Australia Climate Reporting: 2024 Mandates Explained

DATE PUBLISHED: February 29, 2024

key takeaways

Australia is looking forward with the introduction of draft legislation to establish mandatory climate related reporting for large entities from 1 July 2024;
Mandatory reporting will reflect a global shift towards increased transparency and accountability in line with international standards;
ESG reporting provides organisations with the opportunity to share their progress towards environmental, sustainability and corporate governance objectives and demonstrate their organisations value.

As the world faces the challenges of climate change, there's a growing emphasis from regulators, investors, and the broader community for businesses to be transparent about their strategies in addressing environmental, social, and governance (ESG) concerns.

ESG reporting provides organisations with the opportunity to share their progress toward achieving their ESG objectives and serves as a mechanism to hold organisations and their board members accountable and requires them to be transparent regarding their ESG performance.

There is a growing importance of ESG considerations in Australia such that Australia will implement mandatory climate reporting so that Australian standards align more closely with international expectations.

mandatory climate related reporting for companies starting 2024

On 12 January 2024, the Australian Government released the Treasury laws Amendment Bill: Climate -related financial disclosure (Draft Legislation) which introduces significant reforms to both the Australian Securities and Investment Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth) (Corporations Act) by introducing standardised, internationally aligned reporting requirements to ensure entities are making high quality climate related financial disclosures. The Draft Legislation is based on IFRS S2 (Climate -related Disclosures) released by the International Sustainability Standards Board.

Companies will be required to disclose their current and anticipated material climate-related risks over the short, medium and long term in a separate sustainability report which is contained in an entity’s annual report.

who is required to report?

The changes (proposed to be phased in from 1 July 2024 over 4 years) is currently limited to large entities and financial institutions:

Category 1	Category 2	Category 3
Large entities and their controlled entities meeting at least 2 of the 3 criteria	National Greenhouse and Energy Reporting (NGER) Reporters (Entities with emissions reporting obligations under the National Greenhouse and Energy Reporting Act 2007 (Cth))	Asset Owners (Asset owners with assets of $5 billion or more (including the entities they control).

Group 1 - 1 July 2024	Header	Header
Consolidated revenue: $500 million or more EOFY consolidated gross assets: $1 billion or more EOFY employees: 500 or more	Above NGER publication threshold	N/A

Group 2 - 1 July 2026	Header	Header
Consolidated revenue: $200 million or more EOFY consolidated gross assets: $500 million or more EOFY employees: 250 or more	All other NGER reporters.	$5 billion assets under management or more

Group 3 - 1 July 2026	Header	Header
Consolidated revenue: $50 million or more EOFY consolidated gross assets: $25 million or more EOFY employees: 100 or more	N/A	N/A

who is excluded from mandatory reporting?

Certain entities are exempt from the Draft legislation, the evolving landscape of ESG reporting and disclosure standards suggests that this may be temporary and in the future may include:

Small and medium entities below the relevant size thresholds (set out above); and
Entities that are exempt from lodging financial reports under Chapter 2M of the Corporations Act, including where exemptions have been made through an ASIC class order or where the entity is registered with the ACNC.

What should companies and directors do to prepare?

The transition towards compulsory climate-related reporting is one of the most substantial shifts in corporate reporting in recent history and presents challenges for businesses. Successfully navigating these changes will demand considerable investment from businesses. In particular boards hold a key responsibility in overseeing the transition towards improved reporting standards and effectively managing the risks linked to climate change.

Directors should consider:

their current climate and ESG governance policies;
their existing and current climate disclosures and representations in reporting, marketing material and other communications including social media and on their website;
their board and management’s level of climate and ESG and climate competency; and
their current data systems and what is required for climate reporting.

conclusion

As ESG reporting and disclosure requirements evolve and a company’s ESG performance comes under increased scrutiny, successful companies will look beyond the reporting requirements as a mere ticking of a box exercise and instead approach it as a strategic opportunity to demonstrate their organisations value and build greater trust with employees, shareholders, investors and communities in which they operate.

how can mcw help?

McInnes Wilson Lawyers can help you with your reporting obligations and ESG disclosures.

We can also assist with reviewing your corporate governance framework and policies including identify gaps in governance policies, developing governance policies and risk management and reporting framework.

Get in touch with us today if you would like more information regarding the Draft Legislation or assistance with your corporate governance.