Globally, momentum is building for mandatory sustainability reporting by larger entities. The Australian Government’s latest Treasury Consultation Paper proposes a three-year implementation approach for large entities to prepare sustainability reports, including climate-related financial disclosures. By 2027-2028, all large Australian entities (including large proprietary companies lodging financial reports with the Australian Securities and Investments Commission (ASIC) under Chapter 2M of the Corporations Act 2001) are expected to disclose sustainability-related financial disclosures in accordance with the following timeframes:
- Group 1 entities - 2024-2025 onwards
- Group 2 entities - 2026-2027 onwards
- Group 3 entities - 2027-2028 onwards.
Small entities that do not lodge financial statements with ASIC are not necessarily off the hook. Why is this?
Small entities that are part of a larger Australian or global group may be required to measure their carbon footprint and prepare sustainability disclosures for their parent entities if the parent entity is subject to compulsory reporting.
Read our article 'Where you operate will drive your sustainability reporting journey' to understand how this could affect your business.
Value chains
Many large entities and groups have started publicising decarbonisation commitments such as ‘net zero by 2050’. To achieve these targets, they need to ensure all suppliers, customers and service providers throughout the value chain have similar commitments. We are already seeing instances where small businesses are given no choice but to measure their carbon footprint and prepare sustainability disclosures because customers demand it. And in many cases, assurance is also required.
The saying ‘you can run, but you can’t hide’ is true for small businesses in this predicament. In the short-term, they may be able to avoid, in particular, measuring their carbon footprint, but not for long. Eventually, most entities you transact with will require transparency on your carbon footprint, and there will be no escaping.
Read our article 'Overview of the scopes of emissions' to learn more about the scope of emissions.
An entity’s carbon footprint consists of:
- Scope 1 emissions - those under control of the entity
- Scope 2 emissions - from purchased electricity
- Learn more: Measuring Scope 2 emissions
- Scope 3 emissions - indirect emissions from suppliers of goods and services (upstream activities) and from customers (downstream activities)
Scope 3 emissions comprise about 80 to 90 per cent of most entities’ emissions. Therefore, all organisations, including small businesses, will need to reduce emissions through the value chain. And you can’t manage what you don’t measure, so all entities will need to measure their carbon footprint one way or another.
Mandatory sustainability reporting in Australia starts on 1 January 2025 - your questions answered
The Australian Government has finally fulfilled its promise to mandate sustainability reporting in Australia. The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill (Bill) passed through both Houses of Parliament on 9 September 2024 and received Royal Assent on 17 September 2024. The start date for the legislation is 1 January 2025.
After publishing the details of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill, BDO's sustainability team published the answers to the questions they'd received from our clients and readers on specific aspects of the Bill. Read our article to learn more.
How BDO can help
If you are a small business, no matter where you are on your sustainability journey, our national team of sustainability experts can help with:
- Carbon footprint calculations or mandatory climate-related disclosures
- Carbon emission reduction strategies
- Sustainability reporting
- Developing your sustainability strategy
- Assurance over your carbon footprint or sustainability reporting.
Contact us today.