Developing a global approach to sustainability reporting may require an adjustment to the local legal context when implementing global climate change reporting standards in Australia. Ensuring careful consideration with how climate disclosures interact with the corporations act. Ultimately to improve reporting whilst protecting companies from liability risk. Continue reading to see the Governance Institute’s response to the climate related disclosure consultation paper.
THIS ARTICLE’S KEY TAKEAWAYS:
- Governance Institute of Australia recommends a phased approach to implementing global sustainability reporting.
- Mandatory disclosure should be prioritised for large, global entities. These will have the greatest impact, as they are the “heaviest emitters”. This will improve consistency and comparability across different organisations.
- There will need to be appropriate safeguards (proportionate to the risk) to incentivise accurate, comprehensive and timely disclosure of sustainability reporting. This is to protect directors and officers taking on disproportionate liability risk.
- 5 steps for successful implementation of sustainability reporting include: climate first approach, scalable and practical implementation, appropriate levels of external assurance, adjustment for local legal context, and ensuring appropriate funding for the bodies implementing the standards for sustainability reporting in Australia.
Governance Institute’s Take On Sustainability Reporting
The Governance Institute’s submission in response to the Climate-related financial disclosure consultation paper (December 2022) strongly recommends consideration and adjustment for the local legal context when implementing the global climate change reporting standards in Australia.
Governance Institute CEO Megan Motto said a phased approach to reporting would reflect international standards and allow organisations to scale up steadily to meet economy-wide demands.
‘The most appropriate way to proceed would be to prioritise mandatory disclosure for organisations that are best prepared, for example large globally connected entities, government infrastructure and the heaviest emitters.’
Ms Motto says members have expressed concerns about the fact that climate disclosures involve substantial use of forward-looking information, which is dependent on external factors and subject to uncertainty.
She said there needs to be careful consideration of how climate disclosures should interact with the Corporations Act.
‘It will be critical to appropriately incentivise accurate, comprehensive and timely disclosure without reporting entities, their directors and officers taking on disproportionate liability risk’, she said.
‘Our members consider that appropriate safeguards, such as safe harbour provisions, will be critical to achieving this outcome.’
Ms Motto said while the Institute supported assurance requirements in principle, they should be proportionate to the risk, size and complexity of the relevant reporting entity,” she said.
‘Our members believe it’s important that the extent and level of assurance is transparently disclosed by the reporting entity.’
Key steps for successful implementation of sustainability reporting requirements
- Incorporating a climate first approach that recognises the climate risk to the Australian economy, the financial system, the community and investors.
- Scalable and practical implementation of leading practice that incorporates a phased approach to adoption across entity types, sectors and/or sizes.
- Inclusion of appropriate levels of independent external assurance to lend credibility to sustainability information.
- A consideration and adjustment for the local legal context when implementing the ISSB standards in Australia, and;
- Ensuring appropriate funding for the body or bodies charged with implementing the Standards in Australia.
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