Liability reforms are needed to support climate disclosures as Australia moves to a mandated reporting model, writes Louise Petschler GAICD. The AICD also opposes removal of the small business exemption under the Privacy Act 1988.
The Albanese government is continuing work on its election commitment to introduce mandatory climate reporting in Australia. The AICD supports comprehensive, comparable and high-quality climate disclosures to the market. With other peak bodies, the AICD has also flagged the need for adjustments to Australia’s regulatory settings to support these policy objectives.
This is important because Australian settings on disclosure and liability were not designed with climate reporting in mind. Many climate disclosures will, by necessity, involve uncertain and evolving information, forward-looking statements, scope 3 assumptions and incomplete data and scenario analysis.
The AICD reiterated its liability concerns in recent submissions to Treasury and proposed possible solutions to support climate disclosures without excessive litigation risks. Examples include a period of regulator-only enforcement or targeted safe harbours to give certainty to companies and boards making comprehensive and diligent disclosures. We have also commissioned updated external legal analysis of these issues — including the unique features of Australia’s liability environment — to support consideration by government.
At this stage, we expect that the regime will apply initially to large listed companies and financial institutions for reporting periods from July 2024. The Australian standards are likely to reflect the International Sustainability Standards Board (ISSB) standards due later this year.
Privacy Act Review
In last month’s column, we flagged the wide- ranging proposals from the Privacy Act Review. Thank you to members who contacted us with views and concerns about the proposals.
The review’s 116 recommendations propose a comprehensive reshaping of Australian privacy laws, including removal of the current exemption for small business, introduction of a direct consumer right of action for privacy breaches, and an enhanced regulator with wider powers.
In submissions to government, the AICD has noted its support for strong privacy protections and laws while highlighting some key concerns with the proposals, such as:
- The need for a coordinated approach across cyber, privacy, data retention obligations and related areas, where parallel consultations and overlapping regulations risk inconsistent outcomes and complexity
- AICD opposition to the removal of the small business exemption, which we are concerned will create a significant and likely disproportionate new compliance burden for small organisations
- Implications of the proposed direct right of action, including substantial increase in litigation risk for organisations that are victims of wide-scale cyber attacks by sophisticated threat actors
- The need for high and clear fault thresholds for breaches and actions, recognising the complex threat environment and incentivising reasonable steps and diligent risk management by all organisations.
The AICD is also contributing to a parallel consultation on a refreshed National Cyber Strategy. We are continuing to promote a national focus on building cyber resilience — including a genuine partnership with the private sector — rather than additional levels of regulation. The AICD also offers a virtual interactive short course on cyber governance.
To support members, the AICD released its Cyber Security Governance Principles, developed in partnership with the Cyber Security Cooperative Research Centre.
Acknowledgement of Country
AICD Sector Lead — First Nations Justin Agale MAICD recently released a new resource on the governance relevance and significance of an Acknowledgement of Country. The video features his remarks at the 2022 Essential Director Update, discussing how an Acknowledgement of Country can help boards to enter the director mindset. It places an Acknowledgement of Country or a Welcome to Country in a governance context:
“When we acknowledge Country, we are reaching back and bringing to the fore 60,000 years of Australian governance. Sixty thousand years of environmental responsibility. Sixty thousand years of social responsibility. Sixty thousand years of stewardship.”
Gender pay gap
In late March, federal parliament passed laws to increase the transparency of Australia’s gender pay gap. From early 2024, the Workplace Gender Equality Agency (WGEA) can publish pay gap data (mean, median, remuneration quartile) for organisations with more than 100 employees. CEOs will also be required to provide their organisation’s WGEA report and industry benchmarking data to their boards from late 2023.
Separately, the government is working on a new National Strategy for Gender Equality, with a focus on women in leadership and decision-making roles such as board positions.
This article first appeared under the headline 'Weather Report' in the May 2023 issue of Company Director magazine.
Practice resources — supporting good governance
Examples of the AICD’s contemporary governance practice resources for members:
- To support directors on climate reporting, the AICD recently issued a director climate reporting primer — Gearing up for mandatory climate reporting — prepared with CGI partners Deloitte and MinterEllison
Best Interests Duty
- AICD’s landmark legal opinion (Bret Walker AO SC and Gerald Ng MAICD) and practice statement on understanding the duty of directors to act in good faith in the best interests of the corporation
Innovation in the Boardroom
Already a member?
Login to view this content