Navigate Climate Sustainability Reporting — Mandatory for Australian Businesses
Climate change is an urgent global concern and businesses are increasingly expected to play their part in reducing environmental impacts. In Australia, the Treasury Laws Amendment Bill 2024: Climate-Related Financial Disclosure now mandates large business companies to disclose their climate risks and strategies1.
The guide outlines key regulations, challenges and steps necessary for businesses to meet these new requirements, to help businesses understand their obligations and prepare for climate reporting compliance. Here are key highlights from the guide.
From 2025, large businesses and financial institutions in Australia must disclose their climate-related risks, strategies and performance metrics in a sustainability report. This report should be submitted to regulatory bodies including the Australian Securities and Investments Commission (ASIC). Companies must integrate climate disclosures with their financial reporting systems to ensure consistency and comparability.
Businesses must be prepared to take several proactive steps, like establishing robust governance structures, reviewing current reporting practices, investing in reliable data collection systems and engaging with stakeholders such as investors and customers to meet the new requirements. It is also essential to consult experts to ensure the accuracy and reliability of climate-related disclosures.
Implementing climate sustainability reporting presents several challenges, including high compliance costs, difficulties in integrating climate data, and expertise gaps. Managing Scope 3 emissions generated by a company's supply chain is a significant challenge2. Companies must ensure their climate data integrates effectively with existing reporting frameworks and meets the standards for external validation.
Insurance is crucial in mitigating risks associated with climate change, including physical hazards like extreme weather events and transition risks such as regulatory changes. Directors and officers' (D&O) insurance is essential for facing liabilities that may arise from non-compliance with climate reporting requirements. Companies should review their insurance policies to ensure adequate coverage for these evolving risks.
While compliance may present challenges, it also offers opportunities for businesses to enhance their reputation, attract responsible investors and gain a competitive advantage. Companies demonstrating a strong commitment to sustainability can build trust with consumers and investors, improve operational efficiency and position themselves as leaders in transitioning to a low-carbon economy.
Mandatory climate sustainability reporting marks a significant shift in the regulatory landscape for Australian businesses. Organisations must adapt to meet regulatory bodies' requirements for climate-related disclosures.
Our Climate and Sustainability specialists at Gallagher can assist businesses at every step in the transition to net zero, from developing comprehensive reporting frameworks to navigating the complexities with data-driven models.
By taking a proactive approach, businesses can meet regulatory demands, establish themselves as sustainability leaders and ensure resilience and competitive advantage in a changing climate.
1"ASIC Urges Businesses to Prepare for Mandatory Climate Reporting," ASIC, 18 Sep 2024.
2"IFRS S2 Climate-Related Disclosures," IFRS Foundation, Jun 2023. PDF file.
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