The Australian Treasury has released a proposal setting out the climate-related information many companies may soon need to disclose.

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Under the proposal, companies will need to disclose climate-related information as part of their general financial reporting, starting as early as July 2024 for some companies.

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The recent exposure draft released by the Australian Accounting Standards Board (AASB) outlines the proposed disclosures in full.

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Why does the market want climate-related financial disclosures?

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The Australian Government has committed to reduce greenhouse gas emissions by 43 per cent below 2005 levels by 2030 and achieve net zero emissions by 2050. Massive investments are needed across the economy to achieve these commitments.

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The information will be used for the market to mobilise and channel resources to the companies that are best managing and mitigating their climate impacts.

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What do the mandatory requirements mean for companies?

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Rather than reporting from a compliance-based mindset, companies can use the disclosures as an opportunity to reduce their energy costs while reducing their emissions.

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The companies that are first-movers will be able to build long-term value by focussing on efficiency improvements across the supply chain.

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Energy in particular is an opportunity for companies to reduce a major expense as they progress toward their emissions targets.

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With new technologies in the market, brick-and-mortar businesses may have a leg up. But it also means an exponential amount of decisions need to be made across the energy stack as these goals are reached.

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What are Australia’s proposed climate-related financial reporting requirements?

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Under Treasury’s proposal, companies will have to disclose their current and anticipated climate-related risks over the short, medium and long term.

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Disclosure requirements include:

• greenhouse gas emissions from all sources – scope 1 (direct emissions generated by operations), scope 2 (indirect emissions from energy purchased and used) and scope 3 (indirect emissions along the wider value-chain or in the franchise network)
• climate resilience of strategy and business models, informed by scenario analysis
• Responses to anticipated material climate-related physical and transition risks and opportunities
• Any climate-related targets, offset contributions and transition plans.Companies will also be required to obtain assurance by a third-party.

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Treasury is proposing a staged approach to implementation, starting with large businesses and financial institutions from the 2024/25 financial year and expanding to cover all other proposed groups by the 2027/28 financial year.

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What comes next?

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‍Mandatory climate-related disclosures is the first step to signal to the market who is focussing on reducing their impact and capturing this opportunity.

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The market until now has seen sustainability and climate action as something that will inadvertently cost money. But there is a way to reduce energy costs while reducing emissions.

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But you need the data in front of you to be able to weaponise it. To make the best decision on cost and emissions ROI you need a platform that consolidates the data to help you understand what needs to be done.

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Climate reporting and emissions reporting are essential for businesses aiming to meet regulatory requirements and enhance sustainability. By accurately tracking and disclosing greenhouse gas emissions, companies can not only comply with mandatory climate disclosures but also identify opportunities to reduce their environmental impact and operational costs

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If you want to get the rest of the organisation on board with our mission to reach net zero emissions, and - one-day - net zero energy costs, schedule a demo with our team to see how we can help.

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