Mandatory Climate Reporting is Looming: Are You Ready?
In the rapidly evolving landscape of corporate responsibility and environmental stewardship, one certainty is changing boardrooms and C-Suites forever: Mandatory Climate Reporting. In a keynote speech to Deakin University earlier this year, ASIC Chair Joe Longo spoke about how important it is, “the growing interest in environmental, social, and governance (ESG) issues is driving the biggest changes to financial reporting and disclosure standards in a generation. This is a transformational issue for global markets, and we need to be ready to meet that change at every step of its development.” Governments and regulatory bodies worldwide are stepping up their efforts to ensure businesses are transparent about their environmental impact, particularly their greenhouse gas (GHG) emissions. This transparency aims to provide stakeholders—investors, customers, regulators, and the community—with a clear picture of a company’s contributions to climate change and the measures taken to mitigate these effects. These regulations are not just a trend; they are becoming a fundamental aspect of doing business. Countries like New Zealand and members of the European Union have already implemented stringent climate reporting standards. Japan, Singapore, and the United States are also moving in this direction, with some countries adopting stricter measures than others. With the clock ticking towards the regulations’ implementation in our backyard, every Australian business leader should ask, “Are we ready?” Understanding the ISSB’s role Multiple stakeholders, including accounting boards, investors, multinationals, and regulators, have expressed frustration over the need for interoperability between various sustainability standards. Their two primary concerns are: Lack of Consistency: Different countries and organisations use various sustainability reporting frameworks, leading to a lack of comparability and transparency, especially for investors. Limited Focus on Materiality: Sustainability reports do not always emphasise the most financially material climate-related risks and opportunities for companies. A harmonised global approach offers significant benefits: Streamlined Reporting for Companies: Simplifies the reporting process. Consistent and Improved Data for Investors: Enables more informed investment decisions across multiple jurisdictions. The International Sustainability Standards Board (ISSB) develops and approves sustainability reporting standards for financial markets. It led to the development of the new International Finance Reporting Standards (IFRS), designed to create a common language for financial reporting. The first two standards issued, IFRS S1 and S2, outline the general and climate-related disclosure requirements for companies: IFRS S1: Sets out overall disclosure requirements for sustainability-related financial information. Companies must disclose sustainability risks and opportunities over short, medium, and long-term periods. These disclosures should provide insights into aspects such as cash flows, access to finance, and cost of capital. A key feature of IFRS S1 is its integration with general-purpose financial reports, ensuring that sustainability information is part of overall financial statements. IFRS S2: Complements S1 by detailing specific requirements for Climate-related disclosures. Companies must disclose climate-related risks and opportunities that could influence their prospects, including industry-specific metrics derived from the Sustainability Accounting Standards Board (SASB) standards. Both standards build on and go further than the four pillars (governance, strategy, risk management, and metrics and targets) and 11 recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The risks to be disclosed include: Transition Risks from shifting to a lower-carbon economy include policy/legal changes, technological advancements, market dynamics, and reputational issues. Physical Risks include acute risks like extreme weather events and chronic risks like rising sea levels. Companies should also highlight opportunities such as resource efficiency, alternative energy sources, innovative products and services, market expansion, and resilience. Aligning Australian standards with ISSB standards Following the ISSB’s announcement in June 2023, the Australian government initiated a consultation on implementing ISSB-aligned requirements in Australia. A proposed roadmap and timeline were released. They initially targeted the largest companies from 1 July 2024 and planned to expand to smaller companies over the next three years. This timeline has been adjusted, and Group 1 reporting is expected to commence on 1 January 2025. On 27 March 2024, Treasury incorporated the recommendations into an Omnibus Bill to adopt Australia’s version of ISSB S1 and S2. This Bill, named the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, integrates the reporting changes into the Corporations Act (2001) under the financial reporting obligations section (Chapter 2M). The Bill proposes that reporting begins on 1 January 2025 for the first tranche of organisations subject to the new obligations. 