On the 12th of January 2024, the Treasury unveiled its draft legislation titled “Climate-related Financial Disclosure: Exposure Draft Legislation for Mandatory Climate Reporting (and Assurance Requirements) for Certain Types of Entities”. The proposed Exposure Draft legislation aims to amend sections of the Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 (Cth) to establish mandatory requirements for large corporations and financial institutions to disclose their climate-related risks and opportunities.
KEY CHANGES
The forthcoming ISSB regulations are set to impose stricter standards compared to existing norms. Companies will now be mandated to provide more comprehensive and explicit details regarding emission reduction targets. Additionally, businesses will be required to report on assets susceptible to climate risks and those aligned with climate opportunities.
Commencement of mandatory reporting is anticipated to begin in Australia during the 2024/2025 fiscal year. While initially targeted at large listed entities and financial institutions, the scope may extend further.
IMPACT ON BUSINESSES
Every business will face heightened scrutiny regarding climate reporting, with regulatory bodies, financial institutions, other lenders, and consumers exhibiting reduced tolerance for greenwashing. It’s imperative to recognise that mandatory climate reporting won’t solely affect large corporations or those with substantial emissions. These regulations will necessitate reporting on emissions throughout the entire value chain.
PREPARING FOR CLIMATE REPORTING CHANGES
Businesses should take proactive steps to ready themselves for impending climate reporting requirements.
Key considerations include:
- Understanding your business’s climate risks and opportunities.
- Assessing governance and managerial competency to navigate climate-related impacts, including mandatory reporting.
- Identifying major sustainability risks and opportunities.
- Ensuring systems, processes, staff, and data are equipped to respond to a lower carbon business environment and changes in climate reporting.
To effectively navigate these changes, businesses are advised to:
- Review governance structures in relation to climate change, staying abreast of ISSB Standards and Treasury proposals on mandatory reporting.
- Identify gaps in data and disclosure practices, developing action plans to address deficiencies.
- Establish a well-defined strategy for sustainable development and robustly respond to climate change impacts, including climate reporting.
As overwhelming as this may sound, it is critical for businesses to start preparing for sustainability reporting and the follow-on implications this has as soon as possible.
Talk to our team today to help guide you through the process.
