Ready for New Australian Sustainability Reporting Standards (ASRS)?

Ready for New Australian Sustainability Reporting Standards (ASRS)?

Mandatory reporting of climate-related activities for Australian companies will kick off from next year.

The Australian Sustainability Reporting Standards (ASRS) legislation was passed by the Senate in August 2024, with mandatory reporting to start from January 1, 2025.

The Standards will affect large and medium-sized organisations, although each will have different starting dates for compliance.

Affected companies should familiarise themselves with the Standards now and take steps towards meeting compliance.

Read our basic guide to the standards to get started.

What are the Australian Sustainability Reporting Standards?

The ASRS were developed by the Australian Accounting Standards Board and refer to the disclosure of climate-related financial information and activities by companies.

This includes climate opportunities, risks, strategies, targets, and information on greenhouse gas emissions from operations and other activities.

The Australian Government used climate-related standards from the ISSB (International Sustainability Standards Board) as the baseline for developing the ASRS.

Why bring in these standards? 

With the government’s commitment to a net zero economy by 2050, Australian organisations are being urged to play their part in achieving this target. The ASRS will also bring us into alignment with international standards on financial and sustainability and emissions reductions reporting.

From a business point of view, the ASRS is largely about meeting the requirements and demands of investors. According to 2023 research by PwC, investors are becoming increasingly concerned about how climate change will impact a company’s prospects when considering where to invest. They are also demanding more evidence and transparency regarding sustainability and ESG (Environmental, Social and Governance) practices.

Of the investors surveyed, 69% indicated they would increase investment in companies that successfully managed sustainability issues. However, a large majority of the investors surveyed reported lacking confidence in current sustainability disclosures by companies, with 94% suspecting that the information provided contains at least some elements of ‘greenwashing’ (deceptive green marketing).

Given this, regulating sustainability reporting should go a long way towards increasing investor confidence. The is borne out by the surveys, with 85% of investors claiming that assurance from mandatory financial audits would increase their confidence in sustainability reporting.

Do the mandatory standards apply to all businesses?

Small businesses will be exempt from the reporting requirements. Very large entities will need to start reporting from January 1, 2025. Large and medium-sized companies will follow over the next two years. All companies need to meet at least two of the three criteria below.

REPORTING

Sustainability and financial reporting will now be connected

The federal government is amending parts of the Corporations Act to bring in the new framework for reporting requirements.

The framework builds upon traditional mandatory financial reporting with climate-related reporting incorporated into it. This means a company’s annual financial reports will need to include the new information on sustainability.

The ASRS core requirements

– Key areas of compliance

Mandatory climate-related reporting is an important component of ESG practices within corporations. ESG is not only concerned with climate targets and the physical environment, but also with how these are managed and achieved, and in what ways the company’s practices affect employees and the wider community.

In the first year of reporting, entities must provide information pertaining to:

• Governance – the processes, controls and procedures to manage climate-related financial risks and opportunities.
• Strategy – including results of analyses on carbon footprint, information on climate resilience and targets for improvements, and transition plans.
• Risk management – information on the climate-related risks and opportunities the business faces, and how these will be managed.
• Metrics and targets – disclosure of emissions, including scope 1 (direct emissions from sources the company owns) and scope 2 (indirect emissions from using purchased energy).

In the second year, there will be a requirement to also provide information regarding scope 3 emissions (indirect emissions outside the company’s control).

– Steps to achieving compliance – what you can do next

Many large companies are already reporting on a voluntary basis using the TCFD (Taskforce on Climate-related Financial Disclosures) framework.

If your company already reports using the voluntary framework you should be in a good position for achieving compliance with ASRS. However it’s highly likely the new disclosures will require more detail, so all companies should be taking steps now towards complying with the new requirements.

Here are some suggestions for getting started:

• Assess your current carbon footprint how your company manages its climate risk. Consider how your governance processes may need to change to adapt to ASRS requirements.
• Conduct capabilities review. This involves examining your skills and capabilities to meet the new requirements, and considering what changes are required to fill any knowledge gaps (e.g. training or hiring new personnel).
• Set roles and responsibilities, and clear climate goals and targets. Develop action plans to address potential gaps in your compliance.

National Audits Group is here to support and guide you through each step of mandatory sustainability reporting. Get in touch for assistance.

Steven Watson, Managing Director, National Audits Group

Further Reading:

Internal and External Auditing: Why Are Both Important?

Additional source:

https://www.pwc.com.au/assurance/sustainability-reporting-in-australia.html