Recent climate events and their impact on reporting and finance teams

As of 1st January 2025, many large Australian businesses and financial institutions are required to prepare annual sustainability reports containing mandatory climate-related financial disclosures.

Whilst some finance teams might not think combatting climate change falls under their remit, both the government and everyday Australians will now be looking to the soon-to-be public climate-related financial disclosures of Australian businesses to understand more about their climate commitments and achievements.

The ESG crash

Over the past two decades, ‘going green’ has been adopted by organisations looking to build brand loyalty and trust amidst a push for climate action from consumers and government alike. But in some industries, the foot has been taken off the accelerator.

This is because a level of urgency has been removed regarding ESG initiatives in certain sectors; replaced by the pressure of profitability in the face of rising inflation, which has led to more businesses operating in pure survival mode than they were even five years ago. Some even blame the broader culture wars for making ESG a ‘dirty word’. No matter the theory, ESG as a measure of business success is on the decline, as evidenced by financial investors backtracking on ESG funds.

As a result, and without a link to profitability, there’s been little incentive for finance teams to prioritise ESG initiatives - until now. The new Australian reporting regime puts the responsibility of climate reporting firmly onto them, because a failure to address and adequately report on sustainability initiatives delivers risks (and costs) to the business.

However, integrating climate reporting into accounting comes with its challenges. For example, a large retailer with thousands of stores will need to gather and report on energy consumption across each store location. Collecting and analysing this data is easier said than done and, for most organisations, will require investment in new data management technologies.

Real-time climate change deserves real-time reporting

Under the new reporting regime, businesses cannot afford to treat climate reporting as an afterthought. Instead, they should be committing the same level of resources and 'always-on' monitoring they would to any other business-critical matter.

Why? Because it won’t only provide transparency as to performance, it’ll eliminate the hefty reporting burden (and scramble) that comes the months before the report is due, all whilst highlighting new areas where profitability via efficiencies can be found.

One of the most important tools an organisation has to improve sustainability is their own data. Using real-time (or close to it) data to inform climate-related decision-making is something that needs to be taken as seriously as it is for informing production data. If a factory owner only looked at production data once a year and made business decisions based on it, there would be chaos. The same goes for ignoring ESG data for months on end. Whilst the new reporting period only requires organisations to report back annually, that doesn’t mean ESG data should be ignored until then.

For example, a business looking to reduce their fuel consumption needs access to real-time data to help them make more informed decisions about usage, suppliers - even drivers. If you only look at this data once a quarter, or like many, just once a year, then you’ve already missed out on opportunities to improve your environmental footprint (and profits).

Finance teams should be pushing for their organisations to invest in platforms that allow ‘always on’ monitoring across critical climate-related data points. This doesn't necessarily need to be in the form of sensors delivering minute-by-minute reporting (although that would be the gold standard), it can be through a combination of the regular use of forms by employees to input data when it’s available, third-party data feeds, or via spreadsheets/PDFs uploaded at set intervals. Modern platforms can analyse and deliver live updates based on the latest data it has, highlight missing data points, automate input and data pipelines, as well as deliver live dashboards and one-click reporting; making the whole process simple.

All of this makes having access to real-time data an important way for finance teams to properly track and report on their climate initiatives, as well as a mechanism to uncover inefficiencies and thereby improve on them (and the bottom-line). Not only that, with organisations and their directors subject to legal action from ASIC for non-compliance, reputational and financial damage are on the line if organisations fail to put the right mechanisms in place to meet the new climate reporting standards.