4. The company also completed 1,060 site-based safety assurance activities and updated 166 safety system documents and 34 risk assessments.

Notably, Coles treats workplace violence and aggression as a critical safety risk, deploying risk profiling, body-worn cameras, duress devices and de-escalation training in higher-risk stores. Psychosocial safety is also receiving greater attention: more than 99,500 employees completed psychosocial-risk training and more than 2,400 leaders received targeted mental-health training.

Product or service responsibility

For Coles, product responsibility combines food safety, nutrition, affordability and responsible marketing. During FY2026, 98% of eligible Own Brand products displayed the Australian Health Star Rating, and products rated 3.5 stars or higher represented 70.29% of Own Brand sales. Eighty-three per cent of eligible products met government Healthy Food Partnership reformulation targets, up from 81% in FY2025.

Food safety controls include supplier requirements, inspections, recall processes and employee training. Coles delivered more than 19,500 hours of food safety and quality training and reported one Own Brand product recall during FY2026.

Responsible marketing extends to children: Coles states that its policies restrict child-appealing characters on Own Brand products to products meeting its healthier criteria and that it follows Australian advertising codes prohibiting discretionary-food advertising targeted at children.

Philanthropy

Coles’ community contribution model is closely linked to its role in the food system. FY2026 community contributions totalled A$150.5 million under the Business for Societal Impact framework, including cash and product contributions, fundraising, volunteering and programme-management costs.

Food rescue represents the largest identifiable component. Coles reports the equivalent of 40.9 million meals donated through SecondBite and Foodbank, valued at A$105.7 million, while Christmas and winter fundraising raised more than A$3.7 million for SecondBite.

This approach has a dual sustainability function: it addresses food insecurity while redirecting edible surplus away from waste streams. That makes the programme more closely connected to Coles’ core operations than conventional corporate philanthropy.

Metrics, targets, and data robustness

A strength of the FY2026 report is that it distinguishes between targets that are progressing and those that are off track. Coles reports strong operational climate performance and 100% market-based renewable electricity procurement, but openly identifies supplier climate engagement and aspects of deforestation performance as areas where delivery is more difficult.

Circularity performance is comparatively advanced: 88.2% of solid waste was diverted from landfill, 87.2% of eligible Own Brand packaging was recyclable and average recycled content reached 28.1%. More than 700 million pieces of conventional plastic have been removed from Own Brand packaging since 2021.

Data limitations remain most visible in Scope 3 and nature. Agricultural decarbonisation depends on farm-level data that are not yet consistently available, while Coles acknowledges that it does not have uniform access to underlying aquaculture certification audit data. These limitations are important because future ESG maturity will depend increasingly on primary value-chain evidence rather than estimates, certifications and supplier commitments alone.

Assurance, credibility, and comparability

Coles’ assurance architecture is one of the report’s strongest features. EY provides limited assurance over a broad set of sustainability information, including workforce, safety, Scope 3, waste, packaging, community investment and selected nature metrics.

More significantly, energy consumption, Scope 1 emissions, Scope 2 emissions, renewable electricity and related energy metrics receive reasonable assurance. Both the review and audit engagements were conducted under ASSA 5000, Australia’s sustainability assurance standard aligned with the emerging international ISSA 5000 architecture.

The distinction matters. Reasonable assurance involves more extensive evidence testing than limited assurance, including sample-based testing against invoices, system records and other source information for Scope 1 and 2 metrics. As mandatory sustainability reporting matures, Coles already demonstrates some of the control infrastructure likely to become increasingly important for assurance-ready ESG data.

Strategic implications for the sector

Coles illustrates why food retail sustainability cannot be assessed primarily through store-level emissions. The largest environmental dependencies and impacts sit upstream—in livestock, agriculture, seafood, land use, packaging and supplier manufacturing—making procurement strategy central to ESG performance.

The company’s experience also demonstrates the limits of retailer influence. Scope 1 and 2 emissions can be reduced relatively quickly through renewable electricity and asset investment, while FLAG emissions, deforestation and supplier target-setting depend on thousands of actors, agricultural economics, technology and sector-wide infrastructure.

For the supermarket sector, ESG leadership will therefore increasingly depend on the ability to translate buying power into better primary data, credible sourcing requirements, supplier capability-building and measurable value-chain outcomes.

ESG maturity and future positioning

Coles demonstrates relatively high ESG maturity in governance, climate reporting, workforce systems, food safety and external assurance. Climate considerations have moved firmly into regulatory reporting, while nature, human rights and circularity are increasingly managed through structured frameworks rather than isolated initiatives.

The more difficult stage now begins. Supplier engagement is behind schedule, FLAG emissions have not yet fallen, and the company has acknowledged failure to meet aspects of its no-deforestation ambition for beef and cocoa. These are not necessarily signs of weak ESG management; they indicate that Coles has moved into sustainability issues where outcomes cannot be achieved through operational control alone.

Future maturity will depend on demonstrating that these difficult value-chain commitments influence sourcing decisions, supplier relationships, investment priorities and risk management rather than remaining primarily target-driven programmes.

Pacifica ESG View

Coles’ FY2026 reporting reflects a shift from traditional retailer sustainability initiatives toward integrated management of climate, nature, circularity and supply-chain resilience. Its strongest features are mature climate governance, substantial Scope 1 and 2 reductions, broad sustainability assurance and relatively transparent disclosure of underperforming targets.

The harder challenge sits upstream. More than 90% of emissions are Scope 3, agricultural emissions have not yet begun a sustained decline, supplier science-based target adoption is behind schedule, and deforestation objectives remain difficult to deliver.

For investors and sustainability practitioners, the report is therefore most useful not because every target is progressing, but because it increasingly identifies where operational control ends and value-chain transformation must begin.

Implications for the wider market

Coles highlights an important evolution in Australian ESG reporting. Mandatory AASB S2 climate disclosure, ASSA 5000 assurance, GRI reporting and emerging TNFD-related analysis are beginning to coexist within a single corporate reporting system.

For food retailers, this convergence increases expectations beyond operational carbon reductions. Companies will increasingly need credible information on agriculture, land use, biodiversity, labour conditions, packaging, nutrition and supplier emissions.

The competitive benchmark is consequently moving from commitments to evidence: which suppliers are changing, which commodities are improving, whether targets affect procurement decisions, and whether the underlying data can withstand external assurance. Coles is building much of that architecture, but its FY2026 results also show how difficult the next stage of supply-chain sustainability will be.

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