2025: Group 1 – Large Entities Entities meeting 2 of the following criteria: $500m+ consolidated revenue $1b+ consolidated gross assets 500+ employees 2026: Group 2 – Medium Entities Entities meeting 2 of the following criteria: $200m+ consolidated revenue $500m+ consolidated gross assets 250+ employees 2027: Group 3 – Small Entities Entities meeting 2 of the following criteria: $50m+ consolidated revenue $25m+ consolidated gross assets 100+ employees The Bill passed the Lower House on 6 June and now sits with the Senate. Then Parliament has until 2 December 2024 to enact these changes into law. If the Bill passes after this date, the start will be deferred to 1 July 2025. It is also important to note that the Bill does not specify the precise reporting requirements. Instead, it outlines the key components required of organisations. The Australian Accounting Standards Board (AASB) defines the specific obligations and are currently in draft form. Organisations that must comply with regulations in other countries must rely on something other than Australian reporting standards to meet their international compliance. They will need to adhere to the regulations in each jurisdiction. While some countries follow the ISSB model, others do not. Currently, over 20 global jurisdictions have committed to adopting the standards, reflecting significant progress. As a rule of thumb, US regulation is lighter, and EU regulation is more stringent. NZ already follows its own climate change reporting and may not opt into ISSB. Taking advantage of the 1 January 2025 extension Although 1 January 2025 has yet to be confirmed as the official start date, the extension offers businesses a valuable opportunity. Many businesses still need to start, and for those that have, the additional six months provide valuable time to
Maximising Impact: How External Consultants Drive Sustainability Initiatives Forward
In today’s business landscape, sustainability has become a critical component of corporate strategy. Increasing pressure from stakeholders – including investors, consumers, and regulatory bodies – is driving companies to integrate Environmental, Social, and Governance (ESG) principles into their operations. However, navigating the complex terrain of sustainability requires expertise and resources that are often not readily available within an organisation. This is where external consultants are pivotal. They support Sustainability Managers in developing and executing effective ESG strategies and sustainability communications. Understanding the Need for External Expertise Sustainability is a multifaceted domain that encompasses environmental conservation, social responsibility, and corporate governance. Sustainability initiatives also often require cross-disciplinary collaboration that spans supply chain management, stakeholder engagement, and regulatory compliance. Crafting a robust ESG strategy demands a deep understanding of these intricacies and the ability to align sustainability goals with broader business objectives. External consultants bring specialised knowledge and experience to the table. They offer fresh perspectives and innovative solutions that internal teams may overlook, and contribute diverse skill sets and cross-industry insights. This enables Sustainability Managers to leverage a broader range of expertise in addressing complex challenges. A seasoned consultant’s breadth of client experience enables them to customise effective solutions, drawing from a toolbox of proven and adaptable strategies, thus reducing risk and optimising results for the organisation. Driving Strategic Alignment Sustainability Managers must ensure sustainability efforts are closely aligned with their organisation’s corporate strategy. That means ESG goals must be integrated seamlessly into business operations to maximise impact and drive long-term value creation. External consultants excel in helping organisations identify strategic priorities, assess risks and opportunities, and develop actionable plans to embed sustainability across all levels of the organisation. They conduct comprehensive audits and gap analyses to identify areas for improvement and recommend objective and data-informed strategies to address them. Whether implementing renewable energy solutions, enhancing diversity and inclusion practices, or optimising waste management processes, external consultants can accelerate progress towards sustainability targets while improving overall business performance. Navigating the Regulatory Landscape The regulatory landscape surrounding sustainability is constantly evolving. New laws and reporting requirements are emerging at national and international levels. Keeping abreast of these changes and ensuring compliance can be daunting for Sustainability Managers, especially in industries subject to stringent environmental and social regulations. External consultants specialising in sustainability regulations can provide invaluable support in interpreting complex legislation, navigating reporting frameworks such as GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board), and implementing robust governance structures to mitigate compliance risks. They help organisations proactively adapt their ESG strategies to meet evolving standards and stay ahead of regulatory developments. Addressing Resource Constraints and Accelerating Progress Sustainability Managers must commonly deal with resource constraints when tasked with driving ESG initiatives. Limited budgets, competing priorities, and staffing shortages can hinder the effective implementation of sustainability