Three Things You Should Know About the Australian Climate-Related Financial Disclosure

January 3, 2024 EcoVadis EN

Australia would require 23,000 companies to begin reporting climate-related risks and opportunities by 2028 under a proposal from the Australian Accounting Standards Board (AASB).

The system, laid out in an October consultation paper, would apply to companies that meet two of three criteria for number of employees, gross assets and consolidated revenue. It would be phased in, with the thresholds eventually decreasing to 100 employees, Aus$25 million in gross assets and consolidated revenue of Aus$50 million. 

The requirements would apply to entities required to report under Chapter 2M of the Corporations Act that fulfill at least two of the criteria in Table 1. They would also cover any entity required to report under Chapter 2M that is a "controlling corporation" under the National Greenhouse and Energy Reporting Act and meets the NGER publication threshold.

Table 1: Size of companies required to report (meeting two of three criteria)

Note: Applicable to entities required to report under Chapter 2M of the Corporations Act.

One: Disclosure Requirements Will Increase Over Time

Companies that already report using the Taskforce on Climate-related Disclosures (TCFD) recommendations should be well-positioned to meet the new standards. However, Australia’s proposal will require more quantitative information. For example, where offsets are contributing to transition plans, disclosures would be required to include assurances that these offsets are verified through a recognized standard (such as Australian Carbon Credit Units). 

This degree of transparency, which goes beyond anything seen before in Australia, will require companies to invest significantly. In recognition of this, the AASB proposed a phased introduction of the requirements, as shown in Table 2:

Table 2: Reporting requirements

Two: Qualitative Scenario Analysis in the First Year, Quantitative Analysis by 2028

From the beginning, companies would be required to use qualitative scenario analysis to inform their disclosures; by 2028, they must add quantitative analysis. If a company is already reporting quantitative scenario analysis, it is expected to continue. Phasing in requirements for scenario analysis will allow less experienced companies to build reporting capabilities such as methodology and datasets. Additionally, for the first three years of reporting companies will be shielded from liability for false or misleading claims in their forward-looking statements.

This structure is supposed to encourage companies to begin quantitative scenario analysis as early as possible, which will help them interpret the scale of risks and opportunities and improve transparency and comparability of disclosures.

Three: Scope 3 Emissions Will Be Included

Companies will receive a one-year exemption from reporting material Scope 3 emissions. Additionally, because estimating Scope 3 emissions requires companies to rely on other entities’ Scope 1 and 2 disclosures, the Scope 3 emissions reported could have occurred in any one-year period that ended up to 12 months before the current reporting cycle.

Given the complexity of calculating emissions all along an entity’s value chain, the AASB acknowledges that in the immediate term, most Scope 3 disclosures would be estimates. To balance data limitations with the need to ensure reliable information, companies should also disclose how they make their Scope 3 estimates.

It’s clear from the consultation paper that a large number of businesses will need to rapidly improve their climate reporting. The Scope 3 requirement means companies will have to develop a robust, verifiable emissions inventory. Based on our data sample of almost 350 Australian companies that have been carbon-assessed, 10% are currently reporting on Scope 3 emissions, while 14% have had their emissions reports verified by a third party.

How Can EcoVadis Help?

We understand that every company is at a different level of maturity in its emissions reporting. We are experts in supporting companies in calculating, communicating and ultimately managing carbon inventories. Here’s how our Carbon Action Module can support you:

Scope 1 and Scope 2 emissions disclosure: Collect primary emissions data with GHG Metrics – aligned to global standards, including GHG Protocol, CDP, GRI, and TCFD.

Scope 3 emissions disclosure: Enabling companies (procurement and sustainability teams) to engage their value chain partners in the decarbonization journey.

  • Engage your supply partners to measure emissions with a rating assessment, and improve their management system for carbon/GHG via a scorecard with detailed guidance.
  • Enable your suppliers to calculate their Scope 1 and Scope 2 emissions with the EcoVadis Carbon Calculator.
  • Report these emissions data through the Metrics Module on our platform.
  • Collect product-level emissions data to refine Scope 3 calculation with our Product Carbon Footprint (PCF) Data Exchange, which uses a globally accepted framework in compliance with ISO standards and GHG Protocol.
  • Dashboards and configurable reports with an aggregated view of carbon maturity, and reported emissions.

Additional modules empower partners on key GHG management topics with EcoVadis Academy e-learning, as well as targeted Corrective Action Plans that help guide supplier improvement. Want to know more? Contact us today!

About the Author

EcoVadis EN

EcoVadis is a purpose-driven company whose mission is to provide the world's most trusted business sustainability ratings. Businesses of all sizes rely on EcoVadis’ expert intelligence and evidence-based ratings to manage risk and compliance, drive decarbonization, and improve the sustainability performance of their business and value chain. Its AI-powered risk mapping, actionable scorecards, benchmarks, carbon action tools, and insights guide a resilience and improvement journey for environmental, social and ethical practices across 200 industry categories and 175 countries.

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