By Barbara Vrettos -
Snapshot
- Mandatory climate reporting introduces a range of new ‘E’ considerations, but ‘E’, ’S’ and ‘G’ matters all need to be considered together for effective reporting.
- The modern slavery regime showed us that a long lead time is required for compliance; this is also anticipated for mandatory climate reporting.
- ESG compliance is not just relevant for reporting entities. Like the modern slavery regime, climate reporting may become a licence to do business for suppliers.
On 9 September 2024, the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (Cth) passed Parliament. This bill introduced a mandatory climate reporting (‘MCR’) regime. ASIC Chair, Joe Longo, has stated that ESG disclosures represent ‘the biggest changes to financial reporting and disclosure standards in a generation’, and the MCR regime is a key framework for this.
Mandatory climate reporting
The MCR regime mandates that a sustainability report be prepared by certain entities as a new annexure to their annual financial reports. While ‘S’ and ‘G’ considerations are arguably already entrenched in Australia’s corporate regulatory framework and the Modern Slavery Act 2018 (Cth) (‘Modern Slavery Act’), ‘E’ matters are often seen as a new consideration for entities. Directors have had decades to become familiar with the robust disclosure standards required for annual reports, but directors will have a far shorter period to become comfortable with these new sustainability reports. Directors will need to:
- understand what the MCR standards require;
- understand the pertinent climate-related risks and opportunities that are relevant to their business;
- understand what their entity is implementing to address climate-related risks and opportunities; and
- ensure that climate-related risks and opportunities are reflected in the entity’s long-term strategy.
