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It’s official — a new bill is before Australia’s parliament that will make climate reporting mandatory for roughly 20,000 local entities starting on 1st January 2025.
Like many OECD countries, Australia has announced changes to its climate-reporting standards. Besides broadening mandatory reporting to the wider market, it will also introduce new ISSB-aligned requirements, representing a significant uplift in requirements compared to existing frameworks.
Other countries in Asia-Pacific (APAC) are also acting on similar sustainability reporting measures. Singapore’s Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX RegCo) are adopting ISSB and extending mandatory reporting requirements to all listed companies from 2025 and requiring selected non-listed firms to report from 2027 onwards.
The Securities and Exchange Commission (SEC) of the Philippines announced that it will revise the Sustainability Reporting Guidelines for publicly listed companies to align with ISSB standards. It will require listed companies to submit sustainability reports in two formats: the SR Narrative and Sustainability Report (SuRe) form.
Several non-voluntary reporting frameworks already exist in Australia, including the National Greenhouse Energy Reporting (NGERS) scheme and the Safeguard Mechanism, which builds on the NGERS scheme. However, only a small number of organisations (less than 1,000) are obligated to comply with these schemes. Organisations listed on the Australian Securities Exchange (ASX) are required to disclose their sustainability efforts on a “comply or explain” basis. But, for most organisations in the country, sustainability reporting is currently voluntary.
Climate risk reporting is especially important in countries like Australia, due to its high vulnerability to worsening extreme weather and other adverse climate effects. So, despite the lack of legal obligation, many of Australia’s companies still choose to report on sustainability.
A survey of the largest 300 companies listed on the Australian Securities Exchange (ASX 300) found that entities of various sizes are now disclosing financial and sustainability information, whether by creating standalone sustainability reports, including it in annual reports, or both in their annual and standalone sustainability reports. However, many stakeholders don’t find this information helpful. The lack of a common standard for reporting has made it difficult for companies to deliver a transparent, credible and comprehensive picture of their ESG efforts.
A 2023 analysis of 247 Australian businesses found that 57% studied were guilty of “making false, misleading, unclear or unsubstantiated claims, pointing to ‘greenwashing’ — whether intentional or not —on a concerning scale.” As such, investors are seeking greater transparency of companies’ sustainability agendas to determine their long-term viability as businesses.
As such, the changes proposed in the new bill seek to fulfil these needs. But the call for better transparency and accountability brings an even higher level of responsibility.
The journey to ISSB-aligned frameworks is anticipated to create substantial challenges for most organisations, even those with mature climate-reporting practices already in place. Australia’s incoming measures represent a significant uplift compared to the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCDF) framework — one of the most commonly used standards for climate reporting in Australia.
The new requirements proposed in the bill will closely align with the requirements in IFRS S2, which, compared to the TCDF framework, will require companies to make a few adjustments or provide additional information — as much as possible that is reasonable, supportable and available at the reporting date.
Here are a few examples of such changes based on a document prepared by the staff of the IFRS Foundation:
The draft bill will also require Australian companies to prepare an annual sustainability report following these updated guidelines every financial year.
While the capacity uplift to accommodate these changes might be significant, they also have long-term benefits. Instead of making climate reporting a once-a-year, one-off occasion, it will give organisations more insight into the complex web of effects their business has on resources, systems, and individuals and organisations. This informs forward-looking decisions and the development of new and disruptive products and services, as well as contributes to risk mitigation. And now that stakeholders are measuring the value of an organisation not just on their financial performance but their environmental impact as well, it can help organisations connect deeper with clients and suppliers or attract investment.
The initial setup will be the hardest part. It will involve re-evaluating current sustainability reporting efforts and mapping out the areas that need to be changed or improved. It will challenge organisations to become familiar with these new standards and requirements and increase their level of understanding of climate-related risks, opportunities and financial impact.
These changes may have larger organisational implications as well. They will force organisations to take a look at their business models as a whole — everything from data management to auditability to governance and risk — ensuring that their climate strategies are aligned with their organisational objectives, or vice versa.
With mandatory reporting only months away, it’s time for Australian organisations to act. Given the substantial uplift needed, companies must turn to systems and technologies that can streamline climate-reporting processes both within their business and in the lead-up to regulatory filing.
Take charge of your climate-reporting obligations and supercharge your holistic ESG strategy by scheduling a demo to experience firsthand how the Diligent One Platform can support your organisation to build.
