Climateworks has long supported high quality standards and requirements for businesses reporting on their climate risk and opportunities. These government standards would be in line with international best practice for climate risk disclosure and mandatory reporting for certain entities – based on their size and exposure to risk. By setting mandatory standards for disclosure and net zero emissions transition plans and for the scenarios an entity uses, government will help standardisation and comparability, which, in turn, will make compliance easier for businesses. Government can especially support reporting from small and medium businesses which are outside the mandatory regime but may be asked for additional information from financiers and customers.
Reporting based on transparent, credible and comparable data and frameworks will assist investors and consumers to make informed decisions around climate risk and opportunities. A mandatory regime would increase confidence and support businesses to both understand expectations and avoid litigation. This is timely – especially given that many businesses are already expected to report on relevant issues.
Good reporting includes:
- physical and transitional impacts
- emissions arising from operations, energy purchases and supply chains (across scopes 1, 2 and 3)
- a transition plan to get to net zero emissions, including clear ambition for decarbonisation in the interim and long term and tangible actions for implementation.
Climateworks notes that:
- Regulators in Australia and in other jurisdictions have commenced prosecuting or fining companies for greenwashing.
- Businesses are facing growing pressures and requirements to report on climate risk. These pressures come from international markets and finance, shareholders, customers as well as regulators internationally. In the absence of federal government standards and guidance for reporting on disclosure and transition plans, it is harder for businesses to decide how to report and what to include when they do.
- Many major businesses are already reporting, so a rapid and reasonably broad introduction of mandatory reporting is possible and will be more effective. There already exists reasonable understanding and technical support available for such reporting.
- Climateworks supports the inclusion of large, listed entities; major financial institutions (including superannuation funds and institutional investors) and recommends going beyond publicly-listed companies within mandatory reporting. For instance, non-publicly listed companies could include entities covered by NGERs legislation and any comparable climate policies that are introduced.
- Given there are fast emerging expectations around nature-related risk disclosure, it will be more effective if government also factors these expectations into a mandatory regime in Australia. The Taskforce on Nature-related Financial Disclosures is developing a risk management and disclosure framework to enable organisations to report and act on evolving nature-related risks. Both the framework and the guidance that surrounds it are advancing rapidly.