If you think the Federal Government’s new mandatory climate reporting requirements are just for the bigger end of town and won’t affect you, think again.
Yes, the phased-in mandatory reporting requirement will initially impact the big corporates, but it will gradually filter down to smaller businesses including not-for-profits. And it’s coming sooner than you think.
Until now, social responsibility and environmental reporting has been ad hoc. Those who worked it into their annual reporting scorecard have done so largely because they can see the commercial and reputational merit of shining a light on their achievements. Highlighting being a responsible corporate citizen makes sound commercial sense.
In June 2023, the Australian Department of the Treasury released a public consultation paper outlining the proposed implementation of mandatory climate-related disclosures for Australian entities.
The proposal would require climate-related disclosures for all entities including private and public unlisted companies, subject to size thresholds, to prepare annual reports under the Corporations Act.
This first phase is expected to include companies with more than 500 employees,
more than $1 billion in consolidated gross assets, and more than $500 million in consolidated annual revenue. It is most likely that this will be pushed back to early 2025.
The intention is to align Australian reporting standards with the most recent international standards for climate related disclosures, but it appears that the Australian standards will also include not-for-profits among other modifications.
Whatever the size of the entity there will be costs in adapting systems, gathering data and developing reporting of ESG metrics. In addition, the extra scrutiny from all stakeholders of environmental practices and outcomes will require management of brand reputation and investor relations.
It’s a big job and it can’t be done overnight. It will take time to ensure your business is thoroughly prepared and your house is in order to meet the mandated reporting, and to the standards required.
Less obvious, but of fundamental importantance, and the reason planning needs to start now – is your ability to retain your business relationship with customers who are part of the early stages of the mandatory reporting rollout.
Consider this. You are a small to medium business heavily reliant on your contract to supply bigger customers, such as a supermarket chain.
Such groups will most likely be caught up in the first phase of the mandatory reporting implementation and therefore required to meet rigorous reporting standards , including measurement and capturing of the impact of their suppliers’ carbon footprint.
So here is the potential rub. Even though your business might not be required to implement mandatory reporting until later, there is a strong likelihood your customers will require you to provide measurable climate-related information for them to input into their own disclosures.
Not being in a position to do so could seriously jeopardise your business, with the risk being that your customers may look elsewhere.
So, in effect, the introduction of mandatory climate reporting will impact on just about everyone, big and small.
Sure, we are not there yet, but we will be sooner than you think. You should be making plans now and setting up internal structures to measure and record your business’ climate-related impacts.
While this might feel onerous, or even daunting, moving to mandatory reporting makes good sense on a number of fronts.
Some of the advantages and benefits of mandatory reporting for all companies include greater investor confidence, improved risk management, greater transparency, easier access to capital, stronger brand identity, ability to attract the best people and better stakeholder engagement.
In essence mandatory climate reporting will be better for the planet, for society and so ultimately better for business.
But you need to start now. Initially it will be important to set up the systems, processes and data collection procedures. Once established there will be opportunities to develop a communications plan in support of the actions and reputational and brand building.
How can we help? In the coming months, we will be sharing advice on how to kick-start your journey, and use your data and targets to share your sustainability progress with clients, investors, employees and the public.
To find out more, get in touch with our Social Impact team.
