RSM Australia Director of ESG and Climate Services Catherine Bell
The majority of Australia’s publicly listed and private companies are ill-prepared to meet looming new mandatory climate risk disclosures, according to an evaluation of the sustainability reporting practices of more than 1,500 captured entities by national professional services firm RSM Australia.
Less than 40% of the companies evaluated by RSM’s national team of ESG and climate risk experts currently publish a sustainability report, with private companies (20%) well behind public companies (50%).
In addition, only about four in 10 companies collect and report on their direct (Scope 1) and indirect (Scope 2) emissions – compulsory metrics companies will be required to include in their first year of reporting.
This is a significant compliance gap that companies must urgently address, according to RSM Australia Director of ESG and Climate Services Catherine Bell.
Ms Bell described RSM’s research findings – published today in the new report From Sustainability Marketing to Sustainability Accounting: How Prepared is Corporate Australia for Mandatory Climate Reporting? – as “concerning’’, particularly given the new standards are due to be phased in from July 2024, commencing with Australia’s largest corporate entities (Group 1).
“Companies of all sizes should not underestimate the amount of work, time, expertise and investment that will be required to comply with arguably the most challenging addition to corporate disclosure regimes nationally and globally,’’ she said.
‘’While the first group of reporting entities – companies with more than 500 employees and more than $500 million in revenue – are more advanced in their sustainability journey than other companies, our research found 30% of these Group 1 entities were yet to publish emissions data.
“In addition, many companies with highly developed ESG reporting are yet to consider or reliably quantify how changing climate conditions and Australia’s transition to a net-zero economy will impact their company’s short, medium and long-term financials through climate scenario analysis. Only 26% of Group 1 entities had undertaken climate scenario analysis.
“Company Board Directors and CEOs who haven’t made sustainability a priority need to urgently turn their minds and efforts to these new climate risk requirements which we believe, based on industry consultations to date, will be contained within a company’s annual General Purpose Financial Statements.
“Companies that don’t act now could find themselves in the crosshairs of Australia’s new integrated accounting and auditing body, announced this week by Treasurer Jim Chalmers, or Australia’s corporate regulator, the Australian Securities and Investments Commission (ASIC) – both of which have been given riding instructions by the Australian Government to ensure corporate compliance with the incoming standards.’’
Ms Bell said Australia had already clocked up the highest number of climate-related legal actions against companies and financial institutions – including greenwashing – per capita in the world.
“This is even before the strict new sustainability standards come into force. This should serve as a dire warning that companies need to invest in getting this right or face potentially costly legal action and penalties.’’
According to the RSM research, companies in industries such as mining, financial services, the energy sector and real estate had more advanced sustainability reporting practices than companies in the construction, retail, agriculture/ forestry/fishing and ICT sectors.
RSM’s national team of ESG and climate risk experts outline how companies can deliver on the expected requirements, timelines, assurance, corporate risks and opportunities of Australia’s new climate‑related financial disclosure standards in their latest research report.
The report also includes practical advice on how companies can prepare for the reporting standards, and what “ready” will look like when it comes to the new obligations for responsible entities.
As part of the report, RSM reviewed publicly available ESG reporting information of 1,522 publicly listed and private Australian companies as at 31 October 2023. Information was collected from company websites as well as annual and sustainability reports, and NGER published reporting entities.