New ESG Reporting Requirements for Australian Businesses

Sustainability and ESG reporting mandates are set to be introduced in Australia.

Initially focused upon large organisations, new annual ESG reporting obligations are set to impact most Aussie firms with 100+ employees in just 5 years.

Is ESG Reporting Mandatory in Australia?

Regulators plan to phase in sustainability reporting reforms in Australia between 2024-2028. This phased approach allows companies to factor in changes required to successfully collect, monitor and disclose climate-related risk, action and tracking to sustainability goals.

Australian ESG Reporting Requirements

Many Australian businesses already voluntarily report on sustainability and climate-related goals. However, Australia’s ESG reporting standards are extremely poor when compared with global counterparts.

Meanwhile, Treasury is currently seeking feedback on the proposed development of new, ESG reporting mandates for implementation in 2024.  

Designed to improve transparency and accountability on climate-related commitments from Australian business, the proposed ESG reporting framework aims to:

  • Support Australia’s transition to net-zero by 2050
  • Improve transparency into corporate Australia’s sustainability practices
  • Make reporting obligations easy to understand for investors, consumers, regulators and the public
  • Align with international reporting practices
  • Leverage existing financial reporting systems where possible
  • Keep reporting obligations proportional to the environmental risks

Which Australian Companies are Impacted by ESG Reporting Mandates?

Climate-related disclosures will be mandatory for large publicly listed Australian companies and banks in the 2024 financial year. Treasury is also considering including private organisations in the reporting reforms.

“Large” organisations are defined by the Treasury as organisations with either:

  • 500+ employees
  • Over $500 million annual revenue
  • Over $25million assets

In the following 2025/26 financial year, “medium-sized” companies will be impacted. These firms have either:

  • 250+ employees
  • $200 million-plus annual revenue
  • $500 million-plus assets

Thereafter, in the 2027/28 financial year, smaller reporting companies will be included in reporting reforms. This refers to businesses with:

  • 100+ employees
  • More than $50 million annual revenue
  • Assets worth $525 Million+

How to Comply with Australian ESG Reporting Requirements for Large Businesses

As soon as next year, Australian businesses with 500+ employees not yet disclosing climate-related matters will be required to annually collect, monitor and report upon a range of environmental factors.

1. A Climate Risk Assessment and Governance

Large Australian companies must develop and report upon an ESG governance strategy. This details climate financial risks, opportunities, metrics and ESG targets. An ESG strategy should also detail ESG initiatives and tracking to goals.

Reporting must satisfy ISSB (IFRS) Sustainability Reporting Standards and Task Force for Climate-Related Financial Disclosure (TCFD).

2. Materiality

Corporate regulation in Australia will require firms to identify and monitor the most important (or “material”) ESG, climate, and sustainability risks and considerations to the business at a minimum.

3. Scope 1 & Scope 2 Greenhouse Gas Emissions

Aussie companies seeking to comply with new ESG reporting regulations will soon be required to scope, calculate and disclose their GHG emissions from direct operations (Scope 1 and Scope 2 emissions) each year.

Over a period of three years, any material Scope 3 emissions will also be added to ESG Reporting mandates for large Australian companies.

4. ESG and Sustainability Targets & Action

Companies will be required to provide transparency on sustainability targets, decarbonisation or ESG initiatives underway and tracking to ESG goals or net-zero targets.

5. ESG & Sustainability KPIs

Using internationally recognised key performance indicators will simplify reporting for companies and assist regulators, investors and consumers to understand a company’s climate related risks and opportunities.

Australian Government recommends globally-recognised, independent reporting standards to satisfy ESG obligations. This may be ISSB, GHG Reporting protocol and ISO 4064-1:2018.

Who is Responsible for Corporate ESG Reporting in Australia?

Australian regulators are currently capturing feedback and commentary on its latest consultation paper regarding assurance on ESG reporting standards.

Assurance is one matter currently up for discussion. The quality of a company’s ESG reporting and management may be placed on an auditor or independent third-party experts to ensure meaningful ESG reporting and action.

How to Prepare for Mandatory Sustainability Reporting

Australia’s climate-related reporting reforms demonstrate just how sustainability starts with visibility. It’s true, you cannot manage what you can’t measure. So once the major contributors to your firm’s emissions have been identified, it’s important to start to collect data on these processes.

It’s time to start thinking about ESG reporting
…. and data!

For most operations –  bricks and mortar retailers, manufacturers or software companies – the largest contributors to GHG totals are:

  • Water consumption, heating and movement
  • Electricity consumption
  • Transport costs

SNAPI is helping organisations to collect gas, water and electricity consumption data in a faster, smarter and more cost-efficient way. Amongst other value-building applications, this data is critical to monitoring, managing and fulfilling mandatory reporting obligations soon to be introduced to Australian businesses.

For more on emerging ESG reporting standards, click here: https://treasury.gov.au/sites/default/files/2022-12/c2022-314397_0.pdf

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