Australia’s corporate reporting landscape is undergoing a significant shift as mandatory climate-related financial disclosures come into effect from Jan. 1, according to Westpac.
Larger organisations will need to report on their climate risks and opportunities under a new framework introduced by the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, which was passed in September.
The legislation mandates compliance with the AASB S2 – Climate-related Disclosures Standard, developed by the Australian Accounting Standards Board (AASB).
This standard aligns with the International Sustainability Standards Board’s (ISSB) IFRS S2 and expands upon the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The rollout of mandatory reporting will occur in stages, depending on an entity’s size, determined by:
Smaller entities will have more time to adapt, while larger organisations will need to start preparing immediately.
Michael Munro (pictured above left), director of ESG at Westpac Institutional Bank, highlighted that businesses are at varying stages of readiness for the new reporting requirements.
“We’re seeing many organisations at different stages in their climate reporting efforts,” Munro said.
“Some are just beginning, while others are more advanced. Regardless of where they are on their journey, many clients are establishing cross-functional teams, undertaking gap assessments and developing implementation roadmaps in the lead up to mandatory disclosures.”
Key challenges for businesses include:
Munro noted that Scope 3 emissions remain a particular challenge due to data quality issues.
“Many customers are in the process of improving Scope 3 emissions reporting, a task complicated by data quality issues throughout the value chain,” he said.
While climate reporting takes the spotlight, other sustainability topics, such as nature and human rights, are gaining traction.
Joshua Finfer (pictured above right), associate director of ESG at Westpac Institutional Bank, highlighted emerging trends.
“Nature reporting is quickly becoming front of mind, with more Australian and international organisations committing to being Taskforce for Nature-related Financial Disclosures early adopters,” Finfer said. “Further, the ISSB has started researching how to integrate biodiversity ecosystem and ecosystem services into financial reporting and into mandatory reporting.”
The move to mandatory climate reporting represents a substantial change but also a valuable opportunity for organisations. Munro emphasised the broader implications for business resilience.
“The shift to mandatory climate-related disclosure represents a significant change to corporate reporting,” he said.
“It’s a complex process, but it’s also an opportunity for companies to understand their own climate resilience and to prepare for more sustainability disclosures that are coming down the line.”
As businesses adapt, establishing clear roadmaps and addressing data challenges will be critical to meet the requirements and build a foundation for future sustainability reporting.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
