AICD advocacy has seen positive results in two important disclosure reforms. A new voluntary standard on AI is a must-read for all boards.
Climate disclosure now law
Legislation to introduce Australia’s new mandatory climate reporting regime passed Parliament last month. The regime will commence on 1 January 2025 for large companies (roughly equivalent to the ASX 200) and will be accompanied by a three- year modified liability approach protecting climate disclosures from private and activist litigation with “regulator-only” ASIC enforcement.
The modified liability period is a key design feature, which the AICD argued strongly was essential to support fulsome disclosure, given Australia’s burdensome liability settings. Phased implementation will see other organisations commence reporting over forward years. The regime excludes charities, but includes other NFPs, along with public and private companies.
Directors will be required to make a declaration that their organisation’s sustainability report complies with the new standards. Following AICD advocacy, during the initial phase-in period, the directors’ declaration is qualified to confirm that the entity has taken reasonable steps to comply.
The changes require a substantial lift in capability and reporting for Australian entities.
The AICD has resources to support members through the Climate Governance Initiative section of our website, including:
Short course: Climate Governance for Australian Directors
Free e-learning: Introduction to Climate Governance
Continuous disclosure “fault” component to remain
In another positive development, the federal government has committed to retaining the “fault” element for breaches of continuous disclosure laws for private litigation and class actions. The government’s announcement is in response to an independent statutory review into continuous disclosure laws led by Dr Kevin Lewis.
The review examined reforms made in 2021 to reintroduce a fault element into continuous disclosure laws. These changes — strongly argued for by the AICD — mean that companies and officers can only be liable for civil penalties where they have acted with “knowledge, recklessness or negligence”.
FY25 regulatory priorities
The AICD advocates for balanced, fit-for-purpose and modern regulations that support diligent directors to govern for growth.
Our FY25 regulatory priorities are:
Cyber regulation that supports effective board oversight
Balanced policy and liability settings that reflect disclosure complexity
Fit-for-purpose digital regulation that supports sound governance
Long-term, coordinated policy approaches that strengthen national governance, reduce regulatory complexity and promote economic growth.
View AICD’s submissions on the 2021 reforms and the recent independent review on our website. In response to the review’s two central recommendations, the government has decided to:
Retain the fault element for private continuous disclosure litigation (including class actions)
Remove the fault element for civil enforcements actions brought by ASIC
Amend the Corporations Act 2001 (Cth) to expressly provide how “state of mind” can be attributed to the entity under the continuous disclosure regime.
AICD has welcomed the government’s decision on private litigation as a positive outcome.
AI Guardrails and Voluntary Standard
Last month, the government released draft AI Mandatory Guardrails and a Voluntary AI Standard. The draft guardrails focus on testing, transparency and accountability for both developers and users of “high-risk” AI and general-purpose AI systems, such as Chat GPT.
Rather than taking the European Union approach of designating specific AI uses or whole sectors as high-risk, it proposes that organisations assess whether their AI use is high-risk against set principles. If the use is considered high-risk, organisations would apply 10 mandatory guardrails.
To support effective, safe and responsible AI use, the government has also introduced a Voluntary AI Safety Standard to encourage adoption of the guardrails until regulations are finalised.
Effective governance is a theme across the guardrails, with the first three being:
- Establish, implement and publish an accountability process including governance, internal capability and a strategy for regulatory compliance
- Establish and implement a risk management process to identify and mitigate risks
- Protect AI systems and implement data governance measures to manage data quality and provenance.
The AICD encourages boards to review the voluntary standard and discuss these with management here.
Louise Petschler GAICD is General Manager Education & Policy Leadership at AICD.
This article first appeared under the headline ‘Full Disclosure’ in the October 2024 issue of Company Director magazine.
Director AI resources
The AICD has Governance of AI resources available to support members including:
- AI Governance for Directors
- Directors Guide to AI Governance (developed with the Human Technology Institute at UTS)
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