Governance Institute calls for a global approach to the development of sustainability reporting

The Governance Institute’s submission in response to the Climate-related financial disclosure consultation paper (December 2022) strongly recommends consideration and adjustment for the local legal context when implementing the global climate change reporting standards in Australia.

Governance Institute CEO Megan Motto said a phased approach to reporting would reflect international standards and allow organisations to scale up steadily to meet economy-wide demands.

‘The most appropriate way to proceed would be to prioritise mandatory disclosure for organisations that are best prepared, for example large globally connected entities, government infrastructure and the heaviest emitters.’

Ms Motto says members have expressed concerns about the fact that climate disclosures involve substantial use of forward-looking information, which is dependent on external factors and subject to uncertainty.

She said there needs to be careful consideration of how climate disclosures should interact with the Corporations Act.

‘It will be critical to appropriately incentivise accurate, comprehensive and timely disclosure without reporting entities, their directors and officers taking on disproportionate liability risk’, she said.

‘Our members consider that appropriate safeguards, such as safe harbour provisions, will be critical to achieving this outcome.’

Ms Motto said while the Institute supported assurance requirements in principle, they should be proportionate to the risk, size and complexity of the relevant reporting entity,” she said.

‘Our members believe it’s important that the extent and level of assurance is transparently disclosed by the reporting entity.’

Key steps for successful implementation of reporting requirements

The Institute has recommended five key steps for implementing climate change reporting requirements. They are:

• Incorporating a climate first approach that recognises the climate risk to the Australian economy, the financial system, the community and investors.
• Scalable and practical implementation of leading practice that incorporates a phased approach to adoption across entity types, sectors and/or sizes.
• Inclusion of appropriate levels of independent external assurance to lend credibility to sustainability information.
• A consideration and adjustment for the local legal context when implementing the ISSB standards in Australia, and;
• Ensuring appropriate funding for the body or bodies charged with implementing the Standards in Australia.

To read the Governance Institute’s recommendations in full, check out our submissions.