Hosted by Alex O’Mara (Senior ESG Adviser, BDO), the panel heard from Justin Harness (Partner, Strategy & Transformation, BDO) before a panel of Julien Lacave (Senior Consultant Energy & Carbon, Pangolin Associates), Kevin Frohbus (Partner, IFRS & Corporate Reporting, BDO), and Pieter Klopper (Director, Audit & Assurance, BDO) joined them to share their insights.
Anticipating mandatory sustainability reporting in annual reports
Mandatory sustainability reporting is arguably the latest and largest source of pressure to increase ESG (that is, environmental, social and governance) capabilities. Australia, along with the rest of the world, is moving towards mandatory climate reporting.
The proposed implementation plan indicates that larger organisations (group 1) would be required to comply from the 2024-25 financial year, with group 2 commencing in 2026-27, and group 3 in 2027-28; but the effect is expected to extend all the way through the value chain as corporates require decarbonisation strategies from their suppliers. Investors and insurers are also increasingly quantifying and attempting to reduce their sources of Scope 3 emissions, which affects the organisations they invest in and provide insurance for.
Greenwashing in the spotlight
The panel also discussed the scrutiny being placed on sustainability reporting, be it mandatory or voluntary reporting, through the focus on greenwashing from regulators such as the Australian Securities & Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC). Greenwashing is the practice of portraying a company or product as being more environmentally or socially friendlier than it is.
Earlier this year, the ACCC published specific guidance on how to avoid greenwashing and has followed up with campaigns of ‘internet sweeps’ for the validity of sustainability claims. Moreover, the Australian Institute of Company Directors (AICD) has signalled that Directors will need to sign off on any mandatory climate reporting published by their organisation.
Alignment with company strategy
Rather than focus on minimum requirements, the panel highlighted the option for organisations to reframe this moment as an enormous opportunity. Ensuring the climate and wider ESG strategy are aligned with the organisation’s purpose, or “why”, can enhance a company's reputation, attract socially conscious investors and employees, and reduce long-term risks. Organisations that prioritise ESG and climate concerns demonstrate their adaptability and commitment to a more sustainable future, positioning themselves as leaders in an increasingly eco-conscious market, which can be a significant competitive advantage.
Now, more than ever, establishing credibility and transparency is critical in this space. Thinking about climate change in particular, the panel posed the questions: does your organisation have a credible plan to decarbonise? How can you begin or consolidate the work of mitigating the climate risks and opportunities affecting you? These elements are key for alignment with the upcoming mandate.
During this event, expert presenters and panellists shared their perspectives on the key issues and challenges facing the market at the moment:
Upcoming mandatory climate reporting will affect all organisations, as large corporations (the first tranche of adopters) work to reduce their Scope 3 emissions
Data and technology are going to be key in making decarbonisation plans a reality. Improvement in these spaces will be iterative as quality improves and new technologies become available
A holistic view of climate, strategy and transformation can help move your organisation towards embedding decarbonisation strategies and initiatives into the wider business
Transformation requires a whole of business approach which engages individuals at every level of the organisation to work towards a common vision.
Organisational transformation plays a pivotal role in meeting mandatory climate reporting requirements. To effectively address the pressing need for climate accountability, companies must embed new procedures, policies, and governance structures into their core operations. This transformation involves a fundamental shift in mindset, culture, and business practices. The time to begin this transformation is now.
Five questions to help you get started
Here are five key questions you should ask now to get started.
- Is your board up to speed on ESG and climate considerations?
- Do you know how climate risks and opportunities are affecting your organisation?
- Do you have an overarching sustainability strategy in place?
- Does your organisation have a credible plan to decarbonise?
- Do your employees have the skills and capabilities required to carry out the change needed?
BDO’s national sustainability team has expertise and technical capability in ESG strategy and transformation, sustainability reporting, and audit & assurance, enabling us to assist organisations in various aspects of sustainability. Contact them to see how they can help you.