Are you ready for ESG Reporting?
In January 2024, the Australian Government introduced a policy for mandatory climate- related financial disclosures for certain entities under the Corporations Act 2001.
While the proposed law currently targets larger corporations, there will be an inevitable ripple effect for SMEs. Large companies will start demanding ESG compliance from their suppliers and partners, many of whom are smaller businesses. It’s a chain reaction where the standards set at the top will permeate through the entire business ecosystem. This chain reaction means that SMEs, even if not directly bound by the law, must be prepared to align with these emerging norms to remain competitive and relevant in the supply chain.
What does this mean?
Large entities, including listed and unlisted companies, financial institutions, registerable superannuation entities, and registered investment schemes will need to disclose climate-related financial risks and opportunities within their annual reports as soon as 1 July 2024.
Climate-related financial disclosures will include information about an entity’s climate-related risks and opportunities, as required by Australian climate disclosure standards and including:
- Governance – information about the reporting entity’s governance processes, controls and procedures used to monitor and manage climate-related financial risks and opportunities.
- Strategy – the entity’s strategy for identifying and addressing climate-related risks and opportunities (including scenario analysis)
- Transition planning and climate-related targets – the entity’s transition plans with offsets, target setting and mitigation strategies and any climate-related targets (if the reporting entity has them) and progress towards these targets.
- Risks and opportunities – for the entity, including information about material climate-related risks and opportunities for its business, as well as how the entity identifies, assesses, and manages risk and opportunities.
- Greenhouse gas emissions – any metrics and targets of the entity related to climate, including the entity’s gross scope 1, 2 and 3 emissions.
- Industry-based metrics – the entity would be required to have regard to disclosing industry-based metrics, where there are well-established and understood metrics available for the reporting entity.