On Thursday 27 March 2024 landmark climate reporting legislation was introduced into the House of Representatives in Schedule 4 to the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth).
The requirements in the Bill are essentially the same as that reported in our recent article on the draft legislation, except for the following:
- The start date has been deferred from 1 July 2024 to financial years commencing on or after 1 January 2025;
- Directors will be required to state in the directors’ declaration that “all reasonable steps are being taken to ensure the substantive provisions of the Sustainability Report are in accordance with the Corporations Act” for the first three years from commencement of the legislation;
- An extension of the modified liability regime for the first three years around disclosures in respect of Scope 3 Greenhouse Gas (GHG) emissions and scenario analysis to also include ‘transition plans’ included in sustainability reports.
- The granting of some additional liability protections to auditors in relation to financial years commencing within the first three years from the commencement date of the legislation (similar to that provided for directors and officers – in that it only relates to Scope 3 emissions, scenario analysis and transition plans).
Notwithstanding the amendments, these requirements, including the directors’ declaration will require significant evidence to back up the disclosures and the declarations made.
The current status of the Bill is that it has been referred to the Senate Economics Legislation Committee, with the Report due 30 April 2024.
Action to take now
All organisations, regardless of which reporting group they fall under (see our recent article to identify what reporting group you are in), should start now.
Consistent with our earlier article mentioned above, we recommend educating the board and executives on sustainability, emissions reporting and climate-related disclosures. This should involve determining when the new reporting regime is proposed to apply to your organisation and understanding what information your organisation is likely to be required to disclose. This also includes understanding your current and desired future state ESG-related controls and processes.
In addition to education, there are three steps your business should take now to prepare for climate reporting:
- Review your governance in relation to climate change, identifying accountabilities and responsibilities– using the draft Australian Sustainability Reporting Standards (ASRS 1, ASRS 2 and ASRS 101) or IFRS Sustainability Disclosure Standards as a guide (IFRS S1 and IFRS S2).
- Identify your reporting (and resourcing) gaps in relation to data and disclosures assessing whether you have current data on your carbon footprint, and what additional data is required to meet the reporting disclosures.
- Perform a materiality-assessment and consider the Risks and Opportunities related to climate.
Above all, Boards will need to think about the shift towards a ‘carbon-neutral’ economy and how your organisation will need to update your strategy to future proof the business model for sustainable development which includes the impact of climate change, considering the reporting requirements and the implementation of a transition plan.
