Climate disclosure standards remain critical for long-term sustainability efforts
Climate disclosure standards remain critical for long-term sustainability efforts
The political landscape has seen a swift response to newly implemented laws mandating climate disclosures, with the Coalition proposing to unwind these regulations.
The current government has emphasised the need for greater transparency and the provision of comparable information regarding an entity’s exposure to climate-related financial risks and opportunities. This commitment is reflected in the amendments to the Corporations Act 2001 (Corporations Act) and related legislation.
These new disclosure requirements are based on global standards from 2017. Since then, countries like New Zealand, the UK, and the European Union have adopted them, each with its own rules.
BDO’s national sustainability leader, Aletta Boshoff suggests that uniform climate disclosure standards are needed to ensure a level playing field for companies worldwide. These standards would make it easier for investors to compare and assess climate-related risks and opportunities across different regions.
"Clear and consistent climate reporting is not just a regulatory necessity, but a critical tool for driving long-term sustainability,” Aletta said.
“It empowers investors to make more informed decisions, supports companies in managing their environmental impact, and ultimately accelerates the transition to a low-carbon economy.”
The importance of climate disclosure standards
The Paris Agreement, an international treaty with commitments from nearly every country, aims to reduce emissions and adapt to climate change impacts through collective action. Climate disclosures represent the first step—disclosing an organisation’s emissions. However, the subsequent step, which is arguably more crucial, involves reducing these emissions and continuously seeking opportunities to achieve these goals.
Winding back climate disclosure standards would create significant setbacks for businesses and investors alike. After months of preparation, companies have aligned their reporting processes with the current legislation, ensuring they meet the growing demand for transparency in climate-related risks and opportunities.
Any reversal would cause uncertainty, disrupting these efforts and potentially leaving businesses scrambling to adapt once again.
For investors, the lack of consistent, comparable data would increase the risks of misinformed decision-making, potentially undermining their confidence in Australian markets. Furthermore, pulling back on these regulations could signal that Australia is not fully committed to global climate action, potentially deterring international capital and diminishing the country's attractiveness as a destination for sustainable investment.
Stakeholder support for mandatory climate risk disclosure
Chris Gergis, the head of policy at the Australian Institute of Company Directors, highlights the widespread stakeholder support for mandatory climate risk disclosure.
“The real challenge for organisations is that for a long time, major investors have been asking for this kind of data. Currently, it’s all being produced on a voluntary, inconsistent fashion,” he said. Gergis emphasises that the consistency and comparability of mandatory standards help companies manage stakeholder expectations effectively.
According to Treasury, approx. 78 per cent of ASX 100 companies are already voluntarily reporting, a figure that drops to 67.5 per cent among ASX 200 companies and further declines beyond the top 200 largest companies.
In summary
While an argument has been made against unnecessary regulation, the standardisation of climate reporting obligations, to be overseen by the corporate regulator, the Australian Securities and Investments Commission, is a justified measure to protect climate-conscious investors from the risks of “greenwashing” caused by companies' false or inaccurate emissions reporting.
Treasurer Jim Chalmers emphasised that mandating consistent and comparable climate disclosures across companies will give investors greater confidence and certainty.
This approach aligns with the support for corporate accountability, well-informed markets, and global efforts to reduce carbon emissions sensibly while opposing unnecessary regulation.
Let BDO help you navigate climate reporting
Our team can help you assess readiness against the latest sustainability reporting requirements. Contact us today. Climate disclosure standards remain critical for long-term sustainability efforts.