Mandatory climate-related financial disclosure reporting could be introduced in Australia in a phased implementation, possibly from 2024-25, and it won’t just affect the large companies. 

CCIWA’s concern with these new obligations is the timeframe given to prepare. 

“While we support the phased implementation approach, even for large corporations, well advanced in their climate reporting, this timeframe does not provide much time to understand and implement the new requirements,” says Dr Anthea Wesley, CCIWA’s Manager, Policy. 

The inaugural International Financial Reporting Standard (IFRS) global sustainability standards have been released by International Sustainability Standards Board (ISSB). 

There is currently no national approach to sustainability-related reporting in Australia. 

The Federal Government has proposed that Australia’s mandatory climate-related financial disclosure requirements will be aligned “as far as practicable” with the IFRS standards, S1 and S2. 

IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. 

IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.  

The ISSB is consulting on future standard-setting priorities beyond these inaugural standards. 

It has been in the works since COP26 in November 2021. 

Proposed timeline of mandatory reporting: 

Criteria (must meet at least two)	Employees	Consolidated gross assets	Consolidated revenue	Mandatory reporting starts
Group 1	>500	>$1b	>$500m	FY25
Group 2	>250	>$500m	>$200m	FY27
Group 3	>100	>$25m	>$50m	FY28

 

What are SME obligations? 

According to Celia Hayes, Partner in Risk Advisory at Deloitte, businesses with less than 100 employees will not have any obligation to report, but many will form part of the value chain of the larger organisations who will be preparing for disclosures. 

“We expect that smaller business will still need to prepare for the push-through of those reporting obligations to them from their clients, as the reporting entities look to understand the emissions generated, as well as any climate risks, in their value chain,” she says. 

“For these smaller businesses, making sense of their emissions profile and exposure to climate risk, then preparing to communicate on these and any mitigation activities underway or planned, would be a good first step.” 

The ISSB standards can deliver: 

• For investors: access to more consistent, comparable, verifiable and comprehensive disclosures. 
• For companies: positive effects on areas such as governance, strategy, access to capital, cost of capital, reputation, and employee and stakeholder engagement. 
• For financial markets: improved transparency about sustainability-related risks is expected to contribute to long -term financial stability. 

What do businesses need to do to prepare? 

 According to Hayes, here’s what you need to know: 

• Diagnose: Review the draft ISSB standards and evaluate these against your current approach to ESG reporting. Identify key gaps and implications for your systems, personnel and processes. Assess the impact on existing voluntary reporting frameworks.  
• Convene and assess: Connect key business functions to gather necessary data for disclosures. Consider the implications of disclosures and how these can be integrated into future decision-making processes (across the business). Review the current level of capability and look to what resources are required before making necessary changes. 
• Plan: Develop a plan to operationalise the disclosure process, from data capture and measurement, through to review and reporting. Build and socialise a roadmap to support implementation and manage change. Consider if strategic plans and roadmaps for broader climate mitigation and adaptation action need to be updated as part of the disclosure process.
• Communicate: Support the C-suite, audit committee and board to understand the implications of the standards. Consider how key stakeholders are kept informed of new information and developments from reviewing, preparing and disclosing against the ISSB draft standards, and how this can support better strategic decision-making and risk review (essentially, use the benefit of the ISSB data gathering to reporting process to drive business resilience). 

 Want to find out more about climate change and reducing your emissions for your business? Go to CCIWA Climate Change Community