ASIC’s Mandatory Climate Reporting: A New Era of Corporate Responsibility
As global pressures to address climate change continue to grow, the recent call by ASIC (Australian Securities and Investments Commission) for businesses to prepare for mandatory climate reporting is a pivotal moment for companies in Australia. This development reflects the increasing importance of climate-related disclosures and the need for businesses to take proactive measures in reporting their environmental impact and strategies for managing climate risks.
At the core of this shift is the recognition that climate change is not only an environmental issue but also a financial and operational one. Investors, stakeholders, and the public demand greater transparency in how companies are addressing the risks and opportunities associated with climate change. Mandatory climate reporting will soon require businesses to disclose critical information, such as:
Climate Risk Exposure: How climate-related risks—both physical (e.g., extreme weather events, rising sea levels) and transition risks (e.g., policy changes, market shifts)—may impact business operations, assets, and financial performance.
Carbon Emissions Reduction Goals: Clear, science-based targets and action plans for reducing carbon emissions in line with global climate goals, such as the Paris Agreement’s targets.
Sustainable Business Practices: Strategies for integrating sustainability into business models, operations, supply chains, and product offerings, including efforts to promote energy efficiency, waste reduction, and the adoption of renewable energy sources.
Photograph source: Tim Wimborne/Reuters
Treasury Laws Amendment Bill 2024
The Treasury Laws Amendment Bill 2024 introduces mandatory climate-related financial disclosures for large businesses and financial institutions in Australia. This legislation, which received Royal Assent on 17 September 2024, will come into effect on 1 January 2025, requiring companies to prepare annual sustainability reports that include disclosures aligned with international standards for climate-related reporting, such as the Task Force on Climate-related Financial Disclosures (TCFD).
This marks a critical shift in the Australian business landscape. The mandatory disclosures will cover a wide range of climate-related information, including:
Climate Risk Exposure: Businesses will need to disclose both physical risks (e.g., extreme weather events) and transition risks (e.g., policy changes or shifts toward low-carbon markets).
Climate Strategy and Governance: How businesses are integrating climate risks and opportunities into their governance structures and long-term strategies.
Carbon Emissions Reduction Targets: Clear and measurable targets for reducing emissions, aligned with global climate goals such as those set by the Paris Agreement.
Financial Impact of Climate Risks: The potential financial consequences of climate-related risks and how businesses are managing them.
This legislative shift is designed to align Australia with global sustainability trends, providing investors, regulators, and consumers with the information they need to make more informed decisions. It reflects growing recognition that climate change poses both significant financial risks and opportunities, which companies must address transparently.
Proactive Engagement with Climate Reporting Requirements
ASIC’s Commissioner Kate O’Rourke has emphasized the need for affected entities to proactively engage with these requirements well ahead of the January 2025 deadline. Proactive engagement will not only ensure compliance but will also position companies as leaders in sustainability, showing their commitment to addressing climate risks and contributing to the global shift toward a low-carbon economy.
For businesses, this means:
Early Planning and Integration: Companies should begin now to integrate climate-related disclosures into their financial reporting processes, ensuring that the right data is available to meet the upcoming requirements.
Data Collection and Reporting: Businesses will need to collect accurate data on their carbon emissions, energy use, supply chain impacts, and other relevant metrics, ensuring that their reports are not only compliant but also accurate and comprehensive.
Embedding Climate Action in Strategy: Beyond reporting, the mandatory disclosures should encourage businesses to assess their current strategies, set ambitious yet achievable carbon reduction targets, and align operations with sustainable business practices.
Adapting to Changing Expectations: The evolving regulatory landscape underscores the importance of adapting to shifting market and stakeholder expectations. Investors, regulators, and customers are increasingly prioritizing environmental, social, and governance (ESG) factors in their decision-making processes, and companies that fail to disclose or adequately address climate risks may face reputational damage or reduced investment opportunities.
The statement below by ASIC Commissioner Kate O’Rourke underscores the significance of the new mandatory climate reporting requirements set to take effect from 1 January 2025:
“Large businesses and financial institutions should ensure that they implement appropriate governance arrangements and sustainability record-keeping processes ahead of the mandatory climate reporting requirements taking effect from 1 January 2025.
This is a significant reform that will have far-reaching implications for many of our key stakeholders. ASIC recognises there will be a period of transition as organisations develop the capabilities required to comply. We will take a proportional and pragmatic approach to supervision and enforcement as industry adjusts to these new requirements.”
For businesses in the sustainable built environment, this new regulatory environment presents an opportunity to demonstrate leadership in climate action. With the construction and real estate sectors being significant contributors to global emissions, the push for mandatory climate reporting can drive industry-wide innovation in energy-efficient designs, low-carbon building materials, and sustainable infrastructure practices.
By aligning with science-based carbon reduction targets, adopting sustainable building practices, and embedding climate risk management into business strategies, companies can not only comply with the new regulations but also gain a competitive edge in the increasingly sustainability-conscious market.
Image obtained from Market News.
ASIC’s establishment of a dedicated sustainability reporting page on its website is a valuable resource for businesses preparing for the mandatory climate reporting requirements set to take effect in January 2025. This page will serve as an ongoing reference, providing important updates, guidance, and regulatory information to assist organizations in understanding and complying with the new climate-related disclosure regime.
In addition, ASIC has indicated that it will consult with stakeholders to issue new and/or updated regulatory guidance to help entities meet their sustainability reporting obligations. This proactive approach shows ASIC's commitment to supporting businesses through the transition period and ensuring that they have access to the resources needed to effectively navigate the changes.
Preparing for mandatory climate reporting?
If your organisation is committed to making a sustainable impact and wishes to enhance brand visibility, promote your business, and obtain globally recognised certification, and abide by the new mandatory climate reporting. Then visit our LCA Certification Webpage now, and we will help you get started with a complimentary LCA Scoping session today!
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