Companies ‘on collision course’ with mandatory climate reporting
The construction, retail and agriculture sectors are the least prepared to meet imminent mandatory standards, RSM research finds.
Companies are on a collision course with looming climate reporting mandates and most big polluters have fallen behind on reporting emissions, according to research by RSM.
The mid-tier firm, which surveyed the practices of over 1,500 public and private companies set to become mandatory reporters, found a “significant gap between where corporate Australia is, and where it needs to be”.
RSM said companies “were sitting on their hands” with climate director Catherine Bell finding about 60 per cent of companies lacked emissions data.
“Companies of all sizes should not underestimate the amount of work, time, expertise and investment that will be required to comply with arguably the most challenging addition to corporate disclosure regimes nationally, and globally,’’ she said.
Mandatory reporting and disclosure rules take effect in July next year, starting with “group 1 reporters” that meet certain two out of three threshold requirements: 500 employees, $500 million revenue or $1 billion assets.
However, around one-third of these companies have yet to report their direct or indirect emissions (known as scope one and two emissions) and only 36 per cent had published sustainability reports, RSM said.
Companies that lagged the most came from in the construction, retail, agriculture, forestry and ICT industries while mining, financial services, energy and real estate industries performed best.
RSM said private companies were generally unprepared to meet sustainability reporting requirements, with only 20 per cent compliant, compared to around 50 per cent of listed companies.
Most company boards also failed to consider climate risk in their corporate governance strategies, even though reporting standards would require “specific details of the body or persons responsible for oversight at board level as well as in management”, RSM said.
“Companies will be required to disclose information about governance processes, controls and procedures under way to monitor and manage climate-related financial risks and opportunities.”
“Company directors will need to have a firm understanding not only of what physical and transition climate risks and opportunities are, but also how they are managed and prioritised at an operational level.”
Group 1 reporters generally had the highest level of disclosure related to climate governance approaches at 49 per cent, compared to just 26 per cent of all mandatory reporters.
“Australian businesses need to act now to understand climate risks and opportunities to position their organisations for success in the new economy,” RSM said.
“There is no one-size-fits-all approach. The response to both climate risk and impact will be different for every organisation but will need to be proportionate to the size of the business and its level of risk.”
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