Aug 09, 2024 by Mark Dingley
New climate reporting rules are coming in 2025. described in “The Australian” newspaper as “the biggest change to company reporting in a generation”. How will they impact Australian manufacturers?
The importance of environmental, social, and governance (ESG) reporting is growing globally. Now, Australia is catching up with its own climate reporting rules, known as ASIC’s Climate Disclosure Regime. These rules will be mandatory for larger companies and enforced from January 2025.
But it’s not just larger companies who will be affected – the rules could also indirectly impact small and medium suppliers and manufacturers too.
In this article, we’ll delve into ASIC’s Climate Disclosure Regime, its impact on you, and what you need to start considering to prepare.
The Australian Securities and Investments Commission (ASIC) is actively working towards implementing a mandatory climate reporting regime to ensure that Australian companies regularly and accurately disclose climate-related risks, risk-management strategies and emissions targets to investors.
The aim is to increase transparency and reduce “greenwashing” – false or misleading sustainability claims.
Under the Treasury’s proposal, companies must disclose their current and anticipated climate-related risks over the short, medium and long term.
One of the key things to note here is that companies will need to disclose greenhouse gas emissions from all sources:
Companies with a turnover of $500million or more will be the first to report, followed by smaller companies with a turnover of $200m or more and finally those with a turnover of $50m. In the next few years, more than 6,000 entities will be required to report under new climate-related disclosure requirements.
Here’s the tricky part: under the mandatory regime, small and medium businesses, registered charities, and those with reporting exemptions from ASIC will not be required to make climate-related disclosures.
However, they could still be swept up in the changes. How?
It all comes down to the Scope 3 emissions.
The regime mandates companies to report on Scope 3 emissions, which are emissions from a company’s value or supply chain. This requires the organisation to have transparency over emissions from their suppliers, transportation, waste from the manufacturing process, and so on.
As such, farmers, producers and manufacturers who supply major supermarkets and other large companies will likely be affected by Scope 3 reporting requirements. While you won’t have to include mandatory climate reporting in your financial statements, large corporations may need to ask you for the information to comply with the regime.
Therefore, there’s a risk that you could lose the contract if you have a higher footprint or do not provide the information they need. As BDO sustainability leader Aletta Boshoff explained to “The Australian” newspaper: businesses will tell suppliers to measure their footprint, set targets and reduce those footprints if they want to continue to provide their goods to existing affected customers.
Last year, Coles acknowledged that Scope 3 emissions make up most of its overall emissions, and intends to set sustainability targets with at least 75% of its suppliers over the next four years. The supermarket is seeking to better understand the emissions in its supply chain, establish a baseline to reduce Scope 3 emissions, and take the lead on its ESG reporting. In other words, suppliers need to get on the front foot with climate reporting if they want to continue working with Coles.
It’s expected that small businesses will have to deal with some financial costs involved in meeting new requirements from the legalisation even though they are not forced to comply with mandatory reporting. Many companies will also need to upskill in climate reporting.
In a recent keynote speech at the Deakin Law School, Joe Longo, Chair of the Australian Securities and Investments Commission (ASIC), emphasised the urgency of the situation. He said:“This is not an option to put this off until after legislation has passed, and then scramble to comply. You have to figure out how you’re going to marshal data, support and capabilities and start keeping the necessary records now – today.”
Large organisations should take a proactive stance, rallying to implement the systems, processes and governance practices required to meet the new climate-reporting requirements. This approach will help them feel prepared and in control of the upcoming changes.
At the same time, smaller suppliers need to be proactive in documenting and reducing emissions if they want to continue to have access to large customers who will be impacted by the new rules.
Whichever category your business falls into, the message is clear: you need to start now.
Learn more about steps you can take to build sustainability into your coding and labelling process.
Plus, here’s why you should use sustainable packaging according to Woolworths Head of Packaging.