Mandatory Reporting and the opportunities for Transformational Governance

by Kate Dundas, Executive Director, UN Global Compact Network Australia
(Sponsored article)

On Thursday 22 August 2024, the Senate passed the mandatory climate reporting bill, putting climate reporting firmly at the forefront of governance in Australia.

The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Bill) implements Australia’s first mandatory climate reporting regime. This landmark legislation puts climate reporting at the heart of the Corporations Act 2001 (Cth) (the Act) and updates the Australian Securities and Investments Commission Act 2001 (Cth). The legislation will be supported by sustainability and assurance standards made and maintained by the Australian Accounting Standards Board (AASB) and the Australian Auditing and Assurance Standards Board (AUASB).

Who does this legislation impact?

More than 6,000 entities will be required to report under new climate-related disclosure requirements in the coming years.The legislation will be phased in on the basis of the size of an entity or level of emissions.

Group 1, 1 January 2024:

• Two out of the following: $500 million or more in consolidated gross revenue, $1 billion or more in consolidated assets, > 500 employees.
• Asset owners are scoped out of Group 1.
• National Greenhouse and Energy Reporting reporters above the publication threshold.

Group 2, 1 January 2025:

• Two out of the following: $200 million or more in consolidated gross revenue, $500 million or more in consolidated assets, > 250 employees.
• $500 billion or more assets under management.
• All other National Greenhouse and Energy Reporting reporters

Group 3, 1 January 2026:

• Two of the following, $50 million or more in consolidated gross revenue, $25 million or more in consolidated assets, > 100 employees.

What does this legislation include?

The Senate-approved Bill requires relevant entities to disclose their climate-related plans, financial risks and opportunities in accordance with Australian Sustainability Reporting Standards (ASRS) made by the Australian Accounting Standards Board (AASB). The standards are expected to be released in September 2024.

Required information will include disclosures on climate-related risks and opportunities and on scope 1,2 and 3 emissions.

What is the impact on Company Directors?

Directors will be required to declare whether, in the directors’ opinion, the substantive provisions of the sustainability report are in accordance with the Act and the sustainability and assurance standards. Accordingly, under the Act, directors can now be held liable for greenwashing if climate disclosure statements are misleading.

Entities will be provided relief for a fixed three-year period for disclosures relating to Scope 3 emissions and certain climate-related forward-looking statements. For reports issued between 1 July 2025, and 30 June 2028, only the regulator will be able to bring an action relating to breaches of relevant provisions made in disclosures of scope 3 emissions and climate-related forward-looking statements, and the remedies available to the regulator will be limited to injunctions and declarations. Beyond this period, the existing liability arrangements will apply.

The UN Global Compact Network Australia (UNGCNA) has been hosting an Advanced Climate Reporting Community of Practice with Australia’s leading ASX-listed companies to explore emerging issues around climate disclosure. This included a focus on building director capability alongside governance and legal matters associated with climate-related disclosures, such as greenwashing. Other topics from the Community of Practice included integrating scenario analysis into corporate and financial planning processes, scope 3 supplier relationships and the supporting technology necessary to streamline data for reporting.

These insights will form the basis for a broader Community of Practice in 2025, where UNGCNA participating businesses can upskill and network with peers around non-financial disclosures.

A transformational opportunity

Treasurer Jim Chalmers stated that “these critical reforms provide investors and companies the clarity and certainty they need to support the net-zero transformation and further strengthen Australia’s reputation as an attractive destination for international capital.”

This is a climate-first, but not only, approach. Nature and biodiversity disclosures, while not currently mandatory, are widely considered to be next for Australian businesses. The time to start gearing up for broader disclosures is now.

The opportunity for boards to oversee the transformation potential that sustainability reporting can bring is both challenging and exciting.

This past year, the world recorded its first full year exceeding the 1.5C threshold of the Paris Agreement. “We are in a climate and nature emergency,” asserted Assistant-Secretary General and CEO of the United Nations Global Compact, Sanda Ojiambo in a recent address. “Business leaders are increasingly recognising the urgent need for innovative solutions, without which they cannot hope to thrive as the global economy transitions to net-zero.” Indeed, we are fast-tracking to a point of no return.

In regards to Australian businesses, UN Global Compact Network Australia Director Kate Dundas explains that board directors need to assess climate and nature impact beyond their legal duty and incorporate efforts into their core strategy. “We are fast tracking past 1.5C of the Paris Agreement. We just had our hottest year on record. We have surpassed six of the nine planetary boundaries named by the Stockholm Institute. The most pressing question for directors should be, how might we leverage reporting efforts to reimagine Australian business efforts so that we can operate within the planetary boundaries and the Paris Agreement?”

The UN Global Compact Ten Principles offer a framework for transformation that ensures that intersectional sustainability across environment and climate change, business and human rights, labour and anti-bribery and corruption is embedded into company strategy and operations.

Find out more

This October, off the back of the United Nations’ Summit of the Future, the UN Biodiversity Conference (COP16) in Cali, Colombia, the UN Climate Change Conference (UNFCCC COP29) in Baku, Azerbaijan and the inaugural Global Nature Positive Summit, the spotlight will be on Australia.

In a watershed moment for corporate accountability, UNiting Business LIVE Australia, the UN Global Compact Network Australia’s flagship conference, will equip businesses to navigate ongoing socio-environmental and regulatory changes.

Join the sharpest minds locally and globally to help us all lead, learn and connect and to shape what a sustainable future looks like for Australia.

The event’s program is tailored to the bespoke needs of Australia’s C-Suite and Chief Sustainability Officers (CSOs), board members, and emerging and future sustainability leaders. It will equip them with technical and actionable solutions to challenges at the intersection of net zero, nature-positive, human rights and governance.

Attendees will leave armed with practical knowledge to implement in their organisation and drive positive change for the future of business, Australia and the planet.

Hear from Sanda Ojiambo, Assistant Secretary General and CEO of the United Nations Global Compact, as she provides a global context to sustainable development.

Hear from Christine Holgate, CEO of Team Global Express, as she addresses the tension between publicly prioritising sustainability and driving meaningful action for sustainable change.

Hear from Debby Blakey, CEO of Hesta, as she explores how investor influence can drive sustainability impacts and organisational change at a board level.

Hear from The Hon. Matt Kean, Chair of the Climate Change Authority, as he explores the history, connections, strategies, and collaborations between government and business that are essential to propel us towards a net-zero future.

Over 60 speakers will be joined by Australia’s leading businesses, boards and civil society to determine what the future of Australia can become.

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