A recycled mulch supplier fears it will be the "scapegoat" for supply chain issues it says have caused asbestos-contaminated material to be spread across parks, hospitals, schools and train stations.
Dangerous friable asbestos has been found at a central Sydney park, the latest in a string of detections at multiple sites across NSW after the initial discovery of bonded asbestos at the Rozelle Parklands in Sydney's inner west in January.
The City of Sydney council confirmed friable asbestos was found in mulch at Harmony Park, which would be temporarily closed while the site was cleaned.
Tests also found bonded asbestos at Victoria Park and Belmore Park as well as in a garden bed at the Parramatta Light Rail site at Telopea.
The council said the recycled mulch product was used in garden beds and under trees but not in playgrounds.
Premier Chris Minns said the discovery of friable asbestos in a park, along with the other recent finds, was unacceptable.
"That kind of asbestos being found in a park in Sydney is deeply worrying," he said on Tuesday.
Previous finds have been limited to the less-dangerous bonded asbestos, which is mixed with concrete or resin.
Friable asbestos can easily crumble into dust and become airborne, creating a potential health risk.
"The government is currently investigating certain actions that we will take in the weeks ahead, firstly, to raise the fines that are imposed on companies that do the wrong thing," Mr Minns said.
Current penalties of up to $2 million for corporations were already steep but the government was prepared to go further, he said.
"I've got to make a decision about whether these penalties are being incorporated in the cost of doing business, which sometimes happens," Mr Minns said.
But one landscaping supply company, Greenlife Resource Recovery, has launched an appeal against a prevention notice issued by the NSW Environmental Protection Authority after the watchdog determined it supplied the mulch used at Rozelle.
The company said its testing showed mulch stockpiled at its facility was free of asbestos contamination and it was confident the material was also clean when delivered to contractors for landscaping.
"The company has no visibility of, and does not control, how its mulch is used on a site once delivered," it said in a statement.
Greenlife has engaged environmental law specialist Ross Fox, which said the company was "at risk of being made a scapegoat for failures in a complex supply chain for construction and landscaping projects".
Mr Minns said the EPA intended to defend its orders against the company in court.
The agency is investigating a potential mass recall, which the premier said was also likely to face legal challenges and required NSW authorities to work with the Commonwealth.
NSW EPA chief executive Tony Chappel said the whole supply chain was under scrutiny.
"But we are talking about very small quantities that appear to have managed to find their way into the process," he told Sydney radio 2GB on Tuesday.
More than 100 sites across Sydney have been tested, leading to at least 13 positive results for bonded asbestos.
The EPA probe has grown to involve 120 investigators, who are working to trace the supply of mulch.
