Australia: Mandatory climate reporting for companies in 2024
The Australian government is looking to enforce mandatory climate-related reporting obligations for the country's largest companies and financial institutions starting from 1 July 2024.
In June 2023, the Federal Government released a consultation paper, ‘Climate-related financial disclosure,’ which seeks views on the structure and implementation of the requirements for disclosing climate-related financial risk and opportunities in Australia. It is inviting submissions on the implementation of standardised requirements.
Following similarly to the International Sustainability Standards Board (ISSB), Australia’s proposed climate-related requirements focus on core elements of governance, strategy, details risks and opportunities and metrics & targets.
Mandatory disclosure of greenhouse gas emissions
Regulations have been proposed by the nation to start at the beginning of the 2024/2025 financial year. The consultation paper stated the following:
“The Government has committed to ensuring large businesses and financial institutions provide Australians and investors with greater transparency and accountability when it comes to their climate-related plans, financial risks, and opportunities.
“As part of this commitment, the Government will introduce standardised, internationally-aligned reporting requirements for businesses to make disclosures regarding governance, strategy, risk management, targets and metrics – including greenhouse gases.”
Some specific proposals include a requirement for companies to disclose transition plans, including information on offsets, target-setting and mitigation strategies, as well as processes used to monitor and manage climate-related risks and opportunities.
The rules would also require companies to report Scope 1 and 2 and material Scope 3 emissions.
This decision is nothing new, as countries worldwide have already started to adopt mandatory climate reporting policies. In particular, The Task Force on Climate-Related Financial Disclosures (TCFD) has developed consistent climate-related financial risk disclosures for companies, banks, and investors to inform stakeholders.
The EU, Singapore, Canada, Japan and South Africa follow the TCFD already, with the United Kingdom and New Zealand set to mandate climate-risk disclosure in line with these regulations, starting in 2025 and 2023, respectively.
Does mandatory climate reporting work?
Starting 2023, 35 nations and regions have rolled out mandatory climate disclosures, prompting questions about how the regulations will affect businesses and financial organisations moving forward.
Australian companies have been advised, if they are not already doing so, to review their current reporting framework and practices so that they can confirm their ability and preparedness to disclose climate risks in accordance with the TCFD. Businesses will also need to consider the standards being developed by the ISSB, as well as their audit resources and capabilities.
The effects of climate reporting will be widespread, as companies will need to be more mindful of ESG and sustainability practices moving forward. Ultimately, the mandate will work as a means for companies to be held accountable for their own pledges and work further to integrate climate strategies into core business.
