Indirect climate reporting requirements to affect small businesses: ASIC
Small businesses should familiarise themselves with climate reporting requirements, even if the rules may not apply to them directly, ASIC said.
ASIC has reminded small businesses that any large businesses they engage with may need to obtain emissions-related information from them, to fulfill their scope 3 emissions reporting obligations.
Incoming mandatory climate disclosure rules require large businesses to account for the ‘scope 3 emissions’ produced within their value chains. This includes emissions from small suppliers that they engage with, both up-steam and down-stream in their supply chains.
“Even if the new reporting obligations don’t apply directly to you, if you have a customer or supplier that is a large business or financial institution, they may ask you for further information to help them meet their reporting obligations,” ASIC said in a release.
“For example, a large business may need to report on their energy usage. To fulfill that reporting obligation, they may ask you for records of your business’s energy use, such as electricity bills, so they can create a full picture of their own energy use.”
While small businesses will not be directly affected by mandatory disclosure requirements, ASIC reminded them that large businesses within their value chains may seek climate-related information from them in order to complete their scope 3 emissions reporting.
If asked for emissions-related information by businesses in their value chains, ASIC said that small businesses should clarify the type of records needed by the supplier.
Under the legislation, large businesses are allowed to use estimates and industry averages to calculate their scope 3 emissions, ASIC noted. If small businesses have difficulty sourcing certain information, they could discuss providing an estimate instead of exact numbers.
Accountants and tax advisors would play a key role in assisting small businesses adhere to requirements and provide the correct information, ASIC added.
ASIC said that the climate reporting requirements would benefit small businesses by boosting transparency surrounding climate risks and opportunities.
For example, the heightened focus on climate risks would enable small businesses to better predict how climate issues may affect their future insurance arrangements and supply chains.
Mandatory reporting requirements could also unearth new business opportunities by highlighting how and where large companies plan to invest in climate change adaptation and resilience measures.
Furthermore, by building industry knowledge around climate risks and mitigation strategies, small businesses would be better prepared to future-proof their supply chains and operations as climate change-fuelled natural disasters become more prevalent.
From 2028, businesses who earn revenue of $50 million or more, have assets of $25 million or more, or have over 100 employees would have direct climate reporting obligations.
ASIC urged such businesses to read up on regulatory guidelines in order to prepare for the incoming requirements, available on the ASIC website.
