New Bill mandates extensive climate disclosure for Australian firms

New legislation mandating public disclosure of extensive climate-related information has been passed by the House of Representatives.

This Bill will require significant changes to corporate disclosure practices, particularly for large businesses, which will need to produce annual sustainability reports detailing emissions reduction plans and performance.

The Bill, which amends the Corporations Act, is being touted as the most significant change to corporate disclosure requirements in a generation. Joe Longo, chairman of the Australian Securities and Investments Commission (ASIC), described the legislation as "the biggest change to corporate disclosure in a generation".

Lisa Zembrodt, principal and senior director of sustainability consulting at Schneider Electric, highlighted the significant challenges that companies will face under the new laws.

"The changes passed through parliament yesterday, 9 September, and will start coming into force on 1 January. They pose a significant challenge for many businesses," Zembrodt said. "This is a positive move which will drive corporate action on climate change and Australia's journey to net zero. But many businesses lack the tools and plans that this new era of accountability requires."

A survey conducted by Schneider Electric, known as the 'Sustainability Index,' revealed that less than one in five companies have comprehensive decarbonisation roadmaps, and 40 per cent have yet to start their efforts to decarbonise. Zembrodt warned that many companies lacked the necessary data and digital technology essential for complying with the new laws. "A large proportion of businesses are failing to grasp the urgency of climate action," she stated.

According to the new legislation, large companies – those with turnovers exceeding AUD $500 million – will be required to begin disclosures on 1 January, with a progressive rollout to include smaller businesses. Superannuation funds managing more than AUD $5 billion will also be subject to the law. The disclosures will be part of an annual sustainability report, incorporating an annual climate statement, assessments of climate risks, as well as emissions and reduction targets.

The requirements extend beyond the companies themselves, necessitating the reporting of emissions from suppliers and customers, thus broadening the impact of the regulations.

Zembrodt emphasised the importance of immediate action, "Companies cannot delay action to understand the gap between where they are today and what they need to disclose. A gap assessment is a critical first step."

"Already, we've delivered benefit through performing gap assessments and educating executives and Boards. This ensures they understand their responsibilities and allocate the proper resources to addressing both the disclosures and the real decarbonisation actions that must follow."

The new disclosure regulations are expected to drive businesses to invest more heavily in energy management and sustainability initiatives. Zembrodt remarked, "Although the upfront costs of implementing energy efficiency and management schemes can be significant, they are outweighed by the long-term benefits such as increased efficiency."

Findings from the 'Sustainability Index' indicate that two-thirds of respondents are still reliant on basic methods, such as energy bills and spreadsheets, to monitor and manage energy usage. This lack of sophisticated data management tools impacts decision-making and hinders efforts to improve sustainability.

Zembrodt highlighted the critical role of digital technology in meeting new reporting requirements, stating, "The role of digital technology to collect and report on ESG data is critical in meeting these new reporting requirements and managing the net zero transition."