In June, Treasury proposed mandatory climate-related reporting to be phased in from 2024-25 to 2027-28 in Australia. In its climate-related disclosures consultation paper, it indicated that climate-related disclosure requirements will extend to fundraising documents, meaning that organisations preparing for an IPO must consider the steps required as part of their disclosure journey.
In addition, the AASB released Sustainability Reporting Exposure Draft EDSR1 in October 2023. The exposure draft is modelled on IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, with adaptation for Australian entities preparing general purpose financial statements.
Although the focus on climate-related disclosures will initially focus on larger organisations, boards and management of smaller organisations must also prepare. Organisations may find themselves unable to meet stakeholder and market expectations should they not commence or consider the following steps:
Disclose the governance processes, controls and procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities.
- Determine a governance framework and assign responsibilities for managing climate-related risks. The board will oversee the climate-related risk management strategy with support from committees or management.
- Upskill your board and management team on climate-related risks. Directors have an obligation to understand existing and emerging risks that may impact the organisation.
Disclosure to provide an understanding of an entity’s strategy for managing climate-related risks and opportunities.
- Establish a cross functional working group from various departments and locations. Climate-related risks require collaboration across the whole business.
- Identify key stakeholders and create engagement opportunities to understand stakeholder priorities.
- Gather an understanding of how your organisation is dependent on natural, social and human capital and the impact that climate change can make. Consider and identify climate-related risks in the short, medium and long term.
- Determine opportunities to mitigate climate-related risks including:
• Resource efficiency – efficient production and distribution processes, recycling, reduced energy and water usage.
• Products and services – development of low carbon products and services, R&D and innovation to develop new products and/or diversify.
• Resilience – renewable energy and supply chain management.
- Develop a strategy and action plan for mitigating and adapting to climate-related issues.
- Develop scenario analysis to understand the impact and build resilience to potential climate-related risks.
Disclose the processes to identify, assess, prioritise and monitor climate-related risks and opportunities and assess the overall risk profile and risk management process.
- Integrate climate-related risks into existing risk management processes. Promote collaboration across departments, locations and management in relation to climate-related risk management.
- Ensure climate-related risk management is consistent with the organisation’s current risk management processes.
Metrics and targets
Disclosure to understand an entity’s performance in relation to its climate-related risks and opportunities.
- Calculate your greenhouse gas emissions baseline for Scope 1 and Scope 2 emissions and ideally Scope 3.
- Develop reduction targets for Scope 1, 2 and 3 emissions.
- Determine opportunities for reducing emissions such as renewable energy and efficiency strategies.
- Consider industry-based metrics that are relevant to your organisation.
HLB Mann Judd has established a team to help clients with their climate reporting.