Protected industrial action and staff shortages have left tens of thousands of bins uncollected around the City of Sydney as the strikes stretch into their second week.
Waste management firm Cleanaway is also being sued by the Transport Workers Union for allegedly blocking union members from protesting.
Cleanaway is used by City of Sydney and other councils for waste collection.
Business Sydney executive director Paul Nicolaou said it was time the state government stepped in to resolve the matter "to avoid the city's reputation being trashed".
"It is a health hazard with residents reporting rats in and around the rubbish, but it is also an acute embarrassment for Sydney as we prepare to welcome visitors to the Sydney WorldPride 2023 celebration," he said.
World Pride begins Friday and runs until March 5.
"It is the first time this event has been held in the southern hemisphere and it is imperative that Sydney looks its best as visitors discover the city, many for the first time," Mr Nicolaou said.
"As things stand, this garbage collection dispute risks trashing our city and its reputation as a world city. It must be fixed."
Locals have been encouraged to put their bins out as usual, but delays caused by industrial action have left them uncollected for days and excess household rubbish has begun to spill onto streets.
Warmer weather has caused bags of rubbish to ferment, with Waterloo residents complaining about maggot infestations in apartment garbage rooms.
Lord Mayor Clover Moore said Cleanaway usually had an excellent record.
But a range of factors, some in the contractors' control, meant the city's "expected standards" hadn't been met.
Cleanaway staff in other jurisdictions such as Erskine Park in Sydney's west and parts of Queensland have also taken industrial action in recent weeks.
An estimated 95 per cent of local councils in NSW contract external waste contractors to collect household rubbish.
13°C