Australia is embarking on a significant shift towards greater transparency and accountability in corporate sustainability practices. Beginning on 1 July 2024, mandatory ESG (Environmental, Social, and Governance) reporting will be introduced in phases. This move aligns Australia with global trends and aims to enhance the country’s environmental responsibility.
What You Need to Know
The Australian government has confirmed that the new regulations will initially focus on climate-related financial disclosures. This phased approach allows companies time to build the necessary capabilities and infrastructure to comply with the new requirements.
Phased Implementation
Group 1: Large Entities – Companies with over 500 employees, revenues exceeding $500 million, or assets over $1 billion will start reporting from the 2024-2025 financial year. These entities will set the precedent, leading the way in transparency and accountability.
Group 2: Medium Entities – Companies with over 250 employees, revenues over $200 million, or assets over $500 million will follow in the 2025-2026 financial year. This phase will expand the scope of reporting to a significant portion of the business sector.
Group 3: Smaller Entities – Companies with over 100 employees, revenues over $50 million, or assets over $25 million will be required to report from the 2027-2028 financial year. This final phase ensures that even smaller companies contribute to and benefit from enhanced sustainability practices.
Reporting Requirements
The new regulations mandate comprehensive disclosures covering various aspects of climate-related financial risks and opportunities. Companies will need to report on:
- Governance: Processes and procedures for managing climate-related risks and opportunities.
- Strategy: The entity’s approach to addressing climate-related risks and opportunities.
- Risk Management: Methods for identifying, assessing, and managing climate-related risks.
- Metrics and Targets: Data on greenhouse gas emissions, including Scope 1, 2, and material Scope 3 emissions, as well as progress towards climate-related targets.
These disclosures will align closely with international standards such as the IFRS S2 Climate-related Disclosures and TCFD (Task Force on Climate-Related Financial Disclosures) to ensure consistency and comparability globally
Start preparing now: Early ASIC guidance on the mandatory climate disclosure regime | ASIC
Benefits of Mandatory ESG Reporting
- Enhanced Transparency: Stakeholders, including investors, consumers, and regulators, will have access to reliable and consistent information on corporate sustainability practices.
- Accountability: Companies will be held accountable for their environmental and social impacts, driving more responsible business practices.
- Global Competitiveness: Aligning with international standards will help Australian companies remain competitive on the global stage.
Preparing for the Change
Companies are encouraged to start preparing now by:
- Assessing Current Capabilities: Conducting a gap analysis to identify areas needing improvement.
- Building Capacity: Investing in the necessary infrastructure and training to meet the new reporting requirements.
- Engaging Experts: Consulting with ESG specialists to develop a robust compliance strategy.
The introduction of mandatory ESG reporting marks a new era for Australian businesses, including startups and SMEs. This move not only aligns with global standards but also fosters a culture of sustainability and accountability. By starting preparations early, companies can ensure a smooth transition and leverage the benefits of enhanced transparency, improved risk management, and a competitive advantage in the evolving ESG landscape.
Stay tuned for more updates and insights on how these changes will impact your business and how you can stay ahead in this evolving landscape.
For more detailed information, you can refer to the latest updates from the Australian Securities and Investments Commission (ASIC) and the Australian Treasury.
Sources:
- Herbert Smith Freehills, “Australian climate reporting: proposed legislation introduced into Parliament”
- ASIC, “Start preparing now: Early ASIC guidance on the mandatory climate disclosure regime”
- Sustainability Magazine, “Australia to introduce mandatory climate reporting in 2024”
- Brightest.io, “Australia Climate, Sustainability & ESG Reporting Requirements”
