Taking a comprehensive look at where you stand across all ESG pillars is critical in understanding where you are and where you want to be. This foundation provides the first opportunity in setting measurable targets as well as developing other ESG opportunities.
The Australian Climate Risk Disclosure framework is finally coming, so what does it mean for businesses?
In December, the Government announced the release of a consultation paper for the development of the Australian Climate Risk Disclosure framework. The paper mentions implementing these rules as soon as January 2024.
There has been ongoing outcry from investors and stakeholders alike, demanding better quality, standardised and internationally-comparable disclosures. In response, the ISSB (International Sustainability Board) was created for the purpose of developing comprehensive global standards for climate disclosure, based on the already established TCFD framework. These standards are currently being refined in response to stakeholder feedback with plans to issue the final standards during 2023, though the developments of these international standards create a potential gap for Australia.
“To ensure Australia remains aligned with major international capital markets, disclosure obligations need to be credible and comparable to other prominent jurisdictions. So the Government has committed to introducing standardised, internationally aligned reporting requirements for businesses to make disclosures regarding governance, strategy, risk management, targets and metrics – including greenhouse gasses.”
The consultation paper also mentions that international jurisdiction with mandatory climate disclosures are aligned with TCFD and that there is scope to deliver a reporting requirement that is initially TCFD-aligned and then able to reflect ISSB standards when they become available for jurisdictional adoption.
Other key discussion points:
- Mandatory climate-related financial risk disclosure requirements for large and financial entities
- Phasing in approach with the above to produce their first reports for FY 2024-25
- Disclosure requirements could gradually be applied to smaller listed entities over time
- Use of financial materiality principles when making climate disclosures
- Assurance for climate disclosures and clarification as to who provides assurance
- Scope 1 and 2 emissions to be disclosed with Scope 3 to be potentially included
- Disclosure of offsets and transition plans to commitments and alignments
- Data and capability challenges and their impact on applying new requirements
- Potential governance in scenario analysis
- Clarification on 'reasonable grounds' for forward looking statements
- Potential integration of the TNFD standards
- Ensuring Financial reporting framework is fit for purpose to support climate disclosures
So how can businesses prepare in the meantime?
A tailored ESG strategy not only helps your business to align to sustainability standards, but provides opportunities to create a more robust approach to ESG as a whole. ESG disclosures provides insights to stakeholders and potential investors while also demonstrating social licence to operate.
Identifying and assessing material topics that relate to the business and its key stakeholders is instrumental in prioritising sustainability efforts and climate goals. The insights gained can assist in identifying risks and opportunities, prioritisation of focus areas and produce more relevant communications and ESG reports.
Stakeholder mapping and engagement provides a valuable tool that can help strengthen key stakeholder relationships, provide in-depth understanding to what stakeholders consider material and reduce potential risk. This also provides the first step in developing a stakeholder engagement plan.
Reporting on ESG has never been more important. Growing expectations from stakeholders and investors and potential mandates, means the time is now to get started. Transparently reporting on ESG not ony provides potential opportunity for financial investment but also risk mitigation, carbon reduction opportunities and reputational development.
ESG risk is no longer an emerging risk, it is a fundamental issue that is here is to stay. An organisations commitment to ESG is realised through a key focus on resourcing for ESG initiatives and guiding the implementation of the ESG initiatives. Execution of these, forms an integral part of the Board’s oversight along with ESG risk identification. We can assist Boards with ESG strategy, risk, governance and ongoing development.
Our team of ESG experts have a wide range of industry knowledge and experience with ESG reporting and integration. No matter what stage your company is at with ESG reporting, we can help you at every step. Get in touch today to discuss your ESG reporting and integration needs.