Draft legislation outlining mandatory climate reporting standards released
Last week, the Australian Government released draft legislation to introduce mandatory reporting as part of establishing a new climate risk disclosure framework.
Under the proposed reforms, relevant entities will be required to submit an annual sustainability report as part of their annual financial reporting. These changes have been brought about to further Australia’s goal towards achieving net zero emissions as well as achieving its 2030 emissions target. The Federal Treasurer the Hon Jim Chalmers outlined the rationale behind introducing the draft legislation in a media statement.
“[The government’s] changes will establish Australia’s climate risk disclosure framework, giving investors and companies the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation,” he said.
The draft legislation will amend Australian Securities and Investment Commission Act 2001 and the Corporations Act 2001 to introduce “standardised, internationally-aligned reporting requirements for businesses”, in order to ensure there is transparency for investors and stakeholders.
Who will be impacted?
The government has proposed a phased approach to the implementation of the reporting requirements, dividing affected entities into three groups. Entities that are currently required to lodge financial reports under Chapter 2M of the Corporations Act and meet two of the three criteria in any one of the three categories below will be impacted by the proposed reforms.
Group 1: Entities with consolidated gross revenue of $500 million or more, consolidated assets of $1 billion or more, or with more than 499 full-time equivalent employees. Entities that fall into Group 1 will be required to issue the first sustainability report for annual reporting periods starting 1 July 2024.
Group 2: Entities with consolidated gross revenue of $200 million or more, consolidated assets of $500 million or more, or more than 249 full-time equivalent employees. Entities that fall into Group 2 will be required to issue the first sustainability report for annual reporting periods starting 1 July 2026.
Group 3: Entities with consolidated gross revenue of $50 million or more, consolidated assets of $25 million or more, or more than 100 full-time equivalent employees. Entities that fall into Group 3 will not be required to issue the first sustainability report until annual reporting periods starting 1 July 2027.
Who is excluded?
Small and medium-sized businesses that fall below the above thresholds or do not fulfill the above criteria;
Businesses that are not required to file annual financial reports under section 2M of the Corporations Act 2001 or have been granted an exemption from the requirement to file an annual financial report by ASIC and registered Australian charities or not-for-profit organisations.
“The draft legislation gives companies the opportunity to build capacity to make high quality climate risk disclosures by providing early visibility of the proposed reporting requirements and expand the breadth of entities required to report over time,” Mr Chalmers said.
Further obligations
The climate-related mandatory reporting obligations will be subject to the same assurance requirements that currently apply to financial reports under the Corporations Act 2001. Companies will be required to provide an assurance report from their auditors regarding the climate disclosures they have made.
You can find out more about the draft legislation on mandatory climate reporting on the Treasury website.