Climate reporting marks ‘pivotal shift’ for Australian businesses
Early adoption of mandatory climate reporting may present significant opportunities for businesses, says BDO.
BDO has urged businesses to ensure they understand the new reporting timelines for the mandatory climate reporting legislation and start to prepare.
The mandatory reporting regime will take effect for large entities from 1 January 2025.
The bill to implement the new reporting was passed by the Senate last week with amendments and will return to the House of Representatives for a final vote.
The firm said the reforms to climate reporting mark “a pivotal shift for businesses across the country”.
BDO national leader of sustainability Aletta Boshoff said the changes offer significant opportunities for companies who adopt them early.
“The introduction of mandatory climate reporting presents a significant opportunity for businesses to enhance their strategic planning and risk management,” said Boshoff.
“Companies that proactively adapt to these new requirements will not only ensure compliance but also build resilience and attract investors seeking sustainable practices.”
Under the new regulations, entities will be categorised into three groups, with Group One entities required to start reporting for the year ending 31 December 2025.
Group Two and Group Three entities will follow in subsequent phases.
Boshoff said it’s crucial for businesses to understand their reporting timelines and prepare accordingly to avoid last-minute compliance issues.
“Now is the time for businesses to begin integrating these climate reporting requirements into their operations,” she said.
“Early preparation will provide a competitive edge and demonstrate commitment to responsible business practices.”
Under the legislation, entities that lodge financial reports with the Australian Securities and Investments Commission (ASIC) also need to prepare and lodge sustainability reports relating to climate-related disclosures.
This includes evaluating their exposure under both high and low global warming scenarios, ensuring a thorough analysis of potential risks, said BDO.
BDO noted that the legislation mandates reporting against both a 1.5-degree warming scenario and a higher-risk scenario.
This ensures that companies consider transition and physical climate risks, leading to more informed decision-making and strategic planning, the firm said.
“For businesses, this is a clear call to action. Aligning with the new climate reporting standards will not only facilitate regulatory compliance but also enhance market positioning and investor confidence,” said Boshoff.
“Companies should start evaluating their climate risk management strategies and prepare to meet these upcoming requirements effectively.”
KPMG head of ESG advisory and assurance Adrian King said the climate-related financial disclosures are desperately needed in Australia.
The passage of the bill through the Senate brings Australia one step closer to mandatory reporting on climate change, said King.
“Importantly, the changes will help Australia keep up with similar developments in key economies across the world,” he said.
King said requiring organisations to make climate-related disclosures will enable investors to understand and manage the climate-related risks within their investment portfolios, as well as help Australia meet its climate and decarbonisation targets.
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