When it comes to digital reporting, Australia has long been a laggard.
Unlike the rest of the world, Australia doesn’t mandate digital reporting – one of just two developed countries without a digital reporting regime.
And while companies can do so voluntarily, the process just hasn’t gained traction.
“Companies here have had the ability to report in a digital way to regulator ASIC for more than a decade, but no company has chosen to do so,” Joanne Gorton, Managing Partner of Audit and Assurance at Deloitte Australia tells Business Chief.
But that could all be about to change.
With the new climate and sustainability standards set to be adopted from 2024, companies will need to add ESG disclosures to their portfolio of reporting requirements – the impact of which could be the “burning platform”, declares Joanne.
The Treasury has proposed mandatory climate-related reporting for the country’s largest companies and financial institutions starting 1 July 2024. Once implemented, Australia will join 35 nations and regions worldwide – including New Zealand – in the roll-out of mandatory climate disclosures.
“The new ESG reporting requirements are the biggest reporting change Australian companies have had to deal with – larger even than the transition to International Accounting Standards back in 2005,” shares Joanne.
And as the demand for more information grows, so too does the need for that information to be standardised, consistent, accurate and comparable.
This significant increase in reporting requirements could be the push needed for Australian companies to embrace and prioritise digital reporting.
While Joanne and her team at Deloitte are pushing for structural reform in making digital reporting mandatory, something that would bring the country in line with the world’s advanced economies, the Treasury has a different view, however.
“In their most recent Climate reporting consultation paper, the Treasury noted that they would not mandate digital reporting for climate disclosures ahead of financial reporting,” she explains.
Productivity and transparency gains
Currently, annual reports and financial statements are provided to regulators such as ASIC (Australian Securities & Investments Commission) and the ASX (Australian Stock Exchange) in a PDF document which is not able to be read and easily analysed by technology.
Not only are companies spending hundreds of hours in preparing and lodging financial reports, but the process gives rise to error, with Deloitte research finding there were more than 8,000 documents re-lodged with the ASX since 2019 due to mistakes made.
By embracing digital reporting (in short, presenting information in a machine-readable way) companies not only reduce errors, enhance productivity, and improve efficiency, but crucially increase transparency – ensuring reliable information is in the public domain.
Corporate digital reporting plays a huge role in making this happen, “making it easier for international investors to read and analyse their financial information and making them more likely to invest in Australian businesses”, explains Joanne.
Backing this up, a 2019 inquiry into the regulation of auditing in Australia noted that the roll-out of digital financial reporting has the capacity to assist not only auditing, but the efficient and transparent functioning of financial markets more broadly.
Machine-readable financial statements can be easily and accurately analysed not only by audit firms but other interested third parties including regulators, academics and investors – a shift that could build trust and deliver better social and environmental outcomes, and crucially drive investment.
Putting Australia on the world stage
According to Joanne, increasing visibility of their companies on the world stage is the biggest opportunity Australian companies have in the shift to digital reporting.
“We are a small country, and we need to attract our fair share of the foreign investment from international capital markets into the Australian economy.”
Joanne points out that Australia, like many other countries, needs to make the transition from reliance on fossil fuels to renewables and with this, there are huge implications for the country and economy.
“Therefore, the more we can do to make Australia an attractive destination for foreign capital, the stronger our economy will be.”
New modelling from Deloitte Access Economics (DAE) shows mandatory digital financial reporting for all large Australian businesses would grow the economy by up to US$7.7 billion annually and support more than 14,000 jobs from 2030.
ESG reporting mandate a catalyst for transition
The biggest barrier is the willingness of Australian companies to embrace and prioritise digital reporting, largely due to time and costs.
While year one brings extra time and costs in setting up systems to tag the information and report it in a digital way, from year two onwards the benefits outweigh the costs, says Joanne.
Then there is AI, which could well be the catalyst for change. With companies around the world scrambling to take advantage of advancements in AI and the automation benefits it can bring, now could be the perfect time to shift to digital reporting voluntarily to get a jump start on your competition.
While Joanne is excited by the possibilities of AI, she believes only a mandatory shift to standardised reporting methods and metrics would allow for meaningful comparison between Australian companies.
Thankfully, those companies are waking up to the productivity and competitive advantages a shift to digital reporting would bring.
The impending ESG reporting requirements should therefore be seen as an opportunity to make the switch to digital reporting across the board.
“If we had a digital corporate reporting regime, we would be on par with our major economic trading partners like the US, UK, Europe and Japan,” says Joanne.
“Australian businesses have a once-in-a-lifetime opportunity not only to facilitate interest from overseas investors, but also to make meaningful change that will help society as a whole.”