strategies. This may leave managers overwhelmed and unable to achieve desired outcomes. In these cases, external consultants offer a cost-effective solution. Many provide on-demand access to their specialised skills and resources without the overhead costs of hiring additional full-time staff. External consultants can act as an extension of the internal sustainability team, filling gaps in expertise and capacity as needed. Whether conducting in-depth research, analysing data, or managing stakeholder engagements, consultants can alleviate the burden on internal resources. This allows Sustainability Managers to focus on strategic decision-making and priority relationships and initiatives. Consultants experienced in working with diverse clients across industries can quickly adapt to each organisation’s unique needs and challenges. They can provide flexibility for Sustainability Managers operating in dynamic environments where agile responses and innovative solutions are needed to meet rapidly shifting priorities. Moreover, external consultants bring a crucial element of acceleration to the table. With their specialised expertise and focus, consultants can expedite the pace of ESG progress within businesses facing resource constraints. By leveraging their deep understanding of sustainability frameworks, regulations, and best practices, consultants can swiftly identify critical areas for improvement and implement targeted strategies to drive measurable impact. Enhancing Stakeholder Engagement Effective communication is essential for building trust, credibility and ownership around sustainability initiatives. External consultants can play a vital role in helping organisations craft compelling narratives, engage stakeholders, and communicate progress transparently. From developing sustainability reports and ESG disclosures, to designing stakeholder engagement programs and conducting materiality assessments, consultants can help Sustainability Managers articulate their sustainability story in a way that resonates with diverse audiences. Consultants are also often connected to valuable networks within the sustainability ecosystem, and can facilitate partnerships with NGOs, industry associations, and peer organisations. Companies can leverage these networks to amplify their impact, promote best practices, and drive collective action towards shared sustainability goals. Providing a Supportive Network for Sustainability Managers Navigating the complexities of sustainability initiatives within organisations can be a daunting task, particularly for Sustainability Managers who may feel isolated in their efforts. The role often entails balancing competing priorities, managing stakeholder expectations, and driving change across diverse functional areas, all while facing resistance from internal stakeholders already feeling stretched. External consultants serve as more than just advisors; they provide a valuable support network and forum for Sustainability Managers to seek advice, share experiences, and gain perspective from peers facing similar challenges. Peer Learning and Knowledge Sharing: External consultants can connect Sustainability Managers with other professionals in the field to facilitate peer-to-peer learning. Through workshops, roundtable discussions, and networking events, consultants can create a forum for sharing best practices, lessons learned, and innovative solutions to common sustainability challenges. This collaborative environment fosters a sense of camaraderie and solidarity among Sustainability Managers, and empowers them to learn from each other’s experiences and collectively drive progress towards shared sustainability goals. Access to Industry Insights and Trends: Keeping abreast of emerging sustainability trends, regulatory developments, and industry best practices is essential for effective decision-making and strategy development. External consultants offer access to a wealth of industry insights and market intelligence to provide Sustainability Managers with timely information and analysis to inform their initiatives. Staying informed about the latest trends and benchmarks helps Sustainability Managers
6 things to consider for your Sustainability Transformation
Sustainability Transformation is needed now Today, to stay competitive, every organisation needs an Environment, Social and Governance (ESG) strategy. Not just for the social and environmental sustainability benefits, but for long term business sustainability too. It is now an integral part of how we do business and something that stakeholders expect. Many organisations already have ESG initiatives implemented into the core of their business. The next step is to share the message and communicate your Sustainability Strategy to your internal and external stakeholders. By aligning with stakeholder values, effective sustainability communications creates loyalty with existing customers and employees and attracts investors and potential talent to the business. Research clearly shows that value alignment is one of the most important reasons for a potential employee to look at a role. “With modern capitalism turning away from focusing only on profit for shareholders, to considering the effect on people and planet, it is vital that organisations consider multiple stakeholders. The operations of a business have a material impact on customers, shareholders, employees, community