Getting ready for mandatory climate disclosure reporting

01 February 2024 Consultancy.com.au 2 min. read
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A large number of Australian companies are not prepared for the proposed obligation on climate reporting. Nancy Xie from South Pole outline the key steps that should be taken by risk and sustainability teams.

Company boards have legal duties to exercise due care and diligence, and with climate-related issues, the expectation on boards has only increased. How can directors ask the right questions to monitor the robustness of climate reporting systems and processes in line with the Australian government’s proposed mandatory disclosure requirements?

Given how many companies will need to report for 2024 and the slower progress of some Australian businesses relative to other regions such as Europe, there will be many companies with a lot of work to do before they can complete their disclosures.

Getting ready for mandatory climate disclosure reporting

“Understanding your greenhouse gas (GHG) emissions footprint and setting decarbonisation targets are just one side of the coin,” says Nancy Xie, Senior Managing Consultant and APAC lead for Climate Risks & Opportunities at South Pole.

“A holistic climate strategy must also understand how climate change might impact the company in the future. There’s an emerging awareness that the transition to a low-carbon future will offer commercial opportunities, too.”

It is key to first establish proper climate governance structures. Existing climate governance models have assigned climate roles and responsibilities at management and board levels. However, not enough companies can demonstrate that the right level of information is being communicated up and used in top-down decision-making around strategy and financial planning.

Next, directors should undertake a comprehensive stocktake of climate-related activities. This includes robust climate risk scenario analyses in line with the latest climate science to gauge potential financial losses, or opportunities to capitalise on, establishing a complete GHG inventory covering all scopes, and having a detailed integrated climate transition plan to outline how targets will be achieved.

“South Pole is working with clients that have already had top-down engagement on climate and are now underway with the steps to prepare for disclosure,” says Xie. “For example, we’ve supported ASX-listed REA Group to get a head start with meeting mandatory requirements and it is already looking beyond compliance.”

Xie says the real value of complying with disclosure requirements is beyond box-ticking — it lies with a data-driven understanding of where the most material climate impacts are in the business.

“Mandatory reporting is a ‘stick’ that incentivises climate action. It has to be taken seriously and directors will be accountable for ensuring the right steps are taken. Ask the right questions, mobilise the right teams and resources for the biggest impact, and future-proof your company.