This month we focus on mandatory climate reporting, which is set to be one of the most significant changes to Australian corporate reporting in decades. To find out more on the reform, read on below and register for our free webinar with senior Treasury and ASIC officials on Wednesday 26 July 2023.’ More detail on the webinar is at the end of this newsletter.
Key climate reporting developments unveiled
On 26 June 2023, the International Sustainability Standards Board (ISSB) issued its finalised sustainability and climate standards, IFRS S1 and S2. The ISSB standards are intended to set a global standard on disclosures to the market related to sustainability and climate reporting.
On 27 June 2023, Treasury released, for consultation, the Government’s proposed position on mandatory climate reporting including providing high level detail on how the ISSB’s Climate standard will be applied to the Australian context. The AICD’s submission to the First Climate Consultation in December 2022 can be found here.
The Treasury proposal would see the largest Australian companies and financial institutions making climate disclosures commencing in the 2024/25 reporting period. It is expected from the 2027/28 Reporting Period, that all organisations subject to Chapter 2M of the Corporations Act will be required to provide climate disclosures.
What is the Government proposing on Mandatory Climate Reporting?
WHO is proposed to be covered?
A 3-tiered approach is proposed, depending on organisational size. Proposed timings are:
· Cohort 1 (for 2024/2025 reporting periods): Reporting Entities (those required to report under Part 2M of the Corporations Act being Disclosing Entities, Public companies, registered schemes and large private companies) who are National Greenhouse and Energy Reporting Scheme (NGERS) “controlling corporations” which meet the NGER publication threshold; and Reporting Entities that fulfill two of the following three thresholds: (1) over 500 employees; (2) $1 billion+ in consolidated gross assets; (3) $500 million+ consolidated annual revenue.
· Cohort 2 (for 2026/2027 reporting periods): Reporting Entities that fulfill two of the following three thresholds: (1) over 250 employees; (2) $500 million+ in consolidated gross assets; (3) $200 million+ consolidated annual revenue.
· Cohort 3 (for 2027/2028 reporting periods): Reporting Entities who are NGERS controlling corporations; and Reporting Entities that fulfill two of the following three thresholds: (1) over 100 employees; (2) $25 million+ in consolidated gross assets; (3) $50 million+ consolidated annual revenue.
NB - For all cohorts, as drafted, the current proposal does not capture charities registered with the Australian Charities and Not-for-Profits Commission (ACNC).
WHEN will mandatory reporting commence?
A staggered approach to implementation is proposed. The initial cohort of reporting entities will be required to disclose for reporting periods commencing 1 July 2024, the second cohort from 1 July 2026, and the third cohort from 1 July 2027.
WHERE will the disclosures be set out?
The Government has indicated climate disclosures should be made in Annual Report, and outlined formal requirements to enhance readability. For listed entities, this will be in the Operating and Financial Review (OFR) within the Directors’ Report.
WHAT will mandatory reporting require?
Disclosure requirements will be on from the ISSB’s climate-reporting standard (IFRS S2), as adapted by the Australian Accounting Standards Board (AASB). The AASB will conduct a separate consultation but is widely expected to make minimal substantive changes when implementing the global standard domestically.
WHAT are the consequences for not complying/poor compliance?
The Government proposes to introduce civil penalty provisions into the Corporations Act, so that a failure to disclose, or inadequate disclosure, would attract a civil penalty.
Transitional climate reporting liability relief
To address liability concerns (for which the AICD has been a leading advocate), the Government has proposed a three-year period of regulator-only enforcement for certain disclosures from Reporting Period 2024/25. This relief is proposed to apply to misleading or deceptive conduct or “similar claims” in respect of scope 3 emission disclosures and select forward -looking disclosures (transition plans, scenario analysis).
For more on the Australia’s proposed mandatory climate reporting framework, see the recently published AICD article.
Webinar – Mandatory climate reporting standards - What directors need to know, 26 July
Join the AICD to find out what this key policy change means for directors and the organisations they govern. The session will feature senior government officials charged with developing and implementing the reporting regime, Warren Tease (Chief Adviser, Treasury), and Claire LaBouchardiere (Senior Executive Leader, ASIC).
The panel will discuss and cover:
To register for this free webinar, click here.
To access free director-focused Climate Governance Initiative Australia webinars, videos, and resources, click here.
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