Mandatory Climate Reporting is Now Law in Australia

by Steve Morgan – Principal, Automic ESG

13 September 2024

Listen to this Blog: Mandatory Climate Reporting is Now Law in Australia

3:23

Further to our article about navigating the Australian Sustainability Reporting Standards (ASRS), we celebrate the passing of the climate reporting legislation by Federal Parliament on the 9^th September 2024.

This will increase transparency of, and accountability for, businesses’ responses to climate-related risks and opportunities. In addition, it is a positive step in Australia’s plan to contribute to the global Net-Zero agenda and an important part of retaining Australia’s attractiveness as a destination for global capital.

Why is this important?

The reforms will provide investors and companies the clarity they require to support the net zero transformation.

The legislation will introduce climate-related reporting requirements broadly in line with the recently released standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB) which include disclosures on climate-related risks opportunities and greenhouse gas emissions across the value chain.

The new reporting requirements are the first step in the Albanese government’s sustainable finance strategy outlined in the Sustainable Finance Roadmap.

The reporting requirements will positively impact the ESG community, including companies, investors and suppliers by bringing clarity to what has been for numerous years a complex reporting ecosystem. Ultimately, this will provide certainty to Australian corporates and enable them to drive progress through climate-related initiatives.

What’s changed?

The main change in the Senate-approved Bill, when compared to that introduced to Parliament in March 2024, is that entities must disclose information derived from scenario analysis using two scenarios; 1.5°C (a low scenario currently mentioned in the Climate Change Act 2022) and the 2.5°C or higher scenario, which well exceeds that in the Climate Change Act.

What’s next?

Deliberations will be finalised by the Australian Accounting Standards Board (AASB) who will issue the first ASRS which is referred to as AASB S2. This is expected to be released imminently.

Organisations should start to prepare their responses to the legislation by undertaking climate risk assessments, scenario analysis, measuring their GHG emissions and setting a decarbonisation pathway with robust internal climate governance. If you require support delivering these, please contact us here.

“In conclusion, while it’s too early to talk about enforcement strategy, that should not be taken to mean it’s too early to be prepared. This means considering and putting into place the systems, processes and governance practices that will be required to meet new climate reporting requirements. It means ensuring you adopt the necessary practices to avoid greenwashing.

Doing this now will allow the best transition – and it will provide a surer foundation for a more profitable business – because a compliant business is a profitable business. As things firm up, ASIC will provide further guidance. But in the meantime, you need to start preparing for the future, now.”