Businesses in Australia should have an extra year to prepare to comply with a proposed new law requiring mandatory climate-related reporting, according to a statement released by the Business Council of Australia (BCA), which is also pushing for an extended period. and a broad scope. immunity from liability related to the new disclosure requirements.
The BCA advocates a “training circles” approach to applying the new climate-related disclosure rules, giving companies time to develop the skills and capabilities needed to ensure proper implementation of reporting requirements.
BCA CEO Bran Black said:
“We believe that a properly calibrated ‘training wheels’ approach will be critical to ensuring successful implementation of the new requirements that serves both users and disclosure preparers.”
The additional time proposal is part of the BCA's submission to the Australian Treasury's draft legislation, released earlier this year, that would introduce mandatory climate-related reporting requirements for large and medium-sized businesses, including disclosures about climate-related risks and opportunities. climate, and greenhouse gas emissions throughout the value chain.
The proposed new legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with more than 500 employees, revenues greater than $500 million or assets greater than $1 billion, as well as asset owners with more than $5 billion in assets, who would begin reporting for fiscal years beginning July 1, 2024. Midsize companies size (more than 250 employees, more than $200 million in revenue, $500 million in assets) would be required to begin reporting for years beginning in July 2026, while smaller companies (more than 100 employees, more than $50 million in revenue, over $25 million in assets) would begin the following year.
While the BCA submission expresses its support for “continuous improvement in the quality of climate-related financial disclosures”, it also calls for “sufficient time for investment in audit systems and capabilities to develop”, as well as “liability safe harbors appropriate transition periods.”
The BCA presentation also highlighted the need for certainty about the reporting standards that will be applied, noting that finalized standards are still under development by the Australian Accounting Standards Board (AASB).
In the submission, the BCA said:
“The start date must allow a minimum of 12 months from the date legislation is proclaimed or AASB standards are published (whichever is later) before compliance is required – which is necessary to ensure there is time sufficient to develop internal capabilities and capacity to meet new requirements.”
The BCA statement also advocates close alignment between future AASB standards and the IFRS' recently released International Sustainability Standards Board (ISSB) standards in order to enable comparisons across jurisdictions and minimize compliance costs for reporting companies. While AASB's proposals build on the ISSB standards, they include a number of modifications in areas such as Scope 3, or indirect value chain emissions reporting, and reporting requirements for companies that do not have material financial risks or opportunities related to the weather.
Another important proposal presented is the extension and expansion of the exemption from liability in the new legislation. The government's draft legislation uses a "modified liability approach", which temporarily suspends liability for the "most uncertain parts" of the new reporting requirements, including Scope 3 emissions and scenario analysis until mid-2027. The BCA's proposals call for the immunity to be extended until 2030, which would align with the requirement for full auditing requirements, and for the approach to include all forward-looking statements as well as “include a high bar for civil actions”.
Black said:
“This is an extremely important reform and the BCA wants to see it implemented, but the aim should be to take the time to get it right, without rushing and risking failure.”
