An important development in Australian corporate reporting is drawing closer, with consultation having concluded on a move to mandatory climate-related financial disclosures. Following the ISSB’s landmark publication of two global standards in June which aim to generate consistent climate and sustainability reporting worldwide, the Australian Treasury issued a consultation paper outlining its plans.
KPMG has responded to that consultation and has welcomed the essential alignment of the Australian proposals to the ISSB approach. These include such key aspects as financial materiality; the requirements to use qualitative scenario analysis to inform disclosures and to give information about climate-related targets and progress towards them.
The government proposes a phased timetable under which the largest companies ‘Group One’ will report by 2024/25; mid-tier companies (Group Two – those which meet two of three criteria: $200 million turnover, 250 employees or $500 million of assets) by 2026/27; and smaller entities (Group Three – two of three criteria: $50 million t/o, 100 employees or $25 million in assets) by 2027/28. Some important details have yet to be determined and a clearer picture will emerge later this year when the government publishes draft legislation, having considered the responses to the consultation document.
Adrian King, KPMG Partner, Climate Change & Sustainability, said, “This will be a significant change in the Australian corporate reporting landscape – currently around 900 businesses disclose their carbon emissions under the National Greenhouse and Energy Reporting (NGER) Act, but we are moving to a broader climate reporting regime. KPMG supports the phased adoption approach to give sufficient time for capacity building among smaller companies and suggests that co-ordinated government assistance may be required to help these companies which are less well-resourced. On the other hand, we believe all large listed companies should be included fully to enable Australia to meet its climate and decarbonisation targets.”
The phased approach means even the largest companies and heaviest emitters will not have to include scope 3 disclosures – the most challenging, involving the emissions from supply chains – until the second year of the new regime. For smaller companies KPMG recommends they should be allowed to provide reduced levels of disclosure (including being excluded from scope 3 requirements), and to have until 2027/8 to give them sufficient transition time.
KPMG regards it as essential that the Australian regime harmonises as much as possible with international standards for consistency and to meet the needs of cross-border investors. Adrian King said: “The speed of developments at a global level is unprecedented and it is imperative that Australia keeps up with the pace. But it is vital that regulators and standard-setters are sufficiently resourced to ensure the new regime fully meets both the needs of users and of preparers and assurers”.
He added, “mandatory climate-related financial disclosures is a major step not only in reporting but also in assurance, which will be critical in enhancing the credibility of the disclosures and helping to minimise ‘greenwashing’*. There will need to be an industry campaign to ensure that we have enough assurers on the Clean Energy Regulator (CER) register, which we believe should be the primary accreditation vehicle for auditors and for those providing specialist input into assurance work in this space.”
*Recent KPMG analysis of the ASX100 shows that just over half of Australia’s biggest companies currently have their sustainability disclosures externally assured.
For further information
Ian Welch
KPMG Media
+61 400 818 891
iwelch@kpmg.com.au
