Gearing up for mandatory climate reporting: what directors need to know now (and why it is a step up from TCFD)
This brief provides directors with a high level snapshot of what they need to do now, to prepare for forthcoming mandatory climate reporting. It will be followed by a more detailed report, later in 2023, ‘A director’s guide to preparing for mandatory climate reporting in Australia’. This is a joint publication by Deloitte, Australian Institute of Company Directors and MinterEllison.
While many companies have already started preparations, the International Sustainability Standards (ISSB) requirements and the anticipated Australian regulations are likely to be more extensive and pervasive than predicted. Our report details why early preparation is critical and what key actions boards can take now to prepare.
Key takeaways from the primer:
- Mandatory climate reporting is imminent: The first tranche of international sustainability-related financial reporting standards promulgated by the ISSB is imminent, with a general sustainability and a climate-specific standard expected in June 2023. The recent Commonwealth Treasury Consultation Paper on Climate Reporting suggests mandatory climate reporting will start in the 2024/2025 financial year. This may initially only be aimed at large listed entities and financial institutions (large banks, superannuation, and insurers), although the scope could be broader.
- Reporting will be subject to stakeholder scrutiny: There will be significant scrutiny of organisations’ climate reporting from regulators, investors and other stakeholders. Directors and senior management will likely need expert advice to navigate complex legal issues.
- Main elements of the reporting model are clear: Key questions remain around who will initially be caught by the standards, what the timelines will be, how the standards will require reporting on scope 3 emissions and how these will be regulated, but the fundamental expectations are largely clear and go beyond the Taskforce for Climate-related Financial Disclosure (TCFD) framework.
- Early preparation is critical: Significant preparation is required in readiness for the anticipated reporting obligations – starting early is key. The runway for implementation will likely be short and will require significant focus from board members and management. Board members should see the opportunities, not just risks from heightened disclosure and market comparability.
- Key actions to prepare: Boards can act now by reviewing existing governance structures to identify responsibility and accountability, setting a comprehensive and measurable sustainability and climate strategy and asking management what the gaps are between current and future resourcing, data and disclosure needs.
Does your board have the right competencies to respond to sustainability related risks and opportunities?