and the environment. An integrated sustainability communications strategy ensures that you leverage the good work you are doing in the ESG space, to both internal and external audiences.” Phil Brown, Partner and B Corp Consultant at The Growth Activists 6 Things to Consider for Your Sustainability Transformation 1. Why you need to communicate your sustainability initiatives A sustainability comms strategy allows you to drive change from within. And showcasing your sustainability initiatives to internal and external audiences, with an integrated comms strategy provides some key and immediate benefits: Both corporate and individual investors are increasingly looking for good returns and good business. More and more funds expect a robust ESG strategy as part of their selection criteria from businesses they are looking to invest in, so it is vital to communicate the good work you are doing. But it ain’t easy… 2. Embedding your sustainability strategy With increasing expectations on businesses to implement ESG strategies, having a standalone ESG team within your organisation is not enough. It will be most effective if your strategy is implemented throughout the organisation. Sustainability objectives need to be embedded within your overall business strategy, so that they filter down to leadership and team KPIs. Your ESG strategy needs to be mandated from the top down, but implemented from the bottom up. Again it is important to communicate your sustainability message through internal comms so that the workforce is onboard. Equally as important is executive and board level buy-in to ensure sustainability becomes a cultural norm and lives in work plans. “Employees are your first and most important advocates. They must understand your sustainability strategy for when they communicate externally with friends, family, colleagues or the general public about where they work and what they do.” Phil Brown, Partner and B Corp Consultant at The Growth Activists Once your team deeply understands these initiatives, they will be able to tell your sustainability story effectively. 3. Sustainability can struggle to find a foothold As sustainability communications are relatively new to most businesses, many don’t have fully developed strategies to rely on. For sustainability teams to win the buy-in of both leadership and the wider business, they need to build a bridge into the marketing and comms team, to find a place in both the internal and external communications strategies.Building this bridge between teams, ensures they have overlapping objectives, goals and metrics. The marcomms team then becomes part owner in making sure sustainability efforts are amplified on the best channels, creating meaning for consumers and stakeholders. It’s also important that there is space for the sustainability team to jump on ad hoc opportunities, especially if something arises in the media or social media so they can join in the conversation. One of the most effective ways is to set up multidisciplinary teams. Find champions in the businesses that are already passionate about sustainability and bring them together as a working group tasked with the Sustainability Transformation. 4. KISS – Keep it simple stupid There are many complexities around ESG for businesses, so it is important to simplify your message for consumers. Endless streams of information, data and analytics can be mind-numbing for even the most conscientious consumer. So, breaking down the data into digestible information and then creating a narrative that your audience can easily absorb is vital for ESG communications. Infographics for data visualisation and video content for sharing your story are great ways to communicate complex information to your audience. “When the average consumer hears a phrase like net-zero, it can have little to no personal meaning to them,” says Phil. “Whereas when they hear a phrase like ‘buying local’, it has significantly more substance. It packages the benefit in a more clearly defined message. Businesses need to understand what their audience values and showcase their credentials in a meaningful way.” Rob Shwetz, Partner and B Corp Consultant at The Growth Activists 5. The environment is important but don’t forget the S in ESG Being green is important, but black lives matter too. Caring and acting for the environment is on trend, and therein lies a shortcoming in many organisations’ Sustainability Transformations and the stories they tell about their initiatives. Since about 2015, individual and corporate investors started paying attention to not only environmental measures, but social and governance data such as labour policies, board diversity, and other social impact measures. Sustainability reports that tick the green box are no longer enough, organisations should look to reporting their impact on other stakeholders including workers, suppliers, and the communities they operate in. And then of course this provides more stories to leverage back to those same stakeholders. 6. Cut the bullshit (greenwashing) We’ve been through a decade ofgreenwashing, when purpose and sustainability was owned by brand or marketing. This meant that whilst sustainability stories were being told, they often had little bearing on the operational social and environmental impact of businesses. Consumer activism can be quick to call out this greenwashing, turning an expensive
