Australia's ASRS climate reporting: A strategic opportunity

Australia's enforcement of mandatory climate reporting in line with the Australian Sustainability Reporting Standards (ASRS) presents a significant data and technology challenge for many organisations.

Thierry Lotrian, Chief Executive Officer at Climate & Decisions, has commented on the requirements, stating that while these regulations might initially appear to be merely a compliance obligation, they can also serve as an opportunity for businesses. "Initially, these standards might seem like a compliance headache. But think of it like preparing for a marathon. You wouldn't wait until the last minute to start training. Similarly, aligning with these regulations requires a steady build-up, and the benefits extend far beyond simply meeting deadlines," Lotrian explained.

The new climate reporting standards will necessitate organisations to shift their focus in areas such as Enterprise Performance Management (EPM). Lotrian noted, "EPM has traditionally focused on financial metrics, but that's no longer enough. Today, sustainability, diversity, and stakeholder engagement are equally important. For CFOs, this means embedding climate and ESG goals into strategic planning. Think of it as a new way to gauge your organisation's health and resilience."

These changes also extend into the realm of risk management, which Lotrian acknowledged. "Risk management traditionally focuses on immediate threats like market volatility or cyber risks. Climate risk adds a new dimension. ERM must now incorporate climate risks and ESG factors, from carbon emissions to resource scarcity. Social and governance considerations, like diversity and ethical practices, also play a pivotal role," he explained.

One key aspect of the ASRS involves reporting on Scope 1, 2, and 3 emissions, which Lotrian believes should not rely on outdated methods. "Relying on manual spreadsheets is like using a sundial in the digital age. Automated systems provide precise, financial-grade reporting, which not only ensures accuracy but also supports better decision-making," he stated.

Accurate climate reporting requires solid data foundations, and Lotrian emphasised the importance of data integrity. "Reliable climate reporting starts with solid data. But let's face it, data is often messy," he remarked. "Robust climate reporting hinges on data that is FAIR—Findable, Accessible, Interoperable, and Reusable. This framework ensures data integrity and enhances transparency, enabling reliable financial and non-financial reporting."

In addition, Lotrian addressed the critical nature of managing supply chains related to the reduction of Scope 3 emissions. "Managing the extended supply chain is now more critical than ever. Reducing Scope 3 emissions involves considering both upstream and downstream impacts. A holistic view of your supply chain will drive comprehensive carbon reduction and support broader sustainability objectives," he observed.

Lotrian proposed five practical steps for businesses to prepare for the ASRS. They involve assessing gaps to identify where businesses fall short of the new climate regulations, conducting materiality assessments, reviewing data and technology systems, setting a carbon baseline, and modelling climate scenarios to guide strategic decision-making.

Concluding his insights, Lotrian highlighted the potential advantages of the ASRS for future business success. "The ASRS is more than a regulatory requirement—it's a chance to future-proof your business. By embedding sustainability into your operations now, you'll not only meet compliance deadlines but also position your organisation for long-term success," he stated.