Consultation Paper on Sustainability Reporting
Australian Securities and Investments Commission (ASIC) releases a consultation paper on sustainability reporting, aimed at providing guidance for businesses that need to prepare sustainability reports.
In August 2024, the Australian Senate passed a mandatory climate-related financial disclosure bill, requiring eligible large corporations and asset owners to disclose climate information.
Related Post: Australia Passes Mandatory Climate-related Financial Disclosure Bill
Background of Sustainability Reporting
In September 2024, the Australian Parliament incorporated sustainability reporting requirements into the Companies Act, requiring businesses to prepare sustainability reports in accordance with the standards set by the Australian Accounting Standards Board (AASB). The goal of a sustainable reporting regime is to improve the quality, consistency and comparability of corporate climate-related financial disclosures. Currently, sustainable reporting needs to include the following:
- Climate statements for the year.
- Notes to the climate statements for the year.
- Directors’ declaration about the climate statements and notes.
The climate statement will be based on the Australian Sustainability Reporting Standard AASB S2 climate related disclosures issued by the Australian Accounting Standards Board (AASB), which is based on IFRS S1 and IFRS S2 issued by the International Sustainability Standards Board (ISSB). The consultation paper released by the ASIC will help companies comply with sustainability disclosure requirements.
How to Prepare a Sustainability Report
In terms of sustainability report preparation, the ASIC will focus on:
- Entities that must prepare a sustainability report: Requirements for implementing sustainability reports for each batch of enterprises, how enterprises determine their compliance with sustainability reporting thresholds, and reporting requirements for enterprises within the group.
- Sustainable records, directors’ duties, and modified liability: The company must maintain sustainable records, the responsibilities of directors in preparing sustainability reports, and the liabilities after the 2028 sustainability report revision.
In terms of sustainability report contents, the ASIC will focus on:
- Statements about no climate risks and opportunities: Documents that companies need to prepare when they believe there are no substantial climate risks and opportunities.
- Statements with forward-looking climate information: Basic methods, assumptions, and evidence of the company regarding forward-looking statements.
- Cross-referencing in sustainability reports: Documents that companies need to submit when cross referencing.
- Labelling: How companies label sustainability reports, climate statements, and other documents.
- Notes to climate statements: Whether it is necessary to add notes to the climate statement.
- Proportionality mechanisms and exceptions under AASB S2: Enterprises need to prove that they comply with the proportion mechanism of AASB S2.
In terms of sustainable financial disclosure beyond sustainability reporting, the ASIC will focus on:
- Sustainability-related financial disclosures outside the sustainability report.
- Sustainability-related financial disclosures in the Operating and Financial Review (OFR).
- Sustainability-related financial disclosures in prospectuses and other documents.
- Sustainability-related financial disclosures in the Product Disclosure Statements (PDS).
In terms of sustainable reporting management, the ASIC will focus on:
- Guidance on how ASIC will approach sustainability reporting and audit relief.
- Relief for stapled entities.
- Wholly-owned companies.
- Extending the relief in other ASIC instruments.
- Use of ASIC’s directions power.
- Review of sustainability reports and ASIC’s approach to enforcement.
The ASIC is soliciting stakeholders’ opinions on potential compliance costs, competitive impacts, and other cost and benefit information in the consultation paper. Stakeholders can submit their responses by December 19th. The ASIC will officially launch its sustainability reporting regulatory guidelines in the first quarter of 2025.
Reference:
ASIC Seeks Feedback on Proposed Guidance on Sustainability Reporting Regime
