The government of Australia announced the release of new draft legislation which would introduce mandatory climate-related reporting requirements for large and medium sized companies, including disclosures on climate-related risks and opportunities, and on greenhouse gas emissions across the value chain.
According to a statement by Australia Treasurer Jim Chalmers introducing the new proposed law, the climate-related disclosure requirements are aimed at helping “maximise the economic opportunities of cleaner, cheaper and more reliable energy and manage climate change risks… giving investors and companies the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation.”
The introduction of the proposed law follows the release of a ‘Discovery consultation’ launched by the Treasury in December 2022 on the development of a climate risk disclosure framework, and a subsequent announcement in June 2023 of plans to implement mandatory climate-related financial disclosure requirements.
In October, the Australian Accounting Standards Board (AASB) released an exposure draft outlining its proposed standards for companies to report climate-related information, which form the basis of the new disclosure requirements. The AASB proposals are based on the recently released sustainability disclosure standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB), while including some modifications in areas such as Scope 3, or indirect value chain emissions reporting, and on reporting requirements for companies that do not have material climate-related financial risks or opportunities.
Under the new requirements, companies would be mandated to report on material climate-related risks and opportunities, metrics and targets including Scopes 1, 2 and 3 emissions, as well as “any governance or risk management processes, controls and procedures of the entity related to these matters.”
The new proposed legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets, which would begin reporting for fiscal years starting from July 1, 2024. Medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) would be required to begin reporting for years beginning from July 2026, while smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets) would begin the following year.
The legislation also includes a phased-in approach for Scope 3 reporting, allowing companies an extra year from the beginning of their disclosure requirements to report on the quantity of their indirect value chain emissions, as well as on the application of liability for reporting, with “limited immunity” for sustainability reports for years until the end of June 2027.
The new law would also introduce assurance requirements for climate-related reporting similar to those for financial reports, and require companies to obtain assurance reports from their financial auditor.
The government initiated a consultation for the new draft legislation, with submissions allowed until February 9.
“The draft legislation gives companies the opportunity to build capacity to make high quality climate risk disclosures by providing early visibility of the proposed reporting requirements and expand the breadth of entities required to report over time.”