Australia to struggle to meet ISSB sustainability standards
Australia will need to prepare its corporate sustainability disclosure framework as the global reporting date kicks off in 2024.
As recently reported by Accounting Times, the International Sustainability Standards Board (ISSB) has issued its inaugural standards IFRS S1 and IFRS S2 aimed at improving trust and confidence in company disclosures about sustainability.
The Federal Treasury released a paper revealing Australia’s plan to implement these standards on 27 June, the same day as the ISSB launch.
According to a release from Treasurer Jim Chalmers, Mandatory reporting is commencing 1 July 2024. This will initially apply for the biggest listed and unlisted companies and financial institutions, with others being added over time.
“The business community has been waiting for Australia’s position on two inaugural IFRS sustainability disclosure standards - that have been in development for almost two years,” commented RSM Australia’s national leader for resources, mining, energy and sustainability, Jacob Elkhishin.
“Australia has just six months, to not only finalise the design of its sustainability reporting framework, but to also either determine whether it would adopt the new ISSB standards in full or as the second Treasury consultation paper indicates ‘will be aligned as far as practicable with the final standards developed by the ISSB.’”
However, these new sustainability targets could have negative effects on Australia’s plans to reduce emissions, says Mr Elkhishin.
“The proposed three-year (2024-25 to 2027-28) phased approach to implement sustainability standards in Australia, while understandable given the differing levels of sustainability reporting maturity among listed companies and unlisted entities, it doesn’t leave Australia a lot of time to meet its 2030 target to reduce emissions by 43 per cent,” he explained.
The adoption of the international standards is voluntary, with other parts of the world such as Europe and Canada already having policy in place. ISSB’s standards simply serve as a framework from which jurisdictions can craft their own systems.
Mr Elkhishin says that the introduction of reporting standards will help to make corporate sustainability a bigger focus for leaders.
“Currently Australia has no legislative power to formulate or enforce corporate sustainability reporting in Australia. Without new legislation, Australia cannot develop, issue, or enforce corporate sustainability disclosures, which may put Australian companies at a disadvantage to better prepared and advanced countries,” Mr Elkhishin said.
“This increased transparency means that business stakeholders, such as investors and customers, will have an opportunity to now also compare business performance on climate, which will inevitably move sustainability up the board and management agenda.’’
He continued: “Companies not already reporting on ESG may face challenges with data, processes, and systems and find themselves on the backfoot which could cost them investors and customers.”
Small to medium businesses will have some more time to prepare for the reporting framework, and Mr Elkhishin said these organisations should spend some time preparing for future reporting.
“It’s crucial that these organisations start considering how they can best prepare for future reporting requirements. In doing so, mid-market businesses should be assessing data they currently have to identify and rectify information gaps and be establishing their capabilities, capacity, and system requirements to ensure they’re on the front foot to meet the disclosure requirements,” he outlined.
There is reportedly a rush to get Australia’s response to these standards ready as soon as possible, with Mr Elkhishin noting “the need for standards to be developed quickly.